McDonald's Food Chain

Details


Themes: Supply Chain Management
Period : 1996 - 2002
Organization : McDonalds
Pub Date : 2002
Countries : Sweden
Industry : Food, Beverage and Tobacco

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Case Code : OPER001
Case Length : 10 Pages
Price: Rs. 300;



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Outsourcing at its Best Contd...

TABLE I
OUTSOURCING THE INGREDIENTS

Cheese

 Dynamix Dairy Industries Ltd., Pune

Dehydrated onions

 Jain Foods, Jalgaon

Iceberg lettuce

 Trikaya Agriculture, Pune

Chicken patty

 Vista Foods, Taloja

Veg. Patty, Veg. nuggets, Pineapple/Apple pie

 Kitran Foods, Taloja

Chicken (dressed)

 Riverdale, Talegaon

Buns

 Cremica Industries, Phillaur

Eggless mayonnaise

 Quaker Cremica Pvt. Ltd., Phillaur

Sesame seeds

 Ghaziabad

Iceberg lettuce

 Meena Agritech, Delhi

Fish fillet patties

 Amalgam Foods Ltd., Kochi.

Iceberg lettuce

 Ooty Farms & Orchards, Ooty

Vegetables for the patties

 Finns Frozen Foods & Jain Foods (Nasik, Jalgaon)

Mutton and mutton patties

 Al Kabeer, Hyderabad

Source: Business India, October 4, 1999.

McDonald's convinced its suppliers to set up two separate production lines for chicken and vegetable patties, keeping in the mind the link between food and religion in India. This was in sharp contrast with its global practice, where McDonald's suppliers produced all types of patties from the same line. These two production lines were housed in two different rooms and the only way a worker could cross over from one line to the other was by passing through the shower room. This eliminated all chances of contamination. However, from a supplier's point of view, more lines meant a reduction in capacity utilisation and high cost of production. To minimise costs, McDonald's helped Vista & Kitran Foods produce derivatives of chicken and vegetable nuggets (not based on McDonald's recipe) for Indian hotels and restaurants and thereby reach new markets. Vista & Kitran's higher margin and higher capacity utilization for non-McDonald's products helped it remain cost competitive. McDonald's philosophy had been 'one world, one burger' i.e. the McDonald's burger should be consistent in terms of cost and quality throughout the world. To ensure this, all of McDonald's suppliers followed the internationally acclaimed HACCP systems wherein both inputs and finished goods were subjected to chemical and microbiological tests.

This kept food fresh and free from contamination. Apart from this, the entire production line was automated using sophisticated technology, barring only the final compilation of the bun, cheese and patty - which was done by hand.

Questions for Discussion

1. What is a 'Cold Chain'? Explain how McDonalds managed the components of the cold chain. Critically comment on the role played by the unique centralized distribution system in McDonald's supply chain.

2. 'McDonald's is one of the few companies that has placed substantial emphasis on effective and efficient supply chain management system as a means to leverage for competitive advantage.' In the light of this statement, analyse the steps taken by McDonalds to standardize its supply chain in India.

Exhibits

Exhibit I: McDonald's - Financial Performance Summary
Exhibit II: McDonald's in Mexico
Exhibit III: McDonald's in Moscow