Valuable Competitive Strategy of McDonalds - Research Paper Example

?Running Head: Company Analysis: McDonalds Company Analysis: McDonalds [Institute’s Company Analysis: McDonalds McDonald’s competes within a demanding market division by offering need-fulfilling products to consumers. To maintain its viability, McDonald’s uses a valuable competitive strategy to make it prominent against rivals. Even though McDonald’s competes on quite a lot of bases such as pace, price, and nourishment; their “strongest priority is making customers happy” (Hartel, 2012). It benefits from a very resourceful supply chain because it integrated an “electronic Foodservice Network” (Hartel, 2012) (eFS Network). In an eFS Network, a business, which functions as a B2B marketplace, assists sales as well as acquisitions to the foodservice industry. Main Competitive Base Identifying the value of the supply chain in preserving quality is one of McDonald’s competitive again, and consequently McDonald's plans to form long-term dealings with a restricted amount of suppliers. Suppliers are generally scrutinized to ascertain that they can meet McDonald's necessary standards. Repeat orders indicate that suppliers can be sure of continued existence and development, whereas McDonald’s constantly enjoys consistent, high quality products. McDonald's highlights its firm principles supported by quality, value and hygiene. McDonald’s as well records the source of each product, which allows the business to manage each link within its supply chain (Facella & Genn, 2008). Figure 1: McDonald’s food supply chain structure (Source: McDonald’s) Figure 2: Length of McDonald’s supplier relationships in UK and US (Source: McDonald’s) McDonald’s lately went through drastic strategy alterations to serve their customers in an enhanced manner. In its earlier system, the company would prepare several sandwiches at once, and place in a warming bin until bought by a consumer. Here, management had to forecast how much foodstuff had to be set aside accurately. Accurate forecast had to be employed because if there were not an adequate amount of foodstuff placed on hold, this would generate the issues of rise of waiting times for consumers and a lot of food would create waste of expired products. McDonald’s radically transformed their approach with the intention of staying competitive with other fast food businesses. Inventory Management McDonalds follows a Just in Time (JIT) method of inventory management, which is the system of delivering produce to consumers the moment they have ordered for it, with least delay between order placement and receiving it. McDonalds does not start to cook or preheat its stuff until it gets a customer order. This makes the finished food item in the inventory for the smallest possible time. This facilitates suitable inventory management and decreases leftovers while providing maximum satisfaction to the consumer. Some of the obvious benefits of shifting to JIT system are; (1) Better quality of food - The burgers are prepared fresh for the consumer and therefore, offer utmost satisfaction. Increased customer satisfaction creates consumer retention as well as improved sales. (2) Improved customer service: McDonalds earlier used to make “special orders for customers while dishing out precooked burgers from the inventory to most customers. Hence such special orders were dreaded by the staff and used to freak them out” (Lai & Cheg, 2009); the staff, now following implementation of the JIT system, is more composed and provides improved service to the consumers. This improved customer service is conditional on the capacity to make burgers quicker. McDonalds is capable of dealing with the demand a lot better. It does not have to waste time in determining the approximate sales hour by hour and maintaining inventory. (3) Improved costs: The holding expenses for the raw material such as “bread, beef, cheese, chicken” (Lai & Cheg, 2009) is quite high due to their spoilage costs. In the previous system, McDonalds used to keep a high inventory resulting in quicker orders but this leads to a lot of unsold foodstuff because of the small shelf life of beef and other similar items once being cooked. The food was then sold at an increased price to include the losses in wasting unsold food. (4) Enhanced handling of raw material handling: With the JIT system, McDonalds does not need to acquire the raw materials in large quantities. This lessens every day costs largely and ascertains fresh as well as high quality raw material repeatedly (Harris, 2009). McDonald’s has mastered Just-in-time inventory method by a commitment of major investment in technology as well as resources to plan a system that will create reliable quality food with smallest possible inventory, with a production procedure that “maximizes efficiency and minimizes waste” (Harris, 2009). Figure 3: McDonald's 'Just in Time' Inventory System - Process Overview Increased holding costs as well as low ordering costs were the aspects that brought the Just in Time system to the company. The capacity to decrease the operating costs makes JIT an extremely practical solution. It has as well led them to decrease drastically the security costs. Safety time was there because of unpredictability in demand as well as unpredictability in lead times from providers of raw material. JIT facilitates the decrease in the lead times and therefore, safety stock. JIT offers for a smart and cost-effective method; however, it is quite important to consider the threats and analyze the related outcomes that might take place. An extremely quick burger making technology makes JIT a practical alternative for McDonalds but this might not stand true for other rival businesses as they might face difficulties in dealing with large orders via JIT system. Lean Management Increasingly severe rivalry in addition to consumer demand for excellence and value within the fast food market has had a major influence on McDonalds. Simultaneously, the financial depression has increased the common need to decrease costs. McDonalds have started accomplishing this by implementing an increasingly ‘lean’ approach. Figure 4: McDonald’s supplier improvements in environmental management (Source: McDonald’s) Figure 5: Drop in Total average energy consumption by Distribution Centres (Source: McDonald’s) The notion of ‘lean’ production was created broadly by the Toyota during the last part of 1970s, leading to a set of essential ways that form the entire approach. By checking each of these sequentially, one can finds out how productively McDonalds have used this approach to distribute its services to the customer. Integral to lean approach (often termed as just-in-time) is the objective of meeting demand immediately, with ideal value and no waste. Therefore, seven sources of waste were identified, which the lean business should attempt to remove; production in excess, waiting time, transportation, process, inventory, motion and defectives. 1. Production in Excess: Traditionally, McDonalds would prepare finished sandwiches in huge sets earlier than time, and keep them warm and ready for sale. Whereas this guaranteed a fast and consistent service, it as well gave them a bad standing for quality and waste. As market share started to drop, a new approach was adopted by the company. Currently, a limited supply of patties, salad items and side orders is pre-prepared; however, everything is combined into finished sandwiches once the order is placed. The length of this practice is below three minutes altogether, which allows an immediate reaction to any unpredicted alteration in demand, and hence lessening the risk of production in excess. Recent technology has helped the ‘made to order’ practice by reducing waiting times, both with respect to production as well as for the consumer. A “computerized system corresponds the customer’s order directly to the production team, and the contemporary cooking equipment can prepare a batch of hamburger patties in less than a minute” (Deng & Cheng, 2012). 2. Waiting Time: McDonalds have a multi-skilled staff, so they can as well assemble other components of the order in this time. These aspects allow the restaurant to implement a lean approach while offering a quick and prompt service - a key performance evaluator in the industry. 3. Transportation, Process & Motion: Transportation waste takes place due to excess managing of supplies around the operation. McDonalds have turn into leader of the fast-food kitchen design, which provides itself well to this phase of lean approach. The “Speedy System” (Seddon et al, 2011) initially planned by the McDonalds and supported by an automobile assembly line, is still in position today. This method joins the complete operation so that every preparation facility is connected in order of the assembly line within which every employee has a particular job. Being in the vicinity to the counter itself keeps transportation waste at a least possible level. This relates with the view of process as well as motion waste; the assembly line removes any needless procedure and every job is shortened to guarantee that value is added all over. 4. Inventory: the lean organisation should eventually get rid of all inventories, as holding stock mostly requires an opportunity cost as well as wastage. However, McDonalds should also be able to meet demand constantly. Hence, other than the aforementioned procedures, a refined stock control system handles this process throughout the supply chain. 5. Defectives: Lean approach depends greatly on getting things right first time without any defect. McDonalds spends a lot in personnel development and encouraging them to accomplish the highest values. Basic tasks as well help in lessening the quantity of faulty goods. The restaurant also has a strategy of ‘first in, first out’, guaranteeing that the buyer gets fresh food consistently (Suarez-Barraza et al, 2012). McDonalds greatly highlights working as a team and incorporates everyone from suppliers to crewmembers with the aim of promoting a lean customs all over the business. The assembly line method promotes a high level of individual dependability for every task, whereas multi-skilling allows employees to become skilled at all phases of the operation. Lean approach is basically supported by a set of ideals, for instance, ‘faultless value’ and ‘no waste’. It would be impractical to imply that McDonalds has realized them completely; nonetheless, the belief is that the business should attempt to get closer to them eventually. Therefore, incessant - not transient - development is a crucial component on which the business places a continuous focus by means of regular reviews and sharing best practices. References Deng, C. Q., and Cheng, G. P. (2012). Cold Chain Management Based on the Viewpoint of a Low-Carbon Economy. Applied Mechanics and Materials, Vol. 178, pp. 361-364. Facella, P., and Genn, A. (2008). Everything I Know About Business I Learned at McDonald's: The 7 Leadership Principles that Drive Break Out Success. McGraw-Hill. Harris, P. S. (2009). None of Us is As Good As All of Us: How McDonald's Prospers by Embracing Inclusion and Diversity. Wiley. Hartel, M. (2012). McDonald's Supply Chain Management. GRIN Verlag. Lai, K. H., and Cheng, T. E. (2009). Just-in-time Logistics. Gower Publishing Company. Suarez-Barraza, M. F., Smith, T., and Dahlgaard-Park, S. M. (2012). Lean Service: A literature analysis and classification. Total Quality Management & Business Excellence, Vol. 23(3-4), pp. 359-380. Seddon, J., O’Donovan, B., and Zokaei, K. (2011). Rethinking lean service. Service Design and Delivery, 41-60. Read More

 

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