Analysis of McDonald's Hospitality Supply Chain Management Report

This report delves into the supply chain management (SCM) of McDonald's, a prominent player in the fast-food industry. It begins by introducing SCM concepts, principles, and processes, examining how these are applied throughout the stages of resourcing, product design, development, logistics, and distribution. The report then assesses the significance of effective SCM from the perspectives of customers, suppliers, distributors, and retailers, highlighting the benefits of streamlined operations. Furthermore, it explores the cross-functional and integrated approach of SCM with other functional areas within the organization. Finally, the report evaluates the supply chain strategy within McDonald's and presents proposals for improvement, providing a comprehensive analysis of its SCM practices.

Hospitality Supply Chain
Management

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................4
P1. Key supply chain concepts, principles and process are applied throughout the stages of
resourcing, product design, development, logistics and distribution..........................................4
TASK 2............................................................................................................................................7
P2. Importance of effective SCM from the perspective of customers, suppliers, distributors
and retailers.................................................................................................................................7
TASK 3............................................................................................................................................9
P3. Cross functional and integrated approach of SCM with other functional areas...................9
TASK 4..........................................................................................................................................11
P4.Supply chain strategy within a hospitality organisation and present proposals for
improvement.............................................................................................................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................12

INTRODUCTION
Supply chain management is the administration of the flow of goods and services and
consists all procedures that deliver raw materials into final products. In includes the active
streamlining of a business's supply side activities to increase consumer value and earn rival's
benefits form the market. In Hospitality sector, supply chain management refers to customer
affiliated actions and activities like food and beverage manufacture and services, housekeeping,
front office management are given extreme importance (Al-Aomar and Hussain, 2018). The back
office operations and activities like accounts, acquisition, supplies chain management, income
recording etc. take a back seat. This assignment is based on McDonald's which is an American
fast food company and operate its business internationally. This organisation was established in
1940 by Richard and Maurice McDonald and headquartered in Chicago, Illinois, US. The firm
wast deal in restaurant sector and operate its business at number of locations with the help of
37,855 restaurants all over the world. This report will discuss about the key supply chain
concepts, principles and processes which are implemented throughout the stages of resourcing
and product design, development and logistic & distribution. Further, will explain about the
importance of effective supply chain management from the perspective of customers, suppliers,
distributors and retails. The interrelation between supply chain and other areas of a hospitality
company and evaluation of supply chain strategy within the hospitality firm will also explain.

TASK 1
P1. Key supply chain concepts, principles and process are applied throughout the stages of
resourcing, product design, development, logistics and distribution
Supply chain management concepts- The Supply chain is responsible to manage the
transportation of the goods and services which are received by the company form suppliers and
manufactured by the company. The main conception of supply chain management is to
administrate, control and minimise the cost of supply of the products and services which is
invested by the management of the company in all the activities of supply the goods to provide
the cost to the customers. In McDonald's the administration of the firm can also use this concept
in its product design and supply of the products to its customers (Al-Aomar and Hussain, 2019) .
It can be used by the company in its different term like product design, development, logistics
and distribution etc. For example, if the company use this concept in product design then it can
use effective machinery so that the products are manufactured in numbers within less time. This
helping minimising the designing cost and it can be used by the firm in its different activities. In
McDonald's, the administration can control the distribution to manage the cost by supply those
products which are required and needed at that place.
Process of supply chain management- for the effective administration of supply chain, there
are several actions and activities which are performed by the management of the organisations
(Hong, Zhang and Ding, 2018). The process of supply chain management is mentioned as below
which can also implement by McDonald's in its business with the purpose of making control or
administrate the supply chain:
Planning- In this step, the company formulate effective long term and short term supply
chain plan of action. For the formulation of the supply chain system to the anticipation of
customer need, supply chain leaders require to germinate merged supply chain strategies. In
McDonald's, in this phase, the company can do effective planning to form a strong network of
supply chain so that the goods and services can be reached to the buyers on time or in effective
manner.
Procurement- The purchase procedure concentrates on the buy of needed raw materials,
elements and products. According to it, the company can make focus on purchasing the material
and goods which are required to manufacture the products and services. Because with the help of

it, the firm can make control and manage the cost which is invest by the organisation in buying
material.
Production- This stage consist manufacturing, transformation or assemblage of materials
in to products. In it, supply chain administrator provide their support to production and assure
that the needed material are available during the time of manufacturing goods and services. In
McDonald's, the production function of the company produce products and services as per
consumer requirement and the supply chain mangers monitor that the required material is
available for manufacturing.
Distribution- It is the next step, in it, the move activity manage the logistic stream of
products across the supply chain. In this company distribute its products with the help of
transportation organisations, third party logistics firms and others so that the p can be flow
quickly and safely to its target audiences (Barata, Rupino Da Cunha and Stal, 2018). In
McDonald's, the administration distributes its products with the assistance of wholesalers,
retailers and sales agents etc.
Customer interface- It is the final step of supply chain management process in which the
need activity revolves around all the problems that are affiliated to planning target audiences
interactions, accomplishing their needs and fulfilling orders effectively (Buhalis and Leung,
2018). In McDonald's, the administration provide the products and services to its customers as
per their requirements and if there are any kind of issues are generated towards needs satisfaction
then they are considered by the firm to make interaction with the consumers.
From the above mentioned supply chain management, the administration of McDonald's
can make proper planning of the supply chain network that what will the people, technology,
instruments are used by the company to supply of the products. If the company will properly
follow the process of supply chain management then it can maximise the savings in labour and
procurement costs. It will also beneficial to accomplish effective inventor control, get efficient
control over suppliers and make better relation with customers. But this process can be very
expensive to implement and the advantages on investment is hard to analyse. When the company
implement this process in its business then the costs are hard and complex to quantify.
Principles of supply chain management
There are seven principles of effective supply chain management which are efficient to
control and manage the supply chain of a company.

Principles 1- The company and supply chain managers understand it target audience's
desires and then make segmentation of the customers. In McDonald's, the administration of the
company firstly analyse the needs and wants of the consumers and then make different their
group. For example, there are different products manufacture by the respective company in
which some are veg or non-veg. So the administration should identify the customers need like
who are prefer veg and non veg then make segmentation in it potential client.
Principles 2- After making differentiation in the consumers on the basis of their needs,
the managers have to adapt logistics networks to offer different segments (Tiwari, Wee and
Daryanto, 2018). In McDonald's, when the company aware with the individuals needs and
requirement then the management of the firm tailor supply network that by which way company
can deliver its products to its clients.
Principle 3- Within this principle, the company trained its supply chain managers so that
they can share information with trading partners to obviate the unnecessary stock. In
McDonald's, the managers share information to the trading partners so that they can stock only
that products which are required by the customers (Modica and et. al., 2018). It will help in
avoiding to purchase unnecessary goods and minimise the purchasing cost.

Source: Principles of supply chain management,(2016)
Principles 4- In it, the company make differentiation in the products because a original
product can not be like by the international customers. So by making differentiation, product
closure to the customers and speed conversation across the supply chain. In McDonald's, the
company make differentiation in the products as per customers requirement and by adopting it,
fulfil the consumers needs.
Principles 5- According this principle, the company must administrate the sources of
supply strategically or with an effective plan of action. In McDonald's, with the help of this
concept, the supply chain management of the company can manage the supply of products in
effective manner which help in minimising the total cost of owning materials and services.
Principles 6- The company should develop a supply chain technology plan so that it can
help in providing its effective support to this function at different levels of determination
devising and offer effective view of the stream of products, services and data. In McDonald's, the
administration of the company can follow this principle, to formulate the plan and strategies
regarding the use of technology for supply of the products. For example, they use provide their
product online, by application and others.
Illustration: Principles of supply chain management

Principles 7- The action based costing is implemented to monitor the consumer's net
profit. In McDonald's, the administration of the company can use activity supported costing
which help in determining the customers profitability like they are satisfied with the product and
want to make change in it.
From the above mentioned principles of Supply chain management, it can be analysed
that the principle of supply chain management are effective to the company because with the
help of them, the company can make segmentation in customers and aware with the needs of
then. So that trading partners can have stock of necessary products and with the help of it the
form can offer products according to consumers needs and minimise the distribution cost
(Leksono and Vanany, 2018). By using effective technology in supply chain management, the
company can deliver goods to its customer in effective manner.
TASK 2
P2. Importance of effective SCM from the perspective of customers, suppliers, distributors and
retailers
Supply chain management is crucial to the company because it assist the firm to
maximise the aggressiveness and customer satisfaction. It is also beneficial because it plays and
inherent part in the success and growth of a company. The effective supply chain management is
essential from perspective of customers, suppliers, distributors and retailers in different manners
(AWADALLAH, and SAAD, 2018). If the supply chain of an organisation running effectively
then is permit the company to quickly supply products to the end customer for a low cost. The
major importance of it is defined as beneath:
Reduce operating costs
Decrease purchasing cost- Companies basically like fast supply of expensive goods and
raw material to obviate costly inventory. It can be also beneficial to McDonald's because the
administration of the company minimising the cost of inventory by maximising the sales of its
products. For example, if the company have number of customers then the sales of the products
is high which help in minimising the inventory cost. In the company retailers also depend on
supply chains so that the firm can supply the product and they can distribute them on time or at
the time of requirement to the customers.

Decrease production cost- Delay in the manufacturing of the company can increase the
cost of production. So by making effective supply chain the company can decrease the
production cost and this factor devise the supply chain administration more important. In the
respective company, if the delivery of the products on time then the retailers, suppliers and
distributed the products to the customers timely.
Improve customer services
Right quantity and quality- The importance of supply chain management is that the
products which are manufactured by the company are good quality and adequate quantity. Now
these days, consumers are prefer high quality goods and in effective quantity. So SCM is
essential to make improvement in customer services (Aliakbari Nouri, Shafiei Nikabadi and
Olfat, 2019). With the help of effective supply chain the management of the company purchase
good quality raw material to the suppliers so that better quality goods and products can be
manufactured by it which able to satisfied the customers needs.
On time delivery- with the help of SCM the respective can deliver and supply the
products to its target audiences on time so that they can fulfil their needs timely. An effective
supply chain can assist in avoiding any problem and assure that consumers get their products in
given time frame. For example, if the company have effective supply chain network like
distributors who deliver the products to the target audiences on time.
Services- Sales of the products and service is the effective service of a business. There
are various problems arise in the sales process of the company so with the help of effective
supply chain the products and services of the company can deliver to retailers, distributors,
suppliers and customers on time. Effective SCM is beneficial because with the help of it, the
company assure that the potential clients of them get the service that they have need and
requirement.
From the above information it can be summarised that by formulating effective supply
chain management, the company can offer good quality products and services to its customers as
per their needs and wants on time. It can also beneficial to monitor the customers needs and
provide products as per their requirements. With the help of the company can increase the profit
of leverage, minimise fixed assets like warehouses, transportation vehicles and increase the cash
flow by delivering the product to consumer timely.

TASK 3
P3. Cross functional and integrated approach of SCM with other functional areas
In an organisation, the management has to segregate a strategic direction while
considering the products which company will produce and recommend to their consumers. When
the products of a firm get old and they require new product to launch at market place on that time
when the supply chain management play an effective role to set new product in the market. This
function of the company help in making balance among the need and distribution and consists
the activities right from procurement of materials and converting them in to products to assure
that the product deliver to the customer on right time (Jia and et. al., 2018). Supply chain
department integrated and interrelated with the diffident functions of the company. In context of
McDonald's, the interrelation of this function is mentioned as beneath:
Purchasing Department- It is the first function with which the supply chain
management function is affiliated to buying the material to manufacture the finished goods. In
McDonald's, SCM related to purchasing function because with the assistance of it, the firm
purchase the raw material so that products can be manufactured as per the demand of the
customers. Purchasing division is also beneficial to buy the material in adequate quantity which
is required for the products which help in minimising the purchasing cost of the firm. It help in
making efficacious coordination with suppliers to supply the substantial without any delays.
Operation department- With the help of this division, the supply chain function aware
with the customers needs and requirement. Before giving raw material buying order, with the
help of operation function, the firm familiar with the need of possible market that what kind of
products they required and which number of units (Soheilirad and et. al., 2018). So that the
goods are manufacture in appropriate quantity and there should not be any wastage and extra
production. If the need is over anticipated the the result can be in term of excess inventory cost.
This help in inventory management, production and distribution of the commodities. This way,
operation function plays a critical role in supply chain function.
Logistics function- This function is affiliated with supply chain management by large
coordination. After manufacturing of the products, the company can supply and deliver its
products with the help of logistics function. This department of the company provide effective
transportation and warehouses to the supply chain function so that finished goods can be safely
stored and distributed to the customers timely in effective manner.

Resource management function- This is the major function through which supply chain
department highly related. This function provide different resources which are required to
produce goods and products like raw material, machinery, technology, time and labour etc. This
function also determine the distribution of origins in the right manner at right time to optimise
the manufacture at minimised costs. With the assistance of this department the supply chain can
provide product which is produced by utilization of effective resources with the purpose of
fulfilling the consumers needs. If the customers will satisfied then the sales of products are
maximized which help in minimising inventory cost.
Information workflow- It is another function is essential to supply chain because if the
company have not effective information about the customers needs then they will not satisfied
their need (Arifin, M Ibrahim and Nur, 2019). The firm can make ineffective production which
can be maximise the production cost and affect the firm in negative manner and lead to
mismanagement. So by getting accurate information and data about the market needs can be
satisfied by manufacturing finished goods as per consumers needs and requirements.
As per the defined information, it can be analysed that the supply chain management
function is effectively interrelate witty the other function of the company so that the business
operations and activities can be run effectively. With the contribution of mentioned departments,
the company can manufactured and distributed the commodities in adequate manner with the
help of different resources (Jalilvand and et. al., 2019). If these department will not make their
contribution then the supply chain management will not deliver the products to the customer on
time in appropriate way. If the operation function give order to suppliers regarding raw material
without monitoring the requirements and demands of the products then it can be affect the supply
chain management function in negative term like increasing inventory cost.
TASK 4
P4.Supply chain strategy within a hospitality organisation and present proposals for
improvement
The supply chain management of the McDonald's is good and help the company in
effective production as per the need and demand of the market. But change in the customers taste
and preferences the supply change management of the firm affect in different manners. So the
effective administration of it the company used adequate plan of actions so that products are

manufactured on time and offer to target audiences as per their needs and requirements (de
Macedo and et. al., 2018). The administration of the company analyse the market demand before
ordering the raw material so that they can mange the cost of inventory and minimise the
production cost. For example, now these people are prefer high quality products so the
administration can use TQM concept and its principles to make control and manage the quality
of the products.
There are several strategies and plan of action which are followed and used by
McDonald's fro effective supply chain like on stop shopping concept, inventory management,
demand forecasting, supply planning and visibility and collaboration across the chain. By using
the inventory management the company manage the cost of inventory (Park, Krishnan and Ha,
2019). For this, the organisation, analyse the market and monitor the needs and requirements so
that it can control the inventory cost and forecast the demand to manufacture the goods. Another
strategy is supply planning which is utilised by the company during the time when the firm face
the issue and challenge regarding the ineffective supply of the products to the market and
customers. By using this plan of action, they can manage the distribution of the goods by making
effective management of transportation, distributors and others. Another strategy which is used
by McDonald's is visibility and collaboration across the chain (Hussain, Al-Aomar and
Melhem, 2019). It can be use by the management when the company face issues in supply chain
regarding more purchasing of raw material lack of production and supply etc. So by using it the
firm make transparency all over the supply chain network such they all are work smoothly. With
the assistance of it, they managers of the organisation focus on buying material, market demand
and others which help in devising and administrating supply chain of the respective firm.
To make improvement in the support system, the administration of the company can use
different plan of action like determine vendor performance and with the help of it, the firm aware
with the vendor execution regarding vendor life cycle times and error rates. By using the concept
of just-in-time, the organisation can decrease the inventory cost and maximise inventory turn
around. With the assistance of it, the firm run at optimum inventory extents and minimise
warehouse costs. Streamline accounting can be another tool which can be help the effective
management of supply chain (Stifanich, Car and Prodan, 2018). It is an ERP system which is
affiliated with several business spheres. It can be beneficial to the company because it will

minimise the excessive paperwork and invoice mix ups. With the utilization of it, the
management decrease payment process administration and connected wait times.
CONCLUSION
From the above given information, it can be summarised that concept of supply chain
management helps an enterprise in manage the flow of its products and services in a manner that
ensure effective transformation of products from raw material. This concept support company in
enhance value for its customers and also provide competitive benefit that help in sustain in
market for long time period. With application of various principles and process of supply chain
management an enterprise can improve its efficiency and can utilise all available resources at an
optimum level. Effective supply chain management offer benefits to all supplier, retailers,
customers and distributors of company. Overall, it is very important for every company to have
an effective supply chain management strategy as it reduce overall cost of business operations.
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