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Supply Chain ManagementHow does the world’s premier fast food restaurant do

it?

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Highlights

• Corporate vision

• Supply chain strategy

• Supply Partners

• Outsourcing

• New markets

• Menu innovation

• Social Media

• Sustainability

• Fast food vs. nutrition

• Marketing

• Outlook

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Corporate vision

““Our number one priority continues to be satisfying our customers‘ needs by serving great-tasting, high-quality food in contemporary restaurants… We will

continue to build customer trust through our commitment to sustainability—including nutrition

and well-being, a sustainable supply chain, environmental responsibility, employee experience,

and the community.”

–McDonald’s Corporation 10K (2012)

Donald ThompsonPresident and CEO

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Global supply chain strategy

• McDonald’s global supply chain is world-class

• Thousands of supply partners globally• purchase food, packaging, equipment and other goods

• Handshake agreements—no complicated contracts• Focus on building long-term relationships with suppliers

• Strict guidelines ensure stores get the best products• High quality standards and product specifications

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Global supply chain strategy

• A quality leadership board (technical, safety and supply chain specialists) provide guidance for all aspects of quality

• Enforce compliance, quality centers & spot inspections

• Supplier Workplace Accountability

• Supplier Code of Conduct

• Corporate publishes a list of approved all suppliers—stores choose local suppliers whenever possible• Product freshness is assured

• Minimize transport cost and time

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Supplier partners

• McDonald’s defines six supplier attributes: • Assured supply of product

• Low cost and best value

• Technical competencies

• System player

• Shared values

• Management excellence

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Supplier partners

• Mutual transparency is a success factor—builds trust• Information is openly shared

between stores and vendors

• Partnership culture

• The three-legged stool• Corporate staff

• Franchisees

• Supplier base

Supplier base

Corporate staff

Franchisees

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Supplier partners

• McDonald’s works closely with suppliers to encourage• Innovation; assure best practices; continuous improvement

• Scales of economy; SC infrastructure; risk management

• Food safety is directly linked to traceability

• McDonald’s tracks of the origin of each product, which enables the company to control the links in its supply chain

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Procurement Warehousing Transportation Retailing of food product

Cold Chain

• McDonalds’ supply chain has an entire cold chain network for the movement of perishable goods

• They also employ hygiene regulations; product handling standards; emergency and contingency plans; risk and crisis management

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Supply chain IT strategy

• McDonald’s uses qualitative forecasting, e-Foodservice Network and proprietary ERP to flow information• Emac Digital—Internet procurement site designed for

McDonald's Corporation's franchises

• Optimizing sourcing; manufacturing operations; and distribution costs

• Dedicated 3PL to keep the product moving

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Outsourcing

• McDonald’s does not supply food, paper or related items to stores

• Their business model consists of a 100% outsourced supply chain

• Three uncompromised outsourcing principles are trust and collaboration between: • The brand; the owners or operators; and the

suppliers

“McDonald’s believes that we should outsource everything to a company who are experts in their subject matter, and then monitor their performance in a proper fashion so that Key Performance Indicators (KPIs) are not affected at all.”—Mr. Upadhye (McD India)

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Global outsourcing—India

Tier 2• Suppliers• Spices, oils,

systems

Tier 2• Farmers• Lettuce,

potatoes, etc

Tier 2• Poultry

farmers• Chicken, eggs

DC Store

Store

Store

Tier 1Food processing

company Consumer

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Taking on new markets

• The company was a fast food frontrunner—with early entry and dominance in global markets

• Several obstacles must be overcome to expand internationally

• Logistics challenges

• Cultural challenges

• Regulatory challenges

• Supplier challenges

• Adhering to strict quality standards

• Product consistencyMcLimits? No chance!

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Menu innovation

• Global fast food players must be flexible• In their offerings and approach to different markets

• Subject to strong cultural influences• Religion; heritage; culinary tastes

• Also impacted by health and nutrition concerns; social pressures

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Social media strategy

• Does McDonald’s successfully incorporate social media into their go-to-market strategy?

• Does 29 million ‘likes’ answer this question?!

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Social media strategy

• The company uses Facebook to bolster brand recognition• Marketing promotions

• Promoting nutrition

• Sustainability education

• These factors have a major impact on product demand • can stress supply chain capacity

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Global sustainability vision

“profitability yields high-quality safe products without supply interruption while leveraging

our leadership position to create an net benefit by improving ethical, environmental, and

economic outcomes.”

—Jessica Droste Yagan Senior Manager for Sustainable Supply

Ethical responsibility

Environmental responsibility

Economic responsibility

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Sustainability

• Global governance structure—Sustainable Supply Steering Committee• Comprised of world-wide SCM reps; social responsibility; and corporate

communications

• Energy efficiency –Increase energy efficiency in restaurants to reduce costs and be more ecofriendly

• Sustainable Packaging & Waste Management – Explore ways to reduce impact of our consumer packaging and waste—82% recycled products used in packaging

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Sustainability

• Green Restaurant Design – Enhance current building standards to incorporate further opportunities for efficiency and innovation in the design

• All of McDonald’s fish product is certified sustainable by the Marine Stewardship Council

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McFatty or McHealthy?

• McDonald’s has done an excellent job transitioning from fast to balanced food

• Their third main competitive baseis nutrition• Recognize that health trend is increasing

in popularity

• They’ve recently focused extraordinary efforts to promote new nutritious choices

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McFatty or McHealthy?

• Global Advisory Council on Balanced Lifestyles• Consists of exercise & obesity specialists,

environmentalists, and other professionals

• Leveraging web-based technology to educate health-conscious consumers • McDonald’s website lets a user select any combination of

menu items, place the items in the online bag, and conduct a nutritional analysis on their selections (“Bag a McMeal”)

–mcdonalds.com

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Marketing strategies

• Product: The company needs to continue introducing new products and closely monitor life-cycles • Some of their iconic products are timeless, i.e. Big Mac

• Price: Current product price points are right

• Promotion: Pursue a balanced marketing mix covering all types of marketing communications• Continued emphasis on Social Media; interactive game with

rewards (Monopoly); endorsement (Shrek); sponsorships

• Place: Be visible and accessible to the customer base• i.e. The partnership with Chinese gas station chain Sinopec

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Outlook

• McDonald’s may have reached market maturation in its US market, but it continues to expand globally

• The company has a can-do, will-do culture• They’re innovative and flexible

• They’re uncompromising in their strict standards

• Ray Kroc’s famous quote still holds true, “None of Us is as Good as All of Us.” • There are so many diverse stakeholders invested, it can’t fail

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References

• Earley, et al. (2004) McDonald’s Restaurant

• (2012) McDonald’s Corporation 10K

• (2010) Inside the McDonald’s Empire. CNBC. http://www.youtube.com/watch?v=MNtludttRh8

• http://www.aboutmcdonalds.com/mcd/sustainability/our_focus_areas/sustainable_supply_chain.html

• http://www.supplychainbrain.com/content/industry-verticals/food-beverage/single-article-page/article/mcdonalds-attributes-much-of-its-success-to-working-closely-with-suppliers/

• Arnseth, L. (2011). Supplying the golden arches. http://www.ism.ws/pubs/ISMMag/ismarticle.cfm?ItemNumber=21980

• http://www.ism.ws/pubs/ISMMag/ismarticle.cfm?ItemNumber=10959

• Cheema, P. (2012) The Big Idea; McDonald’s Unravels its Supply Chain

• www.mcdonalds.com

• http://www.mcdonalds.co.uk/content/dam/McDonaldsUK/People/Schools-and-students/mcd_marketing.pdf