McDonalds Purchasing Management - Essay Example

Purchasing Management Introduction McDonalds Corporation is one of the largest fast food retail chains in the world (Forbes, . It has long been maintaining its production strategies in order to serve diverse customers with the best quality foods and often supplies products from the outside sellers to provide safer foods. In the similar manner, McDonald’s have been producing and supplying quality and safer products for their customers in Singapore. It has also been apparently observed that the company’s success in Singapore is largely dependent on the purchasing and supplying capacities in the market (Vignali, 2001). In this essay, a detailed analysis will be provided regarding make or buy strategy of McDonald’s operating in Singapore. In addition to the subject, the essay will present detailed analysis of the organization’s supplier selection and evaluation. Subsequently, few prominent recommendations will be suggested to the company for improving the same. Discussion Purchasing and Producing Strategies McDonald’s believes in making their customers happy by providing them with the quality and safer food products. Apparently, it has been observed that the success of the company is largely dependent on its employees, suppliers and franchisees. Employees are recognised as the major asset of the company delivering and making different varieties of food for their customers. Apart from them, suppliers are also regarded as one of the vital provider of foods and responsible for packaging of different kinds of soft drinks. In majority of the cases, it has been found that the company owes to the numerous distribution centres that involve in buying various products from the suppliers. These suppliers provide the company with the finished and cooked products to the company so that they can easily serve their customers. Evidently, it has also been observed that McDonald’s engage themselves in working with the suppliers in order to provide the customers with quality products and also fulfilment of corporate and social responsibility. Usually, the company operates its activities with the support of direct and indirect suppliers. The indirect suppliers grow the required agricultural products required for producing food in the restaurants, which in turn promotes for safer and fresh food products. The company also possess a firm belief that working with the suppliers and purchasing different materials, especially hamburgers and buns from the direct suppliers would help them to gain more and more volume of customers in Singapore and other markets. Apart from all these analyses, it can be ascertained that McDonald’s operates its business on the basis of the “three legged stool”, which can also be termed as the business model adopted by the company (McDonalds, 2009). Fig 1: The Three Legged Stool Model Source: (McDonalds, 2009) The above given figure demonstrates that the success and the operating strategies of the company depends on the suppliers and franchisees along with its employees. Employees serve the customers with the best services and foods. On the other hand, franchisees operate its large volume of restaurants along with the purchase of the raw materials and finished food products from its suppliers (McDonald’s, 2009). Selection of Supplier and Evaluation System In most of the countries, it has been observed that McDonald’s always maintains its standard in the creation of the relationship with its suppliers along with setting up of code of conduct and standards for the suppliers as well (Vrontis & Pavlou, 2008). At the initial stage of hiring suppliers for the company, it demands for the supply of the healthy foods and ingredients in each of its restaurants. Similarly, McDonald’s in Singapore also demands for the supply of the proper raw materials from its suppliers. It has also been observed that the company always complies with the cultural and legal norms, and regulations in the process of selection of suppliers. In certain circumstances where suppliers fail to comply with the supply standards, McDonald’s is found to adopt a vertical food supply chain with some other country apart from the country in which it is operating. This adoption of food supply chain helps the company to obtain proper raw materials for the production of the food products (McDonald’s, 2009). Fundamentally, it has also been observed that McDonald’s believes that its responsibilities do not end with the selection of the suppliers but also monitoring the task of the suppliers at all levels of production and supply of food. The administrative authorities of the company performs regular and uninformed assessment of all restaurants and supply centres so that the suppliers are encouraged towards the supply of good quality and adequate quantity of raw materials needed for the production of the food items. In order to assure that proper quality of the materials being supplied by the suppliers, the assigned manager for the restaurant of McDonalds does detailed checking of the food before the receipt of those products in its restaurants. The company also often performs a specific test of the stock of raw materials in its restaurants to keep a watch over the task of the suppliers. All these processes adopted by the company proves that it is very much conscious regarding the selection of the best team of suppliers for its restaurants and also provide its customers with the best services. It can also be ascertained that the company possesses the intention of improving the quality of food products along with gaining maximum customers in various countries of the world through the hiring of suppliers for its restaurants. Apart from this, all these activities of the company also forecasts that the company maintains particular standard in the selection of the suppliers, which can also be determined as one of its distinct and unique features (Vignali, 2001). Recommendations for Improvement From the aforesaid study, it can be analysed that McDonald’s has been much strict in selecting its suppliers and keeping its customers safety as the prime intention. The regular checking of the products supplied by the suppliers is considered as one of the distinct features of McDonald’s. However, it can be recommended that the company must develop certain other strategy for the selection of the suppliers at the initial phase itself. An appropriate strategy has been adopted by KFC in United Kingdom (UK) such that all the suppliers must go through a food quality and safety test by the technical personnel before the supply of the products (KFC, 2013). Hence, it can be suggested that McDonalds must also perform similar kind of test in the initial phase of the selection along with the testing of the finished products during the receipt of the finished food items. Apart from the above mentioned recommendations, it can also be suggested that all the suppliers of the restaurants of McDonald’s must be trained and supervised with the importance of social responsibility so that the suppliers can develop the feeling of supplying the best quality and adequate quantity of raw ingredients to the restaurants. McDonald’s must also plan for setting up of programs for developing the sense of responsibilities among the suppliers that it is the company, which is trusted largely by its customers. Therefore, it can be ascertained that McDonald’s has been adopting proper and accurate supplying strategies for the development of its business. Apart from it, the aforesaid recommendations will be proved as the strategies for making the purchasing strategies more comprehensive and worthy in the markets of Singapore. Purchasing Cost Analysis From the aforesaid analysis of McDonald’s buying strategies from the suppliers demonstrates that it has been one of the major beneficiaries in the world of fast food. A major portion of the restaurants are run by the cooperative effort of the employees along with the suppliers. Through these collaborative efforts, it has been apparently observed that the company has been successful in gaining more of the customers in various countries through the supply of good quality food items. It has also been evidently observed that through the hiring of suppliers and purchasing raw materials from them helped them to promote better food quality along with the fulfilment of social responsibility. In the broader sense, it can also be recognised that through the purchasing strategies from its suppliers, the company has been able to gain competitive advantage in the markets of Singapore. This competitive advantage helped the company to gain success over its existing competitors along with creating success in the business performance (Hill & Jones, 2012). Through the adoption of the purchasing strategies, the company has also been able to generate maximum profits and volume of customers through low cost of production. Many of the raw ingredients were provided by its suppliers in low prices in Singapore and yielded higher rates of profit. The supply of fresh agricultural products by the suppliers of McDonald’s made its food items of high quality and also helped in attracting and retaining large customer base in Singapore (McDonald, 2009). Conclusion From the above discussion and analysis of the purchasing strategy and suppliers’ selection of McDonald’s, it has been clear that the company has been adopting purchasing strategy for the improvement of the quality of food items along with serving the customers with the best quality foods. For the fulfilment of the process, the company has been maintaining strict regulations for its suppliers regarding the delivery of the raw ingredients. It performs various inspections for keeping a watch over its suppliers. Apart from these, it is also suggestible that the company must conduct a safety check of the materials supplied by the suppliers through its technical personnel instead of its administrative officials. Hence, performance of the aforesaid strategy would assist the company in developing its purchasing strategies to its utmost level. References Forbes. (2014). McDonalds [webpage]. Retrieved from http://www.forbes.com/companies/mcdonalds/ Hill, C., & Jones, G. (2012). Strategic management: an integrated approach. United States: Cengage Learning. KFC. (2013). Let’s Talk Chicken. KFC UK and Ireland - Poultry Welfare, pp.1-4. McDonald’s. (2009). McDonald’s Corporation. Worldwide Corporate Responsibility Online Report: The Values We Bring to the Table, 1-71. McDonald, S. C. (2009). Materials Management: An Executives Supply Chain Guide. United States: John Wiley & Sons. Vignali, C. (2001). McDonald’s: “Think Global, Act Local” – The Marketing Mix. British Food Journal, 103 (2), 97-111. Vrontis, D., & Pavlou, P. (2008). The External Environment and its Effect on Strategic Marketing Planning: a Case Study for McDonald’s. J. International Business and Entrepreneurship Development, 3 (3/4), 289-305. Read More