Problems:

• Mexico could not grow potatoes that met McDonald's high standards.
• The country had few distribution centers, which were located at different parts.
• Haulage from the distribution center to the restaurant exceeded 1000 miles.
• There were uncontrolled highway robberies.
• Contract carriers (transporters) did not have standard size vehicles and were unreliable.

A study conducted by McDonald's Mexican subsidiary, Sistemas de Mexico, revealed that Mexico could not grow potatoes that met McDonald's high standards. Thus, frozen potatoes for McDonald's famous fries in Mexico came from the Western United States and Canada. This created the need for logistics services, or what might be called a Golden Arches supply chain.

Once the products crossed over to Mexico, they were sent to one of the two distribution centers in Mexico City or all the way to the other end of the country in Cancun. From the two locations, McDonald's consolidated loads from the United States and Canada as well as from Mexico, and sent trucks to more than 170 restaurants in 30 cities across Mexico. Distribution was handled with three-section trailers: one section for frozen food, one for refrigerated goods and one for dry goods. While a typical haul from a distribution center to the restaurant was about 100 miles in the United States, the trip could exceed 1,000 miles in Mexico. This was because there was not enough restaurant density in Mexico to maintain more distribution centers.

The distribution centers, which were set up on the basis of the demand, were operated by Martin-Brower de Mexico, a subsidiary of McDonald's largest distribution centre operator in the United States. Mexico City accounted for about 40% of McDonald's total demand. Cancun was chosen because of the large number of US tourists in the resort city. Because of Mexico's problems with highway robberies, the new trailers were left undecorated for security purposes.

McDonald's operated with Martin-Brower under a handshake agreement and a strategic alliance, although McDonald's did not have any ownership of the center. The distribution center managed its own fleet of trucks instead of relying on contract carriers. In Mexico, such carriers were unreliable and often did not have standard-sized equipment, which was a key component of the quality offered by McDonald's. Nevertheless, during special promotions at restaurants, the centers often turned to outsourced carriers. Outside carriers had to comply with refrigeration standards, which were generally not fully developed. Some carriers handled frozen goods, but there were only a handful of them.