Operations Management Practices of McDonalds - Case Study Example

Operations Management Practices of McDonalds Inserts His/Her Inserts Grade Inserts Table of Contents 1. Introduction………………………………………………………………..3 2. Strategy of the company…………….…………………………………….3 3. Forecasting ………………………………………………………………..3 4. Product and service design ………………………………………………4 5. Capacity planning ………………………………………………………...4 6. Process design ……………………………………………………………..5 7. Location ……………………………………………………………………5 8. Quality and quality control ………………………………………………6 9. Suppliers ……………………………………………………………………6 10. Logistics ….…………………………………………………………………7 11. Inventory management ……………………………………………………7 12. Conclusion ………………………………………………………………….8 1. INTRODUCTION McDonalds is often regarded as the largest global fast food restaurants network. The history of the company starts in 1940, as a barbecue restaurant, and the 1948 is featured with the business reorganization, and further development as a franchise network. Therefore, serving up to 70 million customers daily in 120 countries, the company generates up to $ 25 billion yearly. (Aghdaie, Sanayei and Etebari, 2012) The main products involve hamburgers, assortment of French fries, a range of soft drinks and milkshakes, as well as ice creams, salads, and seasonal offerings. Therefore, the key emphasis is made on snacks. Additionally, the visitors are attracted by the practices of the order and clearness maintenance. Considering the competition issues, it should be mentioned that most competitors are left far behind, since McDonalds restaurants are often regarded as pioneers in most world regions in the sphere of fast food. In the light of this statement, it should be emphasized that competitors have a chance only in case of operating in adjacent niches. 2. STRATEGY OF THE COMPANY The company’s mission is to become a comfortable and favorite place where anyone can have a snack. Therefore, the company is developing its marketing, financial, HR, and technological strategies in order to expand the network, and attract customers. The strategy, that the company follows, is associated with providing the unmatched level of the service quality, as well as staying committed to the interests, preferences, and requirements of the audience. Therefore, the company is constantly developing the menus, arranging unique actions, and developing the interaction strategies with the customers. In general, the strategy is based on the differentiation patterns, as any element of the marketing strategy is aimed at making the brand, as well as the business approaches of the company more recognizable. (Muller, 2006) The strategy also involves constant improvement of the workers’ effectiveness. Therefore, collective competitions are performed regularly, and the most effective and productive worker is awarded. The effectiveness is also improved by increasing the work ergonomics, as well as making the team interaction more effective, and less time consuming. 3. FORECASTING The key forecasting practices of the company are based on planning, and tendency analysis. Since the company is developing its network on the franchise basis, the forecast can be performed by planning the development rates. Hence, in accordance with the yearly report 2012 (McDonalds Corporation, 2013), the company sells up to 700 franchises yearly, and the revenue is growing $ 500 million yearly. However, the forecasting techniques are not revealed by the CEO, while the annual reports are available on the official web page. The data, offered in the reports can be used for the approximate forecasting of the further development. Considering the generally accepted forecasting practices, performed by the other fast food niche participants (Starbucks, Baskin Robbins, Pizza Hut etc.) the further development is forecasted on the basis of the properly planned franchise selling. Therefore, since the company is making emphasis on the franchise network development, the development planning is executed on the basis of qualitative performance analysis. (Peynado, 2011) 4. PRODUCT AND SERVICE DESIGN The range products offered for the audience, as well as design of these products, are intended to emphasize the reputation of the restaurant, as a place where people enjoy staying. Therefore, bright colors, vivid tastes, as well as comfortable package create the necessary image. Considering the PLC of the network, it should be emphasized that it depends on the product nature. Some are regarded as an integral part of the network, and sold with minimal sales level fluctuations (hamburgers, French fries, soft drinks), the others are regarded as seasonal offerings (salads, vegetable rolls, ice creams). However, regardless of the product nature, its life cycle is monitored independently of the other products. Hence, as it is stated in Watson (2006) the bright instance of the PLC monitoring and product revitalization is French fries. Revitalization depends on the region: therefore, in France it was supplemented with various spices and seasoning, in Eastern Europe the shape of the fries was changed (crescent shaped slices are served instead of, or in addition to the common shredded shape). Product management strategy is performed with the differentiation features. This can be explained by the statement that the company is developing its own range of trademarks, thus, improving the competitive capacity of the prices. (Sheehan, 2006) 5. CAPACITY PLANNING The capacity is planned in accordance with the requirements of the audience. Therefore, while fast food is not regarded as a healthy food, McDonalds offers juices, salads, and low fat / sugar products. Instead of positioning the brand as a family leisure place only, it offers business breakfasts as well. This planning is performed as a result of a marketing strategy, and marketing war with the health care organizations; hence, the actual importance of the capacity planning can be explained by the opportunity of staying open for all the categories of the target audience. In the light of this fact, Engel and Mccann (2009) emphasize that the capacity planning strategy differs from the overall planning principles accepted. It is featured with “response” elements instead of differentiation approaches, common for the marketing planning. 6. PROCESS DESIGN The working process within the company is arranged with the highest ergonomics and efficiency possible. Therefore, instead of the common pyramid management and process structure, everyone is responsible for keeping the working quality on the high level, and for helping others improve their performance. The process design planning strategy is mainly based on the response approaches, since it is intended to consider the requirements of the audience. For example, night shifts are featured with the lower amount of visitors, therefore, fewer workers are required in the kitchens, at cash registers, and restaurant halls. In order to allocate the working resources properly, cleaning is less regular for the off-peak periods, and more human resources are directed for preparing to the peaks. Such an adaptive strategy helps to make sure that all the ingredients will be sufficient, and the rooms remained clean 24/7. 7. LOCATION The head office of the company is located in Oak Brook, Illinois. However, in accordance with the research by Doyle (2005), location is the least important factor in the strategy development within the companies like McDonalds. Therefore, while the company is developing on the franchise basis, and the restaurants can be found all over the world, location is less important than proper communication among the regional departments, and sub-regional representatives. Considering the development strategy of the company, it should be emphasized that the actual location was selected in 1971 in order to have equal control over the restaurants all over the USA. Nevertheless, intensive communication technologies development made the location less important. (Holahan and Schug, 2003) 8. QUALITY AND QUALITY CONTROL Quality control is righteously regarded as one of the most important aspects of the company’s business activity. As a rule, production quality can not be neglected by those who are involved into the food business. Moreover, McDonalds is often subjected to abuses and accusations in low quality products, and negligent attitude of the workers towards the sanitary requirements. Therefore, the company has developed specific strategy for controlling the quality: Quality control is divided into three spheres: Food: properly washed and cooked. The quality is controlled on all the production stages: growing, transportation, cooking Employees: dressed in clean and neat uniform. Responsible for the accuracy and tidiness of themselves, and the rooms, Restaurants (rooms): spotlessly clean, fast and accurate delivery. Quality Service and Cleanliness (QSC) set of requirements intended to regulate the quality of the products and services. Relation of the customers feedbacks. Continuous and proper training of the team. Applying the latest scientific developments and discoveries for improving the quality as well as the quality control process. Reliable suppliers only are dealt with. 9. SUPPLIERS First, it should be emphasized that the key aim of the company is to keep the image of the place, where anyone can have a tasty, healthy, and fresh food, hence, the company can not afford dealing with unreliable suppliers, thus, risking the reputation, and customers’ health. In developing the suppliers’ network, the company is committed to the philosophy of the three-legged stool, the key thesis of which is as follows: “none of us is as good as all of us”. Hudson and Lusk (2004) emphasize that this approach helped to revolutionize the supply system in the sphere of fast food industry, and was essential for improving the overall cooperation principles with the suppliers. The supply chain of the company involves few suppliers, since this is the basis of the most effective quality control process. These suppliers are: The Coca-Cola Co, Marine Stewardship Council, Lopez Foods, Gavina Gourmet Coffee, and others. Some of the suppliers perform on the basis of the joint ventures with McDonalds, the others are more effective with vertical integration. Effectiveness measurement is performed by arranging quality control measurements. Therefore, if the quality of the products depends on seasonal factors, McDonalds make sure the ingredients of the meals correspond with the quality level required. For instance, beef growing requires constant and proper quality control. Manufacturers can control the forage quality, nevertheless, the quality and sanitary norms of the meat are controlled by McDonalds laboratories. 10. LOGISTICS The key principle of the logistics strategy in McDonalds is based on dividing suppliers into two main groups: major suppliers, and small suppliers. As a rule, major suppliers have their own properly arranged logistics, and McDonalds prefers integrating this system into its own one. Small suppliers, in their turn, are fully included into the McDonalds logistics system. This is essential for the general efficiency of the delivery and SCM system, as well as for keeping the product quality level high, since logistics also involves laboratory check of the raw food, and ingredients. (Engel and Mccann, 2009) Transportation that is used for product delivery is mainly trucks. Considering the consistency of this delivery method with the corporate strategy, it should be stated that in the given development circumstances it is the most effective transport, since it offers the required delivery flexibility, it is less time consuming, and trucks can reach any destination easily. Moreover, most restaurants are located in the city centers, therefore, building pipelines, can not be regarded as a suitable option, while railway, air, or ships delivery will have to be assisted with automotive transportation, which means additional elements in the supply chain, and extra delivery costs. 11. INVENTORY MANAGEMENT Inventory management can be regarded as another link in the chain of working efficiency, and quality control process. Therefore, the company manages stocks in every restaurant of the chain, and the key aim of the inventory management principles is closely linked with the effective regulation of the stock reserves, and not allowing to run the stock out. Materials and products that are stored in the stocks are the meals ingredients, raw food, concentrates for the juices, as well as uniform for the workers. Large restaurants of the network can also keep kitchenware, brooms, as well as cleaning liquids. Stocks are not reordered as a rule, however, stock reoders are performed when the product life cycle changes, and there is a need to shorten delivery of some particular ingredient, while the other products are required in larger amounts. Such a flexible approach is a part of the company’s strategy, required to make restaurants comfortable for the visitors by improving the efficiency of the team performance. 12. CONCLUSION AND RECOMMENDATIONS Considering the McDonalds developing strategy, the company should be offered to improve the anti-obesity campaign, and expand the low fat and low sugar menu. Therefore, the target audience of the network will be increased, involving those who care of their health and diet. As for the development strategy, it is hard to make relevant recommendations, considering the fact that the company is highly obsessed with efficiency increase, and quality level maintenance. However, taking into account the fact that the team is growing enormously, more effective team-training techniques should be implemented. This will help to spend less time and effort for training newcomers, and reduce the turnover within the technical staff of the company. Reference List Aghdaie, S. F., Sanayei, A., & Etebari, M. (2012). Evaluation of the Consumers Trust Effect on Viral Marketing Acceptance Based on the Technology Acceptance Model.International Journal of Marketing Studies, 4(6), 79 Doyle, T. (2005). Environmental Movements in Minority and Majority Worlds: A Global Perspective. New Brunswick, NJ: Rutgers University Press. Engel, D. M., & Mccann, M. (Eds.). (2009). Fault Lines: Tort Law as Cultural Practice. Stanford, CA: Stanford University Press. Holahan, W. L., & Schug, M. C. (2003). Which Is Longer, the Short Run or the Long Run?Journal of Economics and Economic Education Research, 4(3), 115 Hudson, D., & Lusk, J. (2004). Activists and Corporate Behavior in Food Processing and Retailing: A Sequential Bargaining Game. Journal of Agricultural and Resource Economics, 29(1), 79 McDonalds Corporation (2013) 2012 Annual Report. Aboutmacdonalds.com retrieved April, 20, 2013, from: http://www.aboutmcdonalds.com/content/dam/AboutMcDonalds/Investors/Investor%202013/2012%20Annual%20Report%20Final.pdf Muller, A. (2006). O, Griet! Skryf N Parodie: Twee Sprokies Op Die Maat Van N Opdrag.Literator: Journal of Literary Criticism, Comparative Linguistics and Literary Studies, 27(2), 215 Peynado, B. (2011). Our Year of Hiding from Microwaves. Womens Studies Quarterly,39(1/2), 161 Sheehan, M. (2006). McDonalds in Crisis: A Comparative Analysis in a National Organizational Context. Competition Forum, 4(1), 221 Watson, J. L. (Ed.). (2006). Golden Arches East: Mcdonalds in East Asia. Stanford, CA: Stanford University Press. Read More