systems engineering study on mcdonald's baclaran branch

Systems Engineering Study:

McDonald’s Baclaran, Pasay CityMcPhilip’s Food Industries, Inc.

The Food Service Industry

•The industry which deals with preparing food items or products refers to the food service industry.

•Restaurants and fast foods mainly contribute to the food service industry.

•“Fast food” generally refers to the type of restaurants that sell quick, inexpensive take-out food.

•Restaurants and fast foods are meant for same services except that restaurants offer a large menu including a variety of cuisines as compared to fast foods, which usually offers a small menu with quick service.

The Food Service Industry

•Fast food retains its position as the largest and the fastest-growing category in the Philippine consumer foodservice industry.

•During 2012, this category reported total foodservice revenue of Php 121.9 billion, taking 30% of total value sales in consumer foodservice.

•Filipinos spend approximately 12% of total income eating out and the sector is valued at $US3 billion, with growth of 10%-15% in the last decade. Traditional food service formats still enjoy a majority market share in the Philippines, but the modern food service market, driven by convenience and price and dominated by fast food restaurants/chains such as Jollibee, McDonalds and ChowKing, is increasing its presence with speed.

Intensity of Rivalry

Threat of Substitute Products

Bargaining Power of

Consumers

Bargaining Power of Suppliers

Threat of New Entrants

Porter’s 5-Forces Model of Competition



Bargaining Power of

Consumers




Strong

Intensity of Rivalry: STRONG

-Very competitive fast food industry

-Competitors advertising capabilities

-Location of outlets

-Major competitors (Jollibee, KFC, Chowking, Burger King)

-Operators compete on the basis of price, location, food quality and consistency, style and presentation, and food range.

-New products are constantly being introduced because variety greatly affects consumer demand.

-Service is also expected to increase in quality.



Bargaining Power of

Consumers




Strong

Strong

Threat of Substitute Products: STRONG

-Filipinos prefer “Lutong-bahay”

-Other dishes serving pasta, pizza, rice, course meals, heavy meals

-Diet foods

-Convenience stores and groceries

-Fast foods are discretionary items that are easily substituted by other types of meals.

-Since customers have become more aware of the health effects of fast foods other substitutes are becoming more and more attractive.

- Other fast food restaurants serving the same food.



Bargaining Power of

Consumers




Strong

Strong

Weak

Threat of New Entrants: WEAK

-Regulation of limit

-Difficult to compete with established leaders in the industry.

-The fast food industry is made up of large chains that already count with economies of scale, distribution channels, and technological advances.

-It is very unlikely that the new entrants will take any significant market shares.

-Fast food giants like McDonald’s count with brand loyalty that makes it hard for new entrants to pose a threat.



Bargaining Power of

Consumers




Strong

Strong

Weak

Weak

Bargaining Power of Customers: WEAK

-Highly competitive with product pricing.

-Fast food already offer selections at various points that cater to all budgets.

-Although customers do not have the power to influence price directly, they influence it greatly.

-With the social media and health concerns customers can readily supply opinions and influence others with these.

-All companies in the fast food industry must stick to social regulations. Spend in enhancing their brand reputation, and promoting quality standards so that customers feel safe and content when consuming their products.



Bargaining Power of

Consumers




Strong

Strong

Weak

WeakModerate

Bargaining Power of Suppliers: MODERATE-Having many food suppliers they have little influence of the industry.

-Suppliers closer to the operators influence transportation costs.

-Supplier relations are very important to this industry.

-The prices charged by suppliers are the major factors that affect net income.

-Although the supplies are commodities and suppliers do not have the ability to charge more than the market, operators do not have the chance to bargain for cheaper products or large quantity discounts.

-The fact that suppliers do not have the ability to increase prices but operators do not have the ability to bargain makes supplier power moderate in the fast food industry.

External Forces Analysis: POLITICAL

-Its international operation is highly affected due to individual countries policies enforced by its government.

-There are policies regarding regulation forbidding the use of materials like plastic and Styrofoam.

External Forces Analysis: ECONOMIC

-Fast food retains its position as the largest and the fastest-growing category in the Philippine consumer foodservice industry.

-During 2012, this category reported total foodservice revenue of Ps121.9 billion, taking 30% of total value sales in consumer foodservice.

-Growth in terms of outlets, transactions and value sales remains vibrant. Outlet growth was estimated to be at 8% in 2012 while transactions and value sales ballooned by 9% and 11% respectively.

External Forces Analysis: SOCIAL

-Filipinos spend approximately 12% of total income eating out and the sector is valued at $US3 billion, with growth of 10%-15% in the last decade.

-Traditional food service formats still enjoy a majority market share in the Philippines, but the modern food service market, driven by convenience and price and dominated by fast food restaurants/chains such as Jollibee, McDonalds and ChowKing, is increasing its presence with speed.

External Forces Analysis: TECHNOLOGICAL

-The food industry has increasingly developed by adopting more advanced technologies that can deliver us healthier, fresher and more varied food.

-Advanced technologies are used in all the stages of food production.

-Operations is infused with new technology:-Uses new POS systems

-The way advertising has improved not only through newspapers but also through television and in online social media networks.

-The delivery can not only be made through phone deliver but also through online delivery.

External Forces Analysis: ENVIRONMENTAL

-McDonald's is growing day by day by increasing the number of restaurant. The main source of ingredient and packaging is nature.

-The continuous and enormous use of natural resources can disturb the balance in the ecosystem.

External Forces Analysis: LEGAL

-Different country got own law is impacting McDonald's. Health and safety has a distinct impact on the functioning of chains in different countries.

-Other legal requirements that the business owner should follow as stipulated in laws are such as operating hours, business registration, tax requirement, labor and employment laws and quality & environment certification (such as ISO) in which the outlet has been certified.

External Forces Impact to 5-Forces

• From the Political Policy prohibiting the use of plastics and styrofoams, supplier relationship is affected due to change to papers and cartons.

• Economically, the food service industry continues to improve and increase their performance in service and generating revenues, thus rivalry among competitors gets more and more intense.

• Due to the influence of the customers through social media with health concerns, the industry players step-up with adapting to new advancements in technology that may help them develop healthier, fresher and varied food products that help address social health concerns.

Opportunities• McDonald’s must take advantage of the growth of the economy

of the Philippines. Since the food service industry is one of the leading industries in the Philippines as well.

• McDonald’s can continuously improve and develop new products that their competitors are not yet offering to the public.

• McDonald’s can continue with their service expansion, in reaching out different locations all over the Philippines to be able to meet every Filipino nationwide.

• McDonald’s has the capability of adapting new systems and technologies that can develop new products that will addresses health concerns.

Threats

• Customers now look for menu offerings that are more for a healthy lifestyle. Since McDonald’s is known for offering fast food menu of burgers, fries, chicken, etc. the customer’s idea of their menu is not healthy.

• McDonald’s has a lot of strong competitors like Jollibee which is the number 1 leading fast food in the Philippines. So as other restaurants like Chowking, KFC, Burger King, etc.

• Since McDonald’s belong to the food industry, they have a lot of substitute products, in which customers may choose over than their products.

Business Analysis: McDonald’s-McDonald's Corporation earns revenue as an investor in properties, a franchiser of restaurants, and an operator of restaurants.

-Approximately 15% of McDonald's restaurants are owned and operated by McDonald's Corporation directly.

-Others through a variety of franchise agreements and joint ventures operate the remainders.

-George T. Yang opened the first McDonald's restaurant in the Philippines in 1981. In 2005, McDonald’s Philippines became a 100% Filipino-owned Company.

-Today, McDonald’s has grown to become one of the country’s leading fast food chains with more than 365 restaurants nationwide.

-With Kenneth S. Yang now at the helm as President and Chief Executive Officer, McDonald’s is now a multi-billion peso company that continues to grow serving Filipinos all over the country.

Business Analysis: McPhilip’s Food Industries, Inc.

• The first franchisee of Golden Arches, McGeorge is McPhilip Food Industries who owns McDonalds Roxas Blvd, Pasay city, and was establish in the year 1985.

• Now, McPhilip’s Food Industries, Inc. has now seven McDonald’s branches located in:

• Vito Cruz, Taft• Vito Cruz, Pablo Ocampo St.• SM Mall of Asia• MOA One E-Comm Building• Baclaran, Pasay city• Blue Bay Walk, Macapagal, Pasay city• SM Cyberzone Gil Puyat, Makati.

Products: Burgers

Products: Chicken and Spaghetti

Products: French Fries

Products: Breakfast

Products: Desserts, Apple Pie and Coffee

Strategy

Franchise Model: The growth of the McDonald’s fast food restaurant business is majorly operated by franchisees. The whole of the company restaurants including the franchise restaurants are to follow only one framework of training, monitoring and operations. McDonald’s continue to improve their product offerings through innovation of flavours, and products. Seasonal products are and new menu items are being offered to be able to catch the hearts of their customers.

StructureThe operation of the store has a crew being looked after by a custodian and a leader, then reports to the manager of the store. The store has 2 assisting managers, an internal manager that also trains employees, these managers report to the restaurant’s manager that leads the daily operations.

StaffStaff trainers work shoulder-to-shoulder with trainees while they learn the operational skills necessary for running each of the workstations in the store, from the front counter to the grill area. All of the employees learn to operate all of the food service equipments, gaining knowledge of the operational procedures.

Step-by-step manuals cover every detail, from how to make a burger, to how to deliver their service to customers. In time, they also get to learn how to train and supervise others.

SystemsPreparation of raw materials, tools and equipment, order processing, billing and payment collection, cooking of the food products, order preparation and service delivery for the customers. Cleaning of the tables, trash and the facilities may be considered part of their daily operations to keep customers coming.

SkillsEmployees enjoy competitive incentives, support, training and opportunities in order for them to deliver the best possible results and advance their career. Learning and development of the employee skills such as teamwork, communications, problem solving, responsibility and customer service in a fun and exciting environment is important for the company.

StyleFrom the influence of the company’s upmost leader, the leadership style of McDonald’s management is democratic. Leaders should be able to rely on their teams to work together and make decisions. Personality and experience are great factors considered in their way of leading people.

Shared Values

Customer Driven: Conscious and deliberate action to exceed the needs and requirements of both internal and external customers. Malasakit: Concern for the customer, employees, co-workers, business partners, community and the company. Integrity: Being upright in character and action, upholding the standards of one’s profession and position through honesty, responsibility and trust. Teamwork: Working as one towards achieving a common goal. Excellence: Day to day drive to deliver the best results. The Ronald McDonald House Charities: McDonald’s gives back to the community through its charity of choice. Established in 1996 in the Philippines, RMHC carries out programs to support the needs for shelter, education and happiness of Filipino children.

MissionTo serve the Filipino community by providing great-tasting

food and the most relevant customer delight experience.

Vision“Una sa Pamilyang Pinoy”• First to respond to the fast changing needs of the Filipino

family.• First choice when it comes to food and dining experience.• First mention as the ideal employer and socially

responsible company.• First to respond to the changing lifestyle of the Filipino

family.

Organizational Structure: Departments

Leadership Style

According to Kenneth S. Yang, President and CEO of the Golden Arches Development Corp. (McDonald’s), “Leadership is the ability of an individual to take on a group of people, harness their strengths, and be able to guide them towards a definite direction”.

From the influence of the company’s upmost leader, the leadership style of McDonald’s management is democratic. Leaders should be able to rely on their teams to work together and make decisions. Personality and experience are great factors considered in their way of leading people.

Employee Skills

All new hired employees of McDonald’s begin their experience with an introduction to the company. Staff trainers work shoulder-to-shoulder with trainees while they learn the operational skills necessary for running each of the workstations in the store, from the front counter to the grill area. All of the employees learn to operate all of the food service equipments, gaining knowledge of the operational procedures.

Step-by-step manuals cover every detail, from how to make a burger, to how to deliver their service to customers. In time, they also get to learn how to train and supervise others.

Employee Development

Employees enjoy competitive incentives, support, training and opportunities in order for them to deliver the best possible results and advance their career. Learning and development of the employee skills such as teamwork, communications, problem solving, responsibility and customer service in a fun and exciting environment is important for the company.

Shared Values• Customer Driven: Conscious and deliberate action to exceed the needs and

requirements of both internal and external customers.

• Malasakit: Concern for the customer, employees, co-workers, business partners, community and the company.

• Integrity: Being upright in character and action, upholding the standards of one’s profession and position through honesty, responsibility and trust.

• Teamwork: Working as one towards achieving a common goal.

• Excellence: Day to day drive to deliver the best results.

• The Ronald McDonald House Charities: McDonald’s gives back to the community through its charity of choice. Established in 1996 in the Philippines, RMHC carries out programs to support the needs for shelter, education and happiness of Filipino children.

Automated Systems

Point-of-Sale System (POS) is a software and hardware networked together to track the sales and inventory of the store.

Value Chain Analysis: Inbound Logistics

McDonald’s uses 100% pure beef for all of their burger products. Everyday, burger patties are prepared and packaged at their approved meat plant in Australia.


McDonald’s chicken McNuggets and chicken

patties are made from boneless breast and thigh meat. The fried chicken is

made from bone-in chicken sourced from reputable

suppliers in the Philippines.


Skinless, prime white fish meat is used for the McDonald’s Filet-O-Fish. The fish is sealed and then stored in a temperature controlled environment.


The French Fries of McDonald’s are produced

and imported from the potatoes of the Russet

Burbank, Russet Rangers and Shepody variety.


McDonald’s use local, farm-fresh and grade-A eggs each going through a candling process. The eggs are washed and sanitized, then re-coated with mineral oil. These eggs are chilled and are only cracked before cooking.


McDonald’s buns are baked locally and delivered

fresh regularly.


Vegetables are sourced from the cold mountains of Baguio and Bukidnon. Shredded in McDonald’s approved facility.


McDonald’s Sundaes are made from milk, sugar, palm oil and stabilizer

which is a necessary ingredient to give the smooth creamy taste.


Imported pasteurized processed American cheese slices.

McDonald’s Premium Roast Coffee is made of

100% pure Arabica coffee beans.


Heinz Tomato Ketchup

Coca Cola products for their beverages.


The procurement, storage, handling and distribution of all of these raw materials are by HAVI Logistics.

Value Chain Analysis: Operations

All the products of McDonald’s, Baclaran are “Grilled Direct” which means they cook batches of food products according to the expected volume of customers. The cooking processes of the different products include:

- Frying of the burger patties on the grill, - Breading and deep fry-cooking of the chicken,- Deep fry-cooking of the pies and fries and storing to the warming bin as temporary storage.- Taking customer orders- Collection of payments- Preparing and serving customer orders

Value Chain Analysis: Operations

Value Chain Analysis: Outbound Logistics

They offer seasonal food products like twister fries, “shake-shake” flavoured fries, flavoured floats and other movie related themes in their products.

Kiddie meals that offer product bundles along with a kiddie toy.

Birthday and special occasion party packages for the young and the old.

Delivery services thru calling 8-MCDO or online ordering at mcdelivery.com.

Value Chain Analysis: Marketing and Sales

- Advertisements through television commercials, print ads, social media and website.

- Customers can create their own online account for updates in product offerings, promos and online delivery available 24/7.

- Fixed delivery fee of 40 pesos.

-Product bundles and packages (BFF bundles, kiddie meals, 50 pesos meals).

- Kiddie crew workshops every summer.

- McCelebrations (Celebrate anything).

Value Chain Analysis: Service

• Online customer care.

Value Chain Analysis: Procurement

HAVI Logistics in the Philippines is the one responsible for the procurement of raw materials in McDonald’s: Frozen goods and other products from Australia, Vegetables from Bukidnon and Baguio, Ketchup from Heinz Company and Coca Cola products for beverages.

Value Chain Analysis: Human Resource Management

The Human Resource Management of McDonald’s is responsible for recruiting and hiring of employees. This includes the restaurant staff, management team, operations group, marketing and human capital group.

The employees of McDonald’s enjoy competitive incentives, support, training and opportunities that help them deliver their best results ad advance their career.

Value Chain Analysis: Technology Development

Point-of-Sale System (POS) is a software and hardware networked together to track the sales and inventory of the store.

Value Chain Analysis: Infrastructure

• McDonald’s, Baclaran, Pasay City branch

• The branch’s head office is the McPhilip’s located in the Diplomat Building in Baclaran, Pasay City. Where the accounting and human resources departments are based.

Financial Analysis

Strengths

McDonald’s have a strong brand image throughout the years not just locally but also in other countries.

They have a systematic way of preparing their food from procurement to distribution to storage to processing and cooking.

McDonald’s has their operations centralized. All of their processes are standard in every McDonald’s branch in order to deliver their own way of giving service to their customers.

There are different branches open to serve customers 24 hours and seven days a week.

McDonald’s has a fixed delivery rate of only 40 Pesos. With different branches that are open 24 hours, there are different locations that are available for delivery 24 hours.

McDonald’s Philippines has online accounts for customers that can inquire about their menu, make orders and delivery online. In addition, they also have an online support for their customers.

Weaknesses

High employee turnover and frequent reshuffling of employees and management in the different branches of McPhilip’s.

Their expenses are increasing from PhP319, 400,114.30 in 2012 to PhP385, 097,381.50 in 2013.

Based from our KPI data, only 240 table turnovers are encountered throughout the month which is low and not a good indicator for having enough sales.

Not up to date service process.

Problem Analysis

Other Possible Problems

Frequent reshuffling and high turnover of employees.

Strong competition

Delay in order preparation

Dissatisfied customers

Problem Statement

• Opportunity loss for fast moving products is amounting to Php1,455,430.00 with a percentage of 5% for month of November 2013 to April 2014.

– 7percent of Chicken (1pc)– 8 percent of McChicken with spaghetti– 5 percent of Burger Mcdo– 7 percent of Cheese Burger Mcdo– 6 percent of Chicken Fillet– 5 percent of Crispy Chicken Fillet– 9 percent of McSpaghetti– 2 percent of Fries– 4 percent of Ice Cream– 4 percent of Pineapple juice

Pareto Chart of Product Wastage

McChicken w/ Spaghetti

Cheese Burger Mcdo

Burger Mcdo McSpaghetti 1 piece Chicken w/ Rice

Chicken Fillet Sandwich

Chicken Fillet0

500

1000

1500

2000

2500

3000

3500

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.00

100.00

Total CountCumulative %

Objectives for Improvement

To be able to lessen the product wasted by a minimum of 50%.

To be able lessen or eliminate human errors in stating customer orders to the kitchen.

To be able to remove the expense of the product waste and be able to add it in the revenue with an average of PhP200,000.00 per month.

Discussion of the Present System

Why – Why Diagram

Decision Analysis

Alternatives to Address the Problem:

Alternative 1


Alternative 2


Alternative 3

Cost and Benefit Analysis

Selecting the Best Alternative

The Best Alternative is the Replacement of the Grilled Direct System into Made-for-You System.

Develop and Design Improvement:

Proposed Flow of Transaction

New Policies and Procedures

Batch Cooker Grilled/Fried Key Point • First person positioned in kitchen • Has primary responsibility for managing UHC

product levels• Works directly with the assembler• Support prep line when needed• Responsible for UHC Product quality• First person to complete stock up (secondaries

person)


Chaser Key point• When 3 or more orders appear on the KVS,

Production manager assumes ‘Chaser position’.• Chaser dresses the burger assembler places

read/white meat On the burger, wraps and places in Heated landing zone.

• Last person on the line, First person off the line.


Management Hotspot• Correct positioning• Remember a dedicated French Fry Person• Prepare the Shift (Stock): 24/2• Be prepared to open both preparation lines• Communicate shift expectation to crew• Watch all KVS screen at all times • Effective UHC management• Check your timing reports throughout the shift• Pay attention to the order prep times• Rubber bands analogy is in play down the line


Crew Hot Spot• Stay in position• Prepare the shift • Be Prepared to open both prep lines with all equipment on,

and stock in place at all times• Watch all KVS screen at all time• Effective Universal Holding Cabinet management • Check your timing reports throughout the shift• Pay attention to order prep time• 2 at a time saves time• Rubber bands analogy is in play down the line.

System Implementation and

Evaluation

How-How Diagram

CONCLUSIONThe objective of McDonald’s is to offer quick service but still have

high quality meals. They came up with the production process that forecast the number of demands depending on the time period per day. They produce certain product volume depending on the prediction in that time period. Using grilled direct system, they have product wastes brought about the reason that the customer did not buy the product.

Using MFY system, they produce the meals upon the customer order. Using this system they will eliminate up to 70 percent of the product waste because with the MFY system, the orders of the customers are not told by the front line crew to the kitchen anymore but the orders appear on the KVS and then meal is cooked and prepared. The policy that the products in the warming bin after 5 minutes will be considered as waste is already eliminated, thus eliminating waste.

systems engineering study on mcdonald's baclaran branch

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