McDonalds - OPERATIONS MANAGMENT

McDonalds - OPERATIONS MANAGMENT , MC, OM

1. Operations Management McDonald's KRISHNA RAJ N S MBA ABM KERALA AGRICULTURAL UNIVERSITY [email protected]

2. Overview HISTORY SYSTEM OVERVIEW OPERATIONS MANAGEMENT WHAT MAKES MCDONALD’S DIFFERENT ? SUPPLY SIDE EXTRAS 2

3. The Mc Way M ove Forward C ontributions D evelop O pen Communications N o Losers A ctively Listen L everage Diversity D eliver S upport 3

4. A Brief History of Time McDonald’s is the worlds largest chain of fast-food restaurants Founder : Ray Croc Founded: 1955 April 15 at Illinois , United States CEO: Steve Easterbrook Headquarters: Illinois, United States Stock Price: * (NYSE) Spreaded Over 36000 locations worldwide 4

5. A Brief History of Time McDonald’s was started as a drive-in restaurant by two brothers, Richard and Maurice Mcdonald in California,US in 1937 They used assembly line procedures in their kitchen for mass production Speed Service Cleanliness were the critical succsess factors Prices were kept low 5

6. A Brief History of Time Later, Ray Croc, distributor for Milkshake Machines interested in McDonald Business and finalized a deal with Mc Brothers in 1954 He established a franchising company, Mcdonald Inc. In 1961, He brought out Mc Brothers’ share for $2.7 million and changed the company n ame to McDonald's Corporation 6

7. From the very beginning, Ray Kroc's energy and vision formed the foundation of the McDonald's   business 7

8. Ray Kroc- Business Model Ray Kroc- Developed a business model known as “The Three Legged Stool.” Owner/Operator, Suppliers and Employees Just as all three legs of a stool need to be equal to support the weight, all three elements of the McDonald’s system are equally important partners in McDonald’s success. 8

9. Brand Strategy 2003-2008 “I’m Lovin ’ it” is an international branding campaign It was the company's first global advertising campaign. 9

10. System Boundaries Input Raw materials Energy Labour Factories Machineries Capital 10

11. System Boundaries Raw materials acquisition Manufacturing, Processing and Formulation Distribution and Transportation Use/ Reuse / Maintenance Recycle Waste Management Throughput 11

12. System Boundaries Usable products Salary and Wages Other Services (Pulse Polio etc.) Water effluent Airborne emissions Solid wastes Output 12

13. Products Mc Donald’s sells Hamburgers, Chicken sandwiches, French fries, Soft drinks, Breakfast items and Deserts. Mc Donald’s also offers salad and vegetarian items, wraps and other localized fare In India they sells McVeggie , Veg McCurry, PanChicken McGrill ,Chicken Maharaja Mac etc. 13

14. Competition McDonald’s is currently ranked second amongst its top competitors in the FFHR subsector. # 1 – Burger King # 2 – McDonald’s # 3 - Wendy’s Three competitors hold 71% of the FFHR market 14

15. Supply Side Operation Strategy Quality Service Cleanliness Value How all those can be ignored !!? QSCV 15

16. Operation Technics McDonald’s Corporation’s operations management (OM) supports the company’s position as the largest fast food restaurant chain in the world The 10 decisions of operations management represent the various strategic areas of operations that must be coordinated for optimal productivity and performance. 16

17. Design of Goods and Services McDonald’s goal in this strategic decision area of operations management is to provide affordable products. As such, the serving sizes and prices of its products are based on the most popular consumer expectations. However, some McDonald’s products are minimized in size to make them more affordable. 1 17

18. Quality Management The company aims to maximize product quality within constraints, such as costs and price limits. McDonald’s uses a production line method to maintain product quality consistency. Consistency satisfies consumers’ expectations about McDonald’s and its brand in this strategic decision area of operations management. 2 18

19. Process and Capacity Design McDonald’s process and capacity design is centered on efficiency for cost-minimization that supports the company’s strategies. This strategic decision area of operations management focuses on maintaining process efficiency and adequate capacity to fulfill market demand. At McDonald’s, the production line method maximizes efficiency and capacity utilization 3 19

20. Location Strategy McDonald’s goal in this strategic decision area of operations management is to establish locations for maximum market reach. McDonald’s marketing mix   includes restaurants, kiosks, and the company’s website and mobile app as venues. Through these locations/venues, McDonald’s reaches customers in traditional and online ways 4 20

21. Layout Design and Strategy McDonald’s uses practicality for this decision area of operations management. The strategy involves maximizing space utilization in restaurants and kiosks, rather than focusing on comfort and spaciousness. 5 21

22. Job Design and Human Resources McDonald’s human resource strategies involve training for skills needed in the production line in restaurant kitchens or production areas. For this decision area of operations management, individual and organizational learning are also emphasized to support McDonald’s organizational culture 6 22

23. Supply Chain Management The firm’s global supply chain supports its various locations around the world. McDonald’s has a strategy of supply chain diversification for this decision area of operations management. Such strategy involves getting more suppliers from different regions to reduce McDonald’s supply chain risks. 7 23

24. Inventory Management McDonald’s goal for this strategic decision area of operations management is to minimize inventory costs while supporting restaurant operations. The company does not directly sell products and ingredients to its restaurants. Instead, local and regional intermediaries and distributors coordinate with McDonald’s restaurant managers to manage their inventory 8 24

25. Scheduling McDonald’s uses corporate conventions for scheduling, based on local market conditions and laws, as well as supply chain needs. For example, the company’s strategy involves regular and seasonal schedules to address fluctuations in local market demand. Thus, in this decision area of operations management, McDonald’s is flexible and adapts to local market conditions 9 25

26. Maintenance McDonald’s lets restaurant managers or franchisees select maintenance service providers. However, for kitchen/production equipment, McDonald’s Corporation also has certified/approved maintenance providers. Thus, the company addresses this strategic decision area of operations management through local and corporate control 10 10 26

27. Productivity at McDonald’s McDonald’s works toward maximum productivity in all of its business areas Order fulfillment rate (McDonald’s restaurant productivity) Stockout rate (Intermediary/distributor productivity) Timely delivery rate (McDonald’s delivery productivity)   27

28. How Do McDonalds Kitchens Operate? From the second you order, the McDonald’s people at different preparation stations around the kitchen begin toasting the buns, adding ingredients and packaging your food so that your meal arrives fresher, hotter and tastier, every time. They prepare food only after you have ordered it, not before ! JIT INVENTORY OPERATION MEANING "JUST IN TIME” 28

29. Source of Ingredients Ingredients comes through global network of suppliers According to growing season, availability and choices Suppliers strictly meets strict quality and safety standards WHAT MAKES MCDONALD’S DIFFERENT ? 29

30. WHAT MAKES MCDONALD’S DIFFERENT ? Crunchy Farm-fresh Vegetables They select the best of the best vegetables that are continuously monitored for freshness, high nutrients and safety, to maintain top quality standards. They use regional/local suppliers to ensure that the freshness and high quality are delivered to you in all their products . 30

31. WHAT MAKES MCDONALD’S DIFFERENT ? High Quality Baked Buns They source their buns from suppliers who use only high quality wheat. All the buns are subject to strict quality and safety controls all through the production process. 31

32. WHAT MAKES MCDONALD’S DIFFERENT ? Meat With 100% Purity They are made from halal beef cuts with no additives or preservatives. Chicken that the serve is carefully deboned breast meat only, with seasoned batter and a choice of sauce portions, while their Spicy McCrispy Chicken Deluxe uses only muscle cuts. All relevant authorities monitor their high quality standards of halal chicken. 32

33. WHAT MAKES MCDONALD’S DIFFERENT ? High Energy Wholesome Dairies To maintain the high quality standards of the world famous McDonald’s cheese, shakes, Mcflurry and Sundaes, they ensure that the fresh milk comes from the approved regional and local suppliers. Quality control procedures are followed throughout the supply chain 33

34. WHAT MAKES MCDONALD’S DIFFERENT ? Fries-Naturally Crisp Their fries are crispy and far from the ordinary. The secret lies in the harvesting of high quality potatoes that come from trusted suppliers. The potatoes are then cooked using only 100% vegetable oil with no fats or flavours and only some salt is added after cooking. 34

35. SUPPLIERS McDonald’s works closely with suppliers to encourage Innovation Assure best practices Continuous improvement Risk management 35

36. Responsible Suppliers “Only purchase from suppliers who meet our stringent food safety standards, but who also share our commitment to social responsibility and sustainability” rain forest and antibiotics policies supplier social accountability program 36

37. Packaging Set of procedures for wrapping the food were developed Introduced thinner paper based wrap consisting f 3 layers of tissue Less pollution, less costly 37

38. Two Level Safety Food Method Routine Food Safety Inspection Mechanism & SGS (Internationally recognized independent accreditation company, leader in inspection testing and certification) * In the past 18 months, over 350* McDonald's ingredients have undergone food testing conducted by SGS, results of which are all satisfactory.  38

39. Reducing Food Wastage Since 2009 all McDonald’s kitchens have operated via a system called “Made For You” Food production only after order Automated Cooking Facilities Cooking time and temperature controlled So wastage reduced to less than 1% 39

40. How Do McDonalds Process Food ? All McDonald's   products comply with the most stringent food safety and quality standards. Every procedure is monitored thoroughly HACCP (Hazard Analysis and Critical Control Point) S ystematic , preventive approach to ensure food safety that identifies, evaluates and controls all hazards GMP (Good Manufacturing Practice) monitors food preparation locations, processes, environments and hygiene 40

41. Problems in Operations Location Planning McDonalds Restaurants have their location in such a way that maximum customers visit their restaurants *No parking facility for the customers Some customers may have no waiting time to eat in, but there is no drive thru facilities 41

42. Problems in Operations Improper capacity planning * failure to deal with peak hours Inventory management * inappropriate ordering or miscalculation of stock Batch processing * numbers of sandwiches are made at the same time with the same condiments.. Waiting needed for new batch in case of a need of variety. 42

43. Sample Product- Delivery System (Beef Burger) 43

44. Hamburger University In 1993, McDonald’s invested $40 million in Hamburger University, a 130,000- square foot facility on an 80-acre campus located at McDonald’s Corporate in Oak Brook, IL. 44

45. Nutrition Information 1 st restaurant to place its information in an easy-to-read graphic format on their packaging 45

46. McCafe Features a relaxed adult atmosphere. Offers customers a variety of specialty coffee drinks along with muffins, pastries and sandwiches 46

47. GO GREEN In several countries across the McDonald’s System, restaurants are recycling their used cooking oil to sell to companies that specialize in refining the product into clean burning diesel for consumer use. In 2006, McDonalds in the U.S has began developing green restaurants. Floor Tiles with a high recycled content Efficient Lighting Products, Skylights and Daylight controls High efficient rooftops Water conserving toilets McDonald’s has taken the initiative to incorporate used cooking oil into their operations 47

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