McDonald's Food Chain

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Case Details:

Case Code : OPER001
Case Length : 10 Pages
Period : 1996 - 2002
Organization : McDonalds
Pub Date : 2002
Teaching Note : Available
Countries : Sweden
Industry : Food, Beverage and Tobacco

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"Our growth plan for the next three years is more a function of getting our logistics and cold chain right rather than going to far off places."

- Amit Jetia, managing director, McDonald's India, Mumbai Joint Venture, in 2000.

Introduction

It was early evening and one of the 25 McDonald's outlets in India was bustling with activity with hungry souls trooping in all the time. No matter what one ordered - a hot Maharaja Mac or an apple pie - the very best was served every time.

But did anyone ever wonder as to how this US giant managed the show so perfectly? The answer seemed to lie in a brilliantly articulated food chain, which extended from these outlets right up to farms all across India.

US-based fast food giant, McDonald's success in India had been built on four pillars: limited menu, fresh food, fast service and affordable price. Intense competition and demands for a wider menu, drive-through and sit-down meals - encouraged the fast food giant to customize product variety without hampering the efficacy of its supply chain.

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Around the world (including India), approximately 85% of McDonald's restaurants were owned and operated by independent franchisees. Yet, McDonald's was able to run the show seamlessly by outsourcing nine different ingredients used in making a burger from over 35 suppliers spread all over India through a massive value chain.

Between 1992 and 1996, when McDonald's opened its first outlet in India, it worked frenetically to put the perfect supply chain in place. It trained the local farmers to produce lettuces or potatoes to specifications and worked with a vendor to get the perfect cold chain¹ in place. And explained to the suppliers precisely why only one particular size of peas was acceptable (if they were too large, they would pop out of the patty and get burnt).

These efforts paid off in the form of joint ventures between McDonald's India (a 100% wholly-owned subsidiary of McDonald's USA) and Hardcastle Restaurants Pvt. Ltd, (Mumbai) and Connaught Plaza Restaurant (New Delhi).

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1] A cold chain refers to the warehousing, transportation and retailing of products under controlled temperatures. Such a chain is necessary for ice creams, frozen vegetables, processed meats, dairy and bakery products. While frozen foods need sub-zero temperatures up to -20°C, products like butter, which require chilling, need about 0-4°C.