McDonald’s Company Operation Analysis

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Table of Contents

Introduction
History of the Company
Goods, Services and Operations Management at McDonald’s
McDonald’s Value Chains Management
Measuring Operational Performance at McDonald’s
Operation Strategy of McDonald’s
McDonald’s Forecasting and Demand Planning Style
Inventory Management at McDonald’s
References

Introduction

The McDonald’s Company is the globe’s largest restaurant chain specializing in serving hamburgers among other fast foods. The chain of restaurants serves about 68 million consumers every day across the 119 countries with McDonald’s’ outlets. The McDonald’s Corporation has its headquarters in the USA (McDonald’s, 2013a). The company was started in 1940, originally as a barbecue center operated by Maurice and Richard McDonald.

During 1948, the proprietors reorganized the business, changing the restaurant into a hamburger. In 1955, businessperson Ray Kroc joined the business as a Franchising agent. Later, Kroc took over the business from the McDonald’s brothers and then expanded the business to a multinational enterprise (McDonald’s, 2013a). A restaurant under the name of McDonald’s is ran by the company. This can also be run as an associate outlet or a chartered outlet.

History of the Company

The McDonald Company started in 1940. Initially, it was operated by the McDonald brothers. The initial business was based in San Bernardino, California. The restaurant was the first to introduce the speedee service model during 1948, later leading to the contemporary fast-food place (McDonald’s, 2013a). The McDonald’s symbol was first used in 1961.

However, it was adjusted towards the end of 2009. During 1961, the company registered the logo of an overlapping M symbol (McDonald’s, 2013b). In 1962, the double M symbol was changed for a single arched M. The single M symbol was not used until it was trademarked in 1968 (McDonald’s, 2013b).

The present McDonald’s was born from the opening of the McDonald’s franchised restaurant in Des Plaines by Ray Kroc. Later, Kroc acquired the business from the McDonald’s. The San Bernardino outlet was destroyed in the 1970s before being sold. Since the start of its international expansion, McDonald’s has been viewed as a model of globalization and a mark of the American lifestyle (McDonald’s, 2013b).

Goods, Services and Operations Management at McDonald’s

Operations management at McDonald’s is the key method employed during the conversion of inputs like information, materials and labor into outputs like goods, services and value-added products. The operations management of McDonald’s includes the practices of capacity planning, forecasting, managing inventory, scheduling, motivating employees, assuring the quality, and control of activity.

Through the practices covered under operations management, the company improves the areas of product development, quality improvement and responding to change sin demand, among other functions that affect operations.

Through operations management, the company develops models of employing the most efficient use of the company’s resources towards the delivery of the finished food services required by their customers. Operations management also ensures that the company provides services and the products developed by the company in a cost-effective manner and at the right time.

Product planning and management are some of the main practices in goods and services planning. Product management entails the development of new product lines, which helps shape the future of the McDonald’s Company through increasing their reputation, market coverage, and the revenues obtained. In the case of the McDonald’s, the addition of new product forms a major component of the future-looking strategies.

The efforts of offering new products help direct the business of the company towards areas that satisfy the needs and wants of the company to a higher level. An example of these moves includes the account of Gasparro and Jargon (2012), which discusses the McDonald’s company planned to launch vegetarian-only outlets during 2013.

The shift in product and services management towards offering foods that are more health-friendly has resulted from the constant pressure to consume healthy food, among the modern-time consumer (Ashbridge, 2007).

McDonald’s Value Chains Management

The value chain of McDonald’s comprises of a number of aspects including the firm’s infrastructure, the human resource base, the technology employed by the company and the procurement process.

The inbound logistics of the company include the sourcing of raw materials and other fresh supplies like vegetables from pre-defined suppliers. As a result, the suppliers continue increasing their labor and capital needs as their production continues to increase from time to time (McDonald’s, 2013c). The McDonald’s does a vertical, backward integration as an effort to reduce its suppliers.

This is aimed at cost reduction and ensuring that they offer high quality products. Some of the products in question include milk and beef, which they source from the company’s farm. The McDonald’s checks the operational standards of their overseas suppliers in New Zealand and Australia by ensuring that they comply with the standards set for American supplier plants. The standards include food safety, animal welfare and testing.

The practices ensure that the consumer of the end product gets a high quality product. The McDonald’s Company operates many of its restaurants centrally, where central management system checks whether the different restaurants are stocked with all that customers may need including wrappers, food supplies and cups (McDonald’s, 2013c). The effort improves the efficiency of the supply chain of the company in different areas like buying policies, capacity and technology deployment.

The McDonald’s ensures that value is delivered at its different operational outlets, whether suppliers, employees or franchises. They do that by setting standards of cleanliness, product quality, and the superiority of service, waste management, energy conservation and sustainable packaging. The company employs all efforts to invest in green operations, regardless of investing in contemporary technological models (McDonald’s, 2013c).

Measuring Operational Performance at McDonald’s

The operational performance of McDonald’s is evaluated on a number of standards. These include the company’s performance in the supply chain, the satisfaction of customers, and the company’s progress towards strategic goals.

Other areas where the performance of the company is perceived include the gauging of operational and performance operational performance in the different areas of business. The other indicator used to show the performance of the company is the financial level of the company following their management structure (GAPbuster, 2009).

The supply chain standards used to gauge the performance of the company include the responsiveness of the company to the needs of its customers. The indicators of good performance for the company in this area include stock out probability, lead time, and the fill rate of the different outlets. For instance, in the case that an outlet is not able to supply the products and services required by the customers for a given day, it marks a negative indicator regarding the performance of the outlet and the central management model (GAPbuster, 2009).

An example is the gauging of product quality at McDonald’s, where emphasis is placed on the performance directly related to the company’s strategic goals. For instance, the reduction in the system resources of the company is likely to affect the supply chain management of the company negatively. Among the areas that mark the competitiveness of the company is the introduction of innovative products, including health foods, service reliability, continual product supplies and flexibility in service delivery (Ashbridge, 2007).

Another area that marks the competitiveness of the company is the measure of customer satisfaction. The customer relations managers of the company are tasked with the role of collecting customer satisfaction information so as to employ corrective strategies for service improvement.

The evaluation of customer satisfaction is done during the time of service, and talking to the customer during service delivery. The company also collects customer satisfaction information through letters or faxes from customers that had visited their outlets; talking to loyal customers for their feedback in order to identify complaints and possible problems (GAPbuster, 2009).

Operation Strategy of McDonald’s

The business structure of McDonald’s is founded upon geographic placement: the company has divided their market into five operational centers. The centers include US, Asia/Pacific and Middle East, Canada, Latin America, and Europe.

However, the major business area for the company is the US where they cultivate control while at the same time expanding to reach other markets (Mourdoukoutas, 2012). As a result, the company’s strategy is characterized by retaining its prominent role in the US market, as well as other global markets. The company has also realized that different groups in the newer markets, as well as the US market, have varied requirements and tastes.

As a result, they have adopted the operational strategy of product differentiation by target consumer groups as well as including varieties of products and services to meet the needs of different groups. An example is the case of India, where the McDonald’s is starting vegetarian-only outlets, compared to their traditional offering in the US and other areas (Gasparro and Jargon, 2012; Ashbridge, 2007).

Through the strategy, the company has realized the customer needs satisfaction as well as local development. The strategy of the company is also characterized by price differentiation, on the basis of the area of operation and products delivered by the company. The strategy of McDonald’s is also characterized by quality service, fast service, delivery of similar value at the different markets and cleanliness (Mourdoukoutas, 2012).

McDonald’s Forecasting and Demand Planning Style

BBC (2012) reported that McDonald’s, the second biggest food seller has shifted to opening vegetarian outlets. The company is renowned for its control and major stake in the fast food industry, but it is adopting drastic changes so as to meet the changing demands of customers.

The changes are also adopted, as a way of ensuring that the needs of emerging markets are met (BBC, 2012). According to the reports, the major market where the company is investing in vegetarian outlets is India and Muslim countries, where meat-free dishes are preferred.

For instance, at the Indian market, it is believed that cows are sacred, which makes the target population a non-meat consuming group (BBC, 2012). On the other hand, in Muslim countries, pork is believed to be unclean, which results in the presence of meat-free diets. In forecasting the needs of the Hindu consumers at India, McDonald’s plans to open vegetarian restaurants during the mid of 2013. The outlet will be located next to the Golden Temple.

This is found in Amritsar City, Northern India. From the demand style planning of the company, the company was optimistic about capturing the wide vegetarian market. The spokesperson reported that, during 2012, the company operated only 271 restaurants, which marks a very small coverage (BBC, 2012).

The company plans to take advantage of the visits taken to the Hindu pilgrimage center at Kashmir, where they plan to open a vegetarian outlet. From the evaluation of the forecasting and the demand planning of the company, it is clear that McDonald’s plans their business in response to variations in customer needs. The strategy has been very successful for the company as it has allowed its entry into the Indian market successfully.

Inventory Management at McDonald’s

Inventory management is a critical aspect of the company’s operations. Inventory management is the chain of practices that control the flow of the stocks required to control the company.

The McDonald’s Company employs the first-in-first-out rule in controlling its inventory (Rungfapaisarn, 2011). This method is effective for the company as it handles fragile items, which requires the company to handle or change the available inventory once or twice within any given week, depending on the area of collection and the business of the outlet.

Additionally, the company has invested in storage facilities, including refrigeration storage, where the inventory managers of the company, so as to ensure that the food items held as inventory are kept fresh. The company has adopted a just in time (JIT) system, which entails the supplying of products, immediately they are ordered. For instance, after visiting a McDonald’s outlet, it is then that the staffs begin assembling and preheating their products (Rungfapaisarn, 2011).

The inventory model is critical in offering high quality products and delivering better customer service. Based on the JIT inventory model of the company, the company can hold the costs required to purchase products like beef, cheese, bread, and chicken, due to their highly perishable nature. Further, the money held by the company is available for current usage, which allows the company better liquidity at all times. Also, the model allows the company to source for better raw materials, at the time of need (Rungfapaisarn, 2011).

References

Ashbridge, I. (2007). McDonald’s milk goes organic. Web.

BBC. (2012). McDonald’s opens vegetarian-only restaurant. Web.

GAPbuster. (2009). Mcdonald’s Training Manual 2010: McDonald’s Company. Web.

Gasparro, A., and Jargon, J. (2012). McDonald’s to Go Vegetarian in India. Web.

McDonald’s. (2013a). Getting to Know Us. Web.

McDonald’s. (2013b). McDonald’s History: Travel Through Time With Us! Web.

McDonald’s. (2013c). Sustainability Supply Chain: Focusing on the 3E’s: Ethics, Environment and Economics. Web.

Mourdoukoutas, P. (2012). McDonald’s Winning Strategy, At Home And Abroad. Web.

Rungfapaisarn, K. (2011). McDonald’s introduces new inventory/menu management. Web.

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