Operations Management at McDonalds - Case Study Example

INTRODUCTION

McDonald's is an easy name that jumps to mind whenever we think of fast food. It is indeed one the earliest fast food chains that exist today.

It is the brainchild of two brothers Richard and Maurice McDonalds, who took over their father's food stand and setup a restaurant in California. It was known as Macdonald's Bar-B-Queue, but after sometime into the business they realized that their most selling item was the hamburger. They shut down their car hop restaurant and they devised a simple menu, The menu consisted of only hamburgers, cheese burgers, French fries, soft drinks, shakes and apple pies. The next thing they did was they streamlined their business to make it more efficient. They used marketing concepts combined with efficiency in productions to design a successful business.

After having established their business in the region and also franchising it to nearby areas, they were approached by Ray Kroc. Kroc was selling milkshake machines and he was interested in the restaurant because they were using his machines. he sought the brothers' permission for franchising throughout the country except for states that already had the brothers' licensed restaurants (Kok and Graves, 2003).

Kroc was a man of business through and through he designed the system to save as much time as possible so as to be able to serve maximum number of customers and not to keep the customers waiting. By the 1970s McDonalds was a booming business. They had introduced breakfast line as well.

All the time McDonalds was basking in the light of success, they were being socially responsible as well. They had build Ronald homes, these homes were established for the families of the children admitted to nearby hospitals. This helped the families in finding a proper shelter until they had their child treated.

OPERATIONS MANAGEMENT AT MCDONALDS

The key feature and aim of any operations management is to have a set of satisfied stakeholders. Stakeholders for any organization in this case a restaurant are the employees, customers, shareholders, suppliers and the society (Kok and Graves, 2003).

Supply Chain management is a key feature in the department of production for any company. It is also a very risky aspect as there are a lot of issues that can befall during the supply chain operation. It is important that the companies should be able to identify the possible risks and at the same time be prepared to combat the issues that might be arriving in the supply chain. As an interruption in the supply chain process can lead to more issues in the production and can occur in the form of huge losses for the company.

In supply chain based risk management the manager analyses the whole of the supply chain by having a holistic view of the supply chain. This helps in analyzing the whole of the supply chain and identifying the possible bottlenecks or possible areas where a failure or interference can occur. This way the necessary steps that might be required can be prepared and kept handy to avoid huge losses. The most probable issues that can exist for a supply chain are natural disasters and possibility of a development of a counterfeit product. The holistic analysis is carried out in the presence of all the stakeholders so that the situation is clear.

Today, there are a lot of software's that help in designing a fool proof and at the same time efficient supply chain that ensures high quality as well as time saving and cost effective alternates to improve the system.

Supply chain security is about how secure the supply chain of any firm is. It requires the combination of basic supply chain along with the security methods related to piracy, theft in between and counterfeiting. Today there are many methods that are employed to ensure that there is no security risk or issue involved. There has been am introduction of many malware detecting software that help in the identification of any possible security breach or any other threat that might affect the supply chain.

Some of the typical everyday measures that are used by the supply chain managers to ensure that there is no fault in the product that is being produced or being delivered to the required destination. First of all before being shipped out the goods must be thoroughly checked and once they are checked their list should be sent out towards the destination where the goods are supposed to reach. This will ensure security in the form checking and rechecking. The other more secure method is to ensure that there is no interference in between and the goods reach the destination under proper lock and key. The supply chain process should be efficient and secure so that there are no issues in the production process of the goods and the system remains efficient and error free. There are a lot of tangible and non tangible methods that can be employed to reduce risk of any supply chain (Chopra and Meindl, 2007).

SWOT ANALYSIS OF MC DONALDS (from operations perspective)

STRENGTH:

• It is fast food that is preferred by people belonging to every age group.
• It has a very strong international brand presence despite many controversies.
• The environment that they provide is hygienic and as well as every outlet has play areas for children which are very considerate on their part.
• They are one of the most socially responsible organization.
• They are willing to accept their mistakes and correct in the most suitable way so as to have satisfied customers.
• They place immense values to the customer choice and sentiments, which makes them a successful brand.

WEAKNESS:

• Lack of proper research before designing of strategy led to over hauling the existing systems and then making changes in them on frequent basis.
• The employee turnover rate is quite high. Many employees are fired from the restaurant as well.
• Health Conscious people always have something to add against McDonalds. They do not offer anything on their menus that could be considered as organic or healthy. This goes against them whenever there is a debate regarding healthy foods.
• There has been a lot of suing against the McDonalds in which people claimed that they were being misled into believing that the fries were being fired in vegetable oil, while this was not the case as they were using beef flavorings to add taste. This angered many vegetarians and Hindu communities as well.
• Their expansion was also not well researched as they had launched their beef burgers in India, there was hardly any sales, though there were many anti campaigns that were going. McDonalds had to re-launch in India by offering McAdoo burgers.

OPPURTUNITY:

• McDonalds can introduce healthy hamburgers and other similar food as this would be a great opportunity because this would help encourage healthy eating. This will also help them in countering the allegations that they have been facing for a very long time due to the selling of high calorie food items.
• They can start online ordering and the customers can check the status of the orders. This will be a feature that would attract more people and increase their brand value. Today with the increased usage of technology people tend to look for easier processes.
• McDonalds does not have any such feature yet. The online purchasing process will help them in increasing customer base as people busy in their offices and with their work will find it easier to simply place orders and have the food delivered to them with a few clicks only.
• They gained a lot of customers through the introduction of beverages like coffee and other drinks and shakes. This will encourage the loyal McDonald buyers to switch from star bucks or any other coffee or breakfast shops to McDonalds. They will be very glad to have their breakfast menus at their favorite restaurants. This will also boost the diversification of McDonalds as with time they are also in need of diversification in their products so as to counter the ever growing competition.

THREATS:

• McDonalds had launched breakfast recently but they have to create a very different and exclusive menu so that they can compete on even footings with the existing brands like Dunkin Donuts and Star Bucks These brands have been selling breakfast for every long time and to make its on existing noticeable McDonalds need to advertise heavily and as well as offer different style and menus from the ones that they are offering to be able to make place for the market that has been majorly captured by the two giants.
• They are well known for a marketing strategy known as “Cradle to grave” marketing. Parents blame obesity of their children to such kind of marketing and this becomes a problem when there are lawsuits and cases against such companies. They need to launch effective measures to counter such statements. Recently they have reduced the size of their fries and also added a fruit in every happy meal that is being sold. They have also launched healthier salad options. When they offer this kind of healthier menu it is the decision of the customer what they buy.
• There have been a number of cases filed against McDonalds and they have to continuously fight them. The lawsuits were all filed under the issue of unhealthy food. People have claimed that they have found rodents in their salads. Some people have claimed that they have found that their burgers contained expired meat. The best way to counter these statements is to invite their customers to check visit their kitchens. This will help rebuild the trust in the customers and also satisfy them that the food that they are being served is in no way contaminated.

PORTERS FORCES MODEL-an internal analysis

The Porter's five forces model is a very effective model to gauge the sustainability of any business. The five aspects of the model are:

Bargaining power of the Suppliers:

In this case the suppliers of McDonalds are very less as they are responsible for producing most of the material used in the products that they sell. This gives them an added advantage over other competitor as their supplies are not in any way disrupted by the external conditions. The suppliers that do supply for McDonalds are so many in quantity that the individual effect that they might have is minimized to the extent of being non effective (Constable, 1976).

Bargaining Power of the Buyers:

The customers have quite a lot of power as there are many competitors in the market and the fast food market is already quite saturated. It is very important for McDonalds to address this issue and develop attraction in term of food menu and other physical attractions as well.

The threat of potential new entrants:

The threat of new entrants is quite high as consumers have very open choices to substitute to other fast foods and the most common is the one about switching to the home made food. There are local bakeries as well which are providing burgers and different products and ,any a times the switching cost is low that people do not mind switching from one to other.

The threat of substitute products:

There is a lot of chances that people might end up losing interest in the fast food that McDonalds has to offer and switch to some other form of fast food. It is not something unusual. The best way to deal with such kind of issues is to keep innovating and introducing exciting menu offers so as to hold the customers interest for a longer time period.

Rivalry among competitors:

There is always a lot of competition among the businesses. To be abreast of the competitors it is necessary that the corporation should conduct research on regular basis so as to make sure that they are aware of what their competition is doing. McDonalds faces a lot of competition from rivals and hence it should develop strategies to counter the competition if it wants to remain on top of the business.

PERFORMANCE OBJECTIVES OF OPERATION MANAGEMENT:

Operation-production management is in charge of the daily procedures within a building or factory. You can say they are the heartbeat of the building operation as they are the ones who make sure the blood is flowing to the rest of the building, to ensure everyone is performing their jobs. They confirm everything is running smoothly and efficiently as possible with the limited resources they have access to. They are responsible for producing the greatest quality for the customers. Some of the jobs of the operation manager include production control cost control and material planning, the main goal is to produce as much product as possible as efficiently and cheap as possible but still maintaining quality control.

Quality

Quality is always placed first and foremost among any of the performance objectives. It is usually the most striking thing about any product and usually affects the buyer decision most. There are many descriptions of quality and if it is defined in the most easiest form it can be defined as Conformance, conformance of the product to the specifications or demands that are being made by the company. McDonald has been never ever challenged for their quality. The only issue they have faced time and again is the rise in cholesterol levels that occurs after the food consumption (Constable, 1976).

There are usually two kinds of effect that quality has upon the decision making of the customers.

• The external effect of quality is all about how satisfied is the customer with the experience. The consumers of McDonalds are always happy there have been numerous surveys about customer satisfaction and the issues that have been brought up by the consumers have all been addressed with time and this is the reason the customer centric approach helps McDonalds retain its market.
• The other aspect of quality is the quality of the procedure that leads to development of the product for customer use. Mc Donald's inside operations are very efficient and hygienic and thus the customers get an end result that rewards as being a highly satisfying experience.

Speed

Speed is all about how efficient the system is. If the processes of the operations are fast then the goods to the customer will be delivered on time and there will no issue about the delays. The speed aspect of the performance objectives can also be divided into two aspects (Bhadur, 2008).

• The external speed: This speed is the one that is displayed by the operators when they are serving the customers. Mc Donald's is a fast food restaurant and hence they need to be utterly fast to be able to serve the customers as per their demands. The employees need to be focused on how much quickly they can manage the resources that is provided to them and handle the oncoming customers. The employees have rush hours identified and they take appropriate measures to have a satisfied clientele.

• The internal speed is how quickly the resources are being replenished. The employees working in the kitchen send out queries to their warehouses and it is the duty of the warehouse managers to provide with the required things. If there is lack of coordination or delays then the outward service provision that is the service being provided to the customers get affected. It is the duty of the restaurant manager to identify the probable amount of buns, patties, fries, disposable utensils and cold drinks that might be required at their branch and communicate it to the warehouse. This helps in maintain the pace of service provision to the customers.

Dependability

The word Dependability can be defined as 'being on time'. In simple and more explanatory words it means service provision to the customers on time be it in the form of a tangible product or an intangible service. The concept might seem simple but it gets very difficult to measure. There are external as well as internal affects of this aspect of performance objective as well (Bhadur, 2008):

• Externally dependability means that the customer is getting the product on time. In a fast food industry the customers are a little less patient with the time it takes for the food to be delivered on their table. In Mc Donald's, it usually self service and thus the person in charge at the counter needs to make sure that the time a customer spend standing at the counter is as much less as possible so that they remain satisfied.
• Internally dependability is directly related to the costs that the company is facing. In many cases when the time that is being spent on various operations is reduced the company saves a lot of money and as well as the process's efficiency is increased. If there are delays the company starts incurring losses both in the form of customers and in the form of far more expensive processes.

Flexibility

Flexibility is a word that can be defined in many ways and from various aspects. If we take it from the perspective of operations management, flexibility means adapting to the situation that is prevalent and making most of it. Fast food industry is too fast paced to allow any kind of delays in the adaptability feature. It is highly recommended to make the best of the situation and help in the continuation of the procedure (Bhadur, 2008).

Cost

Cost in itself a dependent feature. It is dependent upon all the other performance objectives. Once the costs of other features are reduced the overall cost of the function gets reduced and hence the business becomes profitable. It is extremely necessary that the internal costs are reduced so that the profit margin increases. Since McDonalds is a fast food restaurant the cost is usually very neck to neck and hence to increase the overall benefit, the whole process should be made very efficient and fool proof to maximize the cost effectiveness and profit (Bhadur, 2008).