Supply Chain is one of the critical factors for the smooth functioning of any business in the world. When talking about fast food restaurant or business, McDonald’s Supply Chain model is one of the highest precisions. It is this unmatched Supply Chain Structure, which not just ensures on time delivery of raw materials and supplies to McDonalds but also enables it to cut down on its cost and maximize profitability along with maintaining highest quality standards of its products. From the study done in India, the level of commitment of McDonald’s has been done even before it set up its first restaurant in the country.
Most of the cost and resource is use to set up its delivery mechanism. McDonald’s initiative to set up an efficient supply chain and deploy state of art technology changed the entire Indian fast food industry and raised the standards of performance to international levels. Management Issues McDonald’s have a large number of direct suppliers companies that make or deliver final products for to the restaurants as well as an even larger number of indirect suppliers companies and farms that grow or process the ingredients that are eventually delivered to the direct suppliers.
McDonald’s work closely with direct suppliers to continuously improve the practices that impact the employees, the communities, the environment, own suppliers, and the customers. The Social Accountability program and Environmental Scorecard is a review of adherence to the programs that related to sustainable supply, are included in McDonald’s Supplier Performance Index. It is used as the primary evaluation tool used to evaluate the suppliers overall performance in serving McDonald’s needs. McDonald’s expected their suppliers to share and apply their vision of sustainable supply to their own suppliers (indirect suppliers).
They also ask them to help them understand industry wide sustainability challenges and opportunities related to the ingredients they use to make their products. McDonald’s don’t have direct control over those issues, but they can use the size and recognized brand to be a positive influence by raising questions, bringing people to the table, and encouraging improvement. The success of McDonalds India was achieved by sourcing all its required products from within the country. To ensure this, McDonalds developed local businesses, which can supply it highest quality products.
Distributor / Direct Supplier Cold Chain was one of the unique concepts of McDonalds supply chain in India, on which it had spent more than six years to get the system into place. This system brought about a veritable revolution, immensely benefiting the farmers at one end and enabling customers at retail counters get the highest quality food products, absolutely fresh and at great value. Through its unique cold chain, McDonalds has been able to both cut down on its operational wastage, as well as maintain the freshness and nutritional value of raw and processed food products.
This has involved procurement, warehousing, transportation and retailing of perishable food products, all under controlled temperatures. From the Indian McDonald’s study, McDonald’s local supply networks through Radhakrishna Foodland, which operates distribution centers for McDonald’s restaurants in India. The distribution center has focused all their resources to meet McDonald’s expectation of ‘Cold, Clean, and On-Time Delivery’ and plays a very vital role in maintaining the integrity of the products throughout the entire cold chain.
Ranging from liquid and perishable products, the distribution center receives items from different parts of the country. These items are stored in rooms with different temperature zones and are finally dispatched to the McDonald’s restaurants on the basis of their requirements. The company has both cold and dry storage facilities with capability to store products up to -22? C as well as delivery trucks to transport products at temperatures ranging from room temperature to frozen state.
An integral part of the Radhakrishna Foodland specializes in handling large volumes, providing the entire range of services including procurement, quality inspection, storage, inventory management, deliveries, data collection, recording and reporting. It also has the advantage as a one stop shop for all distribution management services, dry and cold storage facility to store and transport perishable products at temperatures up to -22 Degree Celsius, and effective process control for minimum distribution cost.
As distribution centers, the company was responsible for procurement, the quality inspection program, storage, inventory management, deliveries to the restaurants and data collection, recording and reporting. Value added services like shredding of lettuce, re-packing of promotional items continued since then at the centers playing a vital role in maintaining the integrity of the products throughout the entire cold chain. Others Major Suppliers / Indirect Dynamix Dairy Industries (Supplier of Cheese)
Dynamix has brought immense benefits to farmers by setting up a network of milk collection center equipped with bulk coolers. Their factory has fully automatic international standard processing facility. Other than that, it has the capability to convert milk into cheese, butter/ghee, skimmed milk powder, lactose, casein & whey protein and humanized baby food. It also has stringent quality control measures and continuous Research & Development. The cheese milk is store in one large stainless steel cooler and chilled immediately to two degrees Celsius to stop bacterial growth and preserve freshness.
From that point onwards, until just before the burger is actually served in a McDonald’s restaurant hundreds of kilometers away, the temperature is never allowed to increase. Trikaya Agriculture (Supplier of Iceberg Lettuce) Trikaya Agriculture, a major supplier of iceberg lettuce to McDonald’s India, is one such enterprise that is an intrinsic part of the cold chain. Exposure to better agricultural management practices and sharing of advanced agricultural technology by McDonald’s has made Trikaya Agriculture extremely conscious of delivering its products with utmost care and quality.
Initially lettuce could only be grown during the winter months but with McDonald’s expertise in the area of agriculture, Trikaya Farms in Talegaon, Maharashtra, is now able to grow this crop all the year round. McDonald’s has provided assistance in the selection of high quality seeds, exposed the farms to advanced drip-irrigation technology, and helped develop a refrigerated transportation system allowing a small agri-business in Maharashtra to provide fresh, high-quality lettuce to McDonald’s urban restaurant locations thousands of kilometers away.
The pack house, pre-cooling and cold room are located at the farms itself, ensuring no delay between harvesting, pre-cooling, packaging and cold storage. With this cold chain infrastructure in place, Trikaya Agriculture has also a plan to export this high value product to other international markets, especially to McDonald’s Middle East and Asia Pacific operations. Vista Processed Foods Pvt. Ltd. (Supplier of Chicken and Vegetable range of products including Fruit Pies) Vista Processed Foods Pvt. Ltd. , McDonald’s suppliers for the chicken and vegetable range of products, is another important player in this cold chain.
It has a world class infrastructure at their plant that has separate processing lines for chicken and vegetable foods, capability to produce frozen foods at temperature as low as -35 Degree Celsius to retain total freshness, and international standards, procedures and support services. Technical and financial support extended by OSI Industries Inc. , USA and McDonald’s India Private Limited have enabled Vista to set up world-class infrastructure and support services. This includes hi-tech refrigeration plants for manufacture of frozen food at temperatures as low as – 35° C.
This is vital to ensure that the frozen food retains it freshness for a long time and the ‘cold chain’ is maintained. Amrit Food (Supplier of long life UHT Milk and Milk Products for Frozen Desserts) Amrit Food is an ISO 9000 company and manufacture of milk products. The factory has state of the art fully automatic machinery requiring no human contact with product for total hygiene. The factory also has installed capacity of 6000 liters per hour for producing homogenized UHT (Ultra High Temperature) processed milk and milk products.
Other than that, it has strict quality control supported by a fully equipped quality control laboratory. All suppliers complied with Indian government regulations on food, health and hygiene while continuously maintaining McDonald’s recognized standards. As the ingredients move from farms to processing plants to the restaurant, McDonald’s Quality Inspection Program (QIP) carries out quality checks at over 20 different points in the Cold Chain system. Setting up of the Cold Chain has also enabled it to cut down on operational wastage Conclusion The relationship between McDonald’s and its suppliers is mutually beneficial.
For example in India, as McDonald’s expands, the supplier gets the opportunity to expand his business, have access to the latest in food technology, exposure to advanced agricultural practices and the ability to grow or to export. There are many cases of local suppliers operating out of small towns who have benefited from their association with McDonald’s.
Reference
http://www. mcdonalds. com/us/en/home. html http://www. icmrindia. org/free%20resources/casestudies/McDonald%20food%20chain. htm http://www. scribd. com/doc/21803927/McDonalds-INDAIN-supply-chain
