MCDONALD’S SCM

SUPPLY CHAIN MANAGEMENT

Abstract
The study of McDonald’s supply chain management, benefits & limitations.

KAMIL AMJAD
BAT-F15-006
CONTENTS
1 EXECUTIVE SUMMARY…………………………………………………………………………….………………………3
2 INTRODUCTION……………………………………………………………………………………………………………….3
3 STRUCTURE & MEASURES OF SUPPLY CHAIN…………………………………………………………………..4
3.1 STRUCTURE OF SUPPLY CHAIN MANAGEMENT……………………………………………………………4
3.2 PERFORMANCE OF SCM………………………………………………………………………………………………5
3.2.1 QUALITATIVE MEASURES…………………………………………………………………………………..5
3.2.2 QUANTITATIVE MEASURES………………………………………………………………………………..5
4 SUPPLY CHAIN MANAGEMENT STRATEGIES…………………………………………………………………….5
4.1 LOGISTIC STRATEGIES………………………………………………………………………………………………….6
4.2 PROCUREMENT STRATEGIES……………………………………………………………………………………….6
4.3 MARKETING MANAGEMENT STRATEGIES……………………………………………………………………7
5 SUSTAINABILITY OF GLOBAL SUPPLY CHAIN…………………………………………………………………..11
5.1 CODE OF CONDUCT ESTABLISHMENT………………………………………………………………………..11
5.2 THIRD PARTY CERTIFICATION…………………………………………………………………………………….13
5.3 SELECTING THE SUPPLIER………………………………………………………………………………………….15
6 CONCLUSION…………………………………………………………………………………………………………………15
7 REFERENCES………………………………………………………………………………………………………………….16
 MCDONALD’S
SUPPLY CHAIN MANAGEMENT

EXECUTIVE SUMMARY: The market success of McDonald’s can be credited to their strong &
very effective supply chain. They maintain affordability with the help of efficient supply chain.
Then there’s huge amount of stress on innovation with bring new recipes, flavors and others. The
other main stress is on cost cutting while maintaining the same quality worldwide. McDonald’s
utilizes technological advancements and equips suppliers to venture out in different areas and
grow. Few supplier model provides them more volumes to be able to cut costs. McDonald’s rely
on intensive supply chain model and extensive market research. The other factor is stringent food
standards encourages suppliers to maintain high quality to minimize rejections. McDonald’s
encourages domestic cultivation to cut imports and long transportation costs.

INTRODUCTION: McDonald’s is the world’s largest chain of fast food restaurant. McDonald’s,
in full McDonald’s Corporation, American fast-food chain that is one of the largest in the world,
known for its hamburgers. Its headquarters are in Oak Brook, Illinois.
The first McDonald’s restaurant was started in 1948 by brothers Maurice (“Mac”) and Richard
McDonald in San Bernardino, California. They bought appliances for their
small hamburger restaurant from sales-man Ray Kroc, who was intrigued by their need for eight
malt and shake mixers. When Kroc visited the brothers in 1954 to see how a small shop could sell
so many milk shakes, he discovered a simple, efficient format that permitted the brothers to
produce huge quantities of food at low prices. A basic hamburger cost 15 cents, about half the
price charged by competing restaurants. The self-service counter eliminated the need for waiters
and waitresses; customers received their food quickly because hamburgers were cooked ahead
of time, wrapped, and warmed under heat lamps. Seeing great promise in their restaurant
concept, Kroc offered to begin a franchise program for the McDonald brothers. On April 15, 1955,
he opened the first McDonald’s franchise in Des Plaines, Illinois, and in the same year launched
the McDonald’s Corporation, eventually buying out the McDonald brothers in 1961. The number
of McDonald’s outlets would top 1,000 before the end of the decade. Boosted by steady growth,
the company’s stock began trading publicly in 1965.
The public face of McDonald’s was created in 1963 with the introduction of a clown named
Ronald McDonald, while the double-arch “m” symbol became McDonald’s most enduring logo in
1962, lasting far longer than the tall yellow arches that had once dominated the earlier restaurant
rooftops. Other products and symbols would define the McDonald’s brand, including the Big
Mac (1968), the Egg McMuffin (1973), Happy Meals (1979), and Chicken McNuggets (1983). The
chain continued to expand domestically and internationally, extending to Canada in 1967,
reaching a total of 10,000 restaurants by 1988, and operating more than 35,000 outlets in more
than 100 countries in the early 21st century. Growth was so swift in the 1990s that it was said a
new McDonald’s opened somewhere in the world every five hours. It effectively became the
most popular family restaurant, emphasizing affordable food, fun, and flavours that appealed to
children and adults alike. In the late 20th century, McDonald’s moved beyond the hamburger
business by acquiring Chipotle Mexican Grill (1998), Donatos Pizza (1999), and Boston Market
(2000) in the United States, and in the United Kingdom McDonald’s purchased
Aroma Cafe (1999) and an interest in Pret A Manger (2001), a sandwich restaurant chain.
However, by late 2008 McDonald’s no longer owned or had a stake in any of those companies,
instead concentrating on its own brand.

NATURE AND OPERATION OF ORGANIZATION: McDonalds Corporation is the world largest chain
of fast food restaurant, serving more that 58millions customer every day. A McDonald’s
restaurant is operated by either franchisee or the corporate itself. The corporation revenue
generates from rent, royalties and fees paid by franchisees and also from sales in company
operated McDonalds. The menu is consists hamburgers , cheeseburgers , chicken and fish
products , French fries , breakfast menu , soft drinks ,shakes and desserts. The quick-service-
restaurant (QSR) giant has built an entire process over the years for managing a sophisticated
delivery system, starting on the live-animal production side and running all along the supply chain
until products reach their final destination as McDonald’s customers’ favourite.

STRUCTURE OF SUPPLY CHAIN MANAGEMENT:

Supplier Relationship Management – Service Provider Relationship Management –

Customer Relationship Management

Structuring the supply chain requires an understanding of the demand patterns, service level
requirements, distance considerations, cost elements and other related factors. Moving of
material inward is upstream and outward is downward. The upward activities are divided into
tiers of suppliers. A supplier that sends materials directly to the operations is first tier supplier;
one that send materials to a first tier supplier is a second tier supplier; one that sends material
to a second tier supplier is a third tier supplier and so on to the original source. Customers are
also divided into tier. One that gets product directly from the operations is first tier customer and
so on to final customers.

McDonalds deals with different suppliers for its different products and ultimately which aims to
provide customers great taste and on affordable price. McDonalds has been working in
partnership with household brand such as with Coca cola, Tropicana and Buxton who act as
second tier supplier because they supply its products to keystone distribution who works for
McDonalds as first tier supplier. Also there are number of other suppliers such as Sun Valley and
Moy Park who supply McDonalds with Chicken product all these works as second tier supplier for
McDonalds. Also Ecsa, the makers of the beef patties who are key for success of supply chain also
supplies its product to McDonalds first tier supplier (i.e…Keystone Distributors). All the different
supplier deals with Keystone Distributor, who then sends material directly to McDonalds to run
the business smoothly by providing on affordable prices, delivering products on time and helps
in outward movement of orders and receiving payments from customers. Overall, keystone is a
important player in structure of supply chain for making upward and downward activity
successful. The demerits of managing chain of supplier at McDonalds is to incur heavy investment
of time, money, and also it resources needed to implement and has to overlook the supply chain
as well and increase dependency.

PERFORMANCE OF SCM: The model explains Supply chain strategy is an integral part of a
business: It really supports and feeds the overall company business strategy. The supply chain
strategy must include plans for all elements of the chain: Buy, Make, Move, Store, Sell and Return.
Partnerships can develop, and may even be required, between companies and individuals across
the entire supply chain, or they can be focused in specific areas depending on a company’s
competencies and philosophy.

Supply chain management encompasses the planning and management of all activities involved
in sourcing and procurement, conversion and all logistics management activities. Companies
adopt supply chain management to ensure that supply chain is operating efficiently and providing
high level of customer satisfaction with low cost. SCM integrates the demand and supply
management within and across companies.

1: QUALITATIVE MEASURE: The objective is to meet customers demand while keeping prices low
and McDonalds works on lean strategy to serve its customers as McDonald’s doesn’t begin to
cook its orders until a customer has placed a specific order. They stay on JIT (just in time) strategy
which helps them to reduce or sometimes eliminate waste and efficiency within purpose of
minimum cost. Benefit associated with this is the higher quality customer service; even placing
special order does not bring McDonalds into panic situation that can cause delays. Also holding
cost of burgers is fairly high so JIT strategy helps them to reduce the spoilage cost.

2: QUANTITATIVE MEASURE: JIT helps McDonalds to keep eye on Economic Order Quantity which
determines how much to be ordered and there are two factors that drive economic order
quantities down: low ordering costs and high holding costs. Variability in demand and variability
in lead times from suppliers put pressure on organization to maintain certain safety stock in case
of McDonalds; the supplier is internal production process but problem associated with JIT is it
reduces your safety stock which can actually be a big problem, also with lean strategy
organization lack in capacity to respond to fluctuation in consumer demand.

SUPPLY CHAIN IMPROVEMENT STRATEGIES: Integrating the pipeline of supply chain and
choosing the correct suppliers is much more difficult than one can imagine. Not only do
companies have to strongly consider price and quality, but they also have to make sure
that all the organizations are willing to cooperate to benefit the group. Keystone manages
the supply chain to ensure that there is always sufficient stock to fulfill demand when
orders are received. Efficient stock management is essential to kind of business.
PROCUREMENT STRATEGIES: The ordering process involves holding a small buffer stock. This is
extra amount of inventory held to meet any unexpected higher demand. Inventory manager uses
a web based communication software called ‘Weblog’ to view and amend store order proposals.
Each time of ordering weblog creates a proposed order to analyse and amend if necessary.
Weblog helps managers to view what quantity have been ordered, how much is the current stock
level and how much stock is due to be delivered at a particular time. The system automatically
generates a delivery note that gives the exact quantities and descriptions of the delivery. The
manager has to click confirm on weblog when they finishes selecting amount of inventory they
needed to use. Without safety stock customer will suffer. Other reasons for maintaining safety
stock include providing safeguard against issues such as poor quality, production problem and
transportation, delivery charges. Also, if organisation maintains too much inventory would incur
significant holding cost. This is because they will need more staff, equipment and storage space
to handle high inventory levels. However, holding small stock can be dangerous as it may cause
problem in some uncertain demand and lead business to stop its operation.

LOGISTICS STRATEGIES: Many organisations do not perform many of their own logistics
activities. They arrange logistics service providers to take advantage of efficient and
experienced specialists to look after the transport, while the organisation can concentrate
on its core operations. An organisation mainly forms a partnership with other company
to look after warehousing, purchase of material, material handling and many of the other
functions of logistics. When one company uses other companies to run its logistics are
known as third party or 3PL or contract logistics. For McDonalds Keystone distribution
works as a 3PL.

A big organisation like McDonalds need some partner to work with them to look after
sourcing, warehousing, procurement, and distribution to run its business but there can be
certain issues associated with this that by hiring 3PL, that company can loss control over
its logistics activities, difference of opinion and perception can bring problem in service
level, also it increase dependency at certain time and end up disturbing operations of
business.

The process of making sure there is enough stock at all times to meet customer demand
whilst minimising expensive waste is known as stock management. High cost is involved
in holding too much stock so McDonalds uses lean stock control method to save money.

Inventory ordering manager work with the new stock control system, Manugistics, to
ensure sufficient raw stock is available. This helps restaurant to produce the meals
required according to the forecasted demand. Forecast is done on the basis of restaurant
historic product-mix data from last year, store-specific and national causal factors such as
national promotions and school holidays, information from store managers about factors
that might affect demand .e.g. road closure or local events and new promotions.

Restaurant manager need to ensure that the data they enter into the system is as accurate
possible. Every day restaurant manager record opening and closing stock of key food
items. Other items are recorded weekly and monthly basis. The store computers system
identifies any stock count deviations from last stock count so it gives opportunity to
manager to investigate missing product. For example, the manager may have missed off
a box of regular meat while counting them earlier on the shift.

3PL Benefits:

1. Benefit From Professional Supply Chain Expertise

An experience 3PL provider is a knowledgeable source of industry best practices. Such companies
stay current with the latest advancements and developments in logistics technology,
manufacturing processes, and overall logistics. 3PL software, such as JDA Warehouse
Management used by United Facilities, is capable of handling inventory management, providing
advanced reporting, improving the overall visibility of a supply chain to monitor and track
processes.
Outsourcing logistics allows your company to leverage supply chain expertise while focusing on
your core competencies. 3PL services allow businesses and manufactures to have confidence
knowing that all logistics needs are being handled by reliable and experienced professionals.

2. Leverage a Stronger Resource Network

Most 3PL companies offer a vast resource network that lends to significant advantages over in-
house supply chains. By leveraging the resource network of 3PL provider, steps in the supply
chain can be optimized and executed in a more efficient and cost-effective manner.
3PLs can often utilize exclusive relationships as well as volume discounts for their clients, which
can result in minimized overhead costs and timely service. Outsourcing your supply chain
management and logistics needs to a 3PL provider enables your business thrive with resources
that may otherwise be unavailable in-house.

3. Free-up Valuable Time & Capital

Outsourcing your logistics services can free-up a wealth of money and time for your business. A
3PL company can help eliminate the need to invest in transportation, warehouse space,
technology, and staff to execute essential supply chain management processes.
3PL companies can also help minimize costly mistakes while allowing your business to develop a
stronger logistical network with higher returns and lower risks. In addition, 3PLs save your
company the time and capital required execute essential steps in the supply chain. Billing,
auditing, training, staffing, optimizing and improving your supply chain functions is all take care
of.

4. Utilize Flexible & Scalable of Services

A major advantage of investing in a 3PL provider is the ability to effectively scale transportation,
labor, and space according to your company's unique inventory management requirements.
Seasonal businesses can benefit from smoother transitions between market highs and lows, as
well as having the ability to utilize more warehouse space and logistical resources when needed.
Also, working with a 3PL provider better enables your business to grow into new territories with
less barriers to entry. As your company grows, your 3PL provider can help you scale in
accordance, as they offer the resources and capabilities to seamlessly support your growth into
new markets and regions.

5. Continuously Improve & Optimize Your Supply Chain

3PL providers like United Facilities have the resources to make adjustments and continuous
improvements to each link in their clients' supply chains. Logistics professionals will ensure your
company's needs are met by leveraging highly-efficient and cost-effective strategies and systems.
Top 3PLs offer the tools and expertise to optimize and restructure the supply chain, as well as
utilize software and technology to ensure orders arrive when and where you need them. Supply
chain software solutions, like that of JDA, can analyze and monitor logistics practices to pinpoint
and eliminate inefficiencies as well as streamline the supply chain.
Outsourcing your 3PL services to United Facilities will ensure continuous improvements are
implemented to your logistics and supply chain process. Professional 3PL solutions can help
maximize profits, minimize wait times, and improve the customer service of your company.

Drawbacks:

1. Lack of Direct Oversight

One of the downsides of using 3PL services is that the client businesses have no direct control
over their operation. They are relying on the 3PL company to consistently come through in
delivering the promised services. This lack of direct control means that client companies are at
the mercy of any problems the 3PL company faces. Beyond the possible loss of business, the
damage that results from 3PL services failing to deliver certain products on time are the client
company's problem, not the 3PL service's.

2. Pricing Models
3PL services promote their service as the most cost efficient way to get logistics done. While this
may be true, contracting with such a service means that the company is locked into the pricing
model specified in the business agreement. By handing logistics over to a 3PL service, companies
are forgoing the possibility that an in-house logistics department could figure out a cheaper and
more efficient solution.

3. Dependency
Handing over logistics to a 3PL service is a large commitment. Businesses need a reliable structure
to function. Logistical downtime can translate into large amounts of lost productivity and
revenue. Consequently, while the free market dictates that a business which is dissatisfied with
its 3PL service could always find another, or develop its own logistical infrastructure, the reality
is not so simple. Switching the nature of a company's logistical support can cost the company a
great deal in unforeseen costs resulting from the transition. When businesses contract with 3PL
services it creates a dependency which is no small matter to change. This dependency puts the
client company in uncomfortable situations if pricing schemes or service reliability from the 3PL
service is not working out as expected.

MARKETING MANAGEMENT STARTEGIES:

Marketing strategy plays a significant role for developing any type of business. Without proper
marketing strategy, the hard work of the company to attract clients will turn out to be very
inefficient and random.

The main objectives of your marketing strategy must ensure that the product must fulfill the
customers demand as well as maintain a long relationship with those clients.

To obtain this, businesses will need to initiate flexible techniques which reply to the adjustment
in customer perception and demand. It might also provide a product name to your brand that
will aid owners to run their business in markets in an efficient and smooth way.

First and foremost, the main objectives of the market strategy must be to recognize whether
target clients are pleased with the service and products provided by the company.

The first restaurant opened by McDonalds Company was in San Bernardino, California way back
in 1948. At this moment, McDonalds is the world’s finest and leading food service company with
more than $40 billion sales from 30, 000 outlets all over the world.

However, this company didn’t grow quickly because of fortune. McDonalds has reached where
they are now due to hard work and effective marketing strategies.

One of the company’s greatest achievements was the opening of the Happy Meal. In year 1970’s,
McDonalds Company was searching a new ways to catch the attention of customers.
Study indicated that little ones were great influencers in the company’s decision and making
process. This led in the world’s first Happy Meal, a combination of meal suitable for children
including a free toy which place McDonalds smack-dab in the children sites all over the world.

Marketing Strategy: 5P’S

After analyzing the market condition, finding the main factor, target segment as well as
understanding the demand of the market, every company requires coming up with an offers or
such kind of plan which speed up the development of the business.

For that, McDonalds 5P’s marketing strategy that follows product, place, price, promotion and
lastly people.

Product
Product consists of how the company must design, manufactures the products which improve
the experience of every customer. Product refers to physical product and services provided by
the business to its patron.

McDonalds includes specific aspects of its service and products like packaging, looks and
desirability. This includes non-tangible and tangible features of the services and product.

McDonalds has intentionally kept its product depth and width limited. McDonalds had studied
the manners of the Indian clients and totally provided various menus as compare to its menu
presented in world market. The company eliminates beef, mutton and pork burger from their
menu. India is just country wherein McDonalds offer vegetarian menu. As well as the cheese and
sauce use are pure vegetarian.

The company constantly improves its product and service in accordance to the fast changing
desires and tastes of its consumers. One of the good examples is the launching of Chicken
Maharaja Mac and the Chicken McNuggets.

Place
The place for the most part includes distribution outlet and channel of the business. It is very
essential because the service or the product should be accessible to the consumers at the right
time, right place and right quantity.

In United States almost 50% of McDonald’s outlets are located three minutes away from each
other. There are specific level of happiness and fun which McDonalds offers to its consumers. It
offers value position that based on the requirement of the consumer.

Price
Pricing strategy is one of the most significant aspects when it comes to marketing. This includes
price breakdown, when any discount service or payment available.
Business should also consider the possible reactions from its rivalry when it comes to pricing.
Pricing strategy was developed in order to attract middle and lower class individual and the result
can clearly be seen the customer base which McDonalds has at present.

McDonald’s restaurant has specific value pricing as well as bundling strategy like combo meal,
happy meal, family meal and happy price menu in order to improve total sales of the service and
product.

Promotion
The endorsement activities implement by the Company aids communicate effectively with the
potential consumers. Ad targeted to catch the interest of the people it reaches to massive
number of customer at a time. Ad plays an important role for product promotion such TV
advertisement, billboard and posters which also used by some ground breaking business
including Apple Company.

People
McDonalds understands the significance of both consumers and employees. It understands the
truth that happy workers can serve properly and led in happy customers.

McDonalds restaurant constantly does Internal Marketing as this strategy becomes effective it
will lead automatically to the success of external marketing.

Respect for local culture of Pakistan: McDonald’s Pakistan has developed a special menu with
vegetarian selections to suit Pakistan tastes and preferences. McDonald’s does not offer any pork
items in Pakistan. Only the freshest chicken, fish and vegetable products find their way into our
Pakistan restaurants.

In addition McDonald’s have re-formulated some of their products using spices favored by
Pakistanis. Among these are McVeggie burger, McAloo Tikki burger, Veg Pizza, McPuff and
McGrill burger. McDonald’s have also introduced eggless sandwich sauces for vegetarian
customers in Pakistan.

SUSTAINABILITY OF GLOBAL SUPPLY CHAIN:

The McDonald’s supply chain is a complex web of direct and indirect suppliers. They manage this
complex system by working with direct suppliers who share their values and vision for sustainable
supply. McDonald’s hold them to clear standards for quality, safety, efficiency and sustainability.
They expect them to extend those requirements to their suppliers. McDonald’s also partner with
them to identify, understand and address industry-wide sustainability challenges and achieve
continuous improvement. Overall, McDonald’s and their suppliers are collectively focused on
three areas of responsibility: ethics, environment, and economics.
McDonald’s deep-seated culture for long-term, win-win relationships with suppliers dates back
to McDonald’s inception, when founder Ray Kroc established a precedent of trust and loyalty
with its business partners. Kroc’s “System” philosophy is often described as a three-legged stool.
One of the legs is McDonald’s employees, a second leg is the owner/operators that run the
restaurants and the third leg is McDonald’s supplier partners.
The stool is only as strong as all three legs. This means that franchisees, suppliers and company
employees each support the weight of McDonald’s equally. Kroc believed that if the restaurant
owner/operators and suppliers were successful, success would come to him as well. Simply put,
McDonald’s, its owner/operators and their suppliers have a vested interest in helping each other
succeed. Simply put, for one to prosper, each must prosper.
Kroc’s insistence on what UT researchers coined a “what’s in it for we” (WIIFWe) mindset has
created the world’s most powerful restaurant supply chain. WIIFWe thinking is ingrained in the
DNA of McDonald’s, its suppliers and its restaurant owner/operators. Kroc’s System has stood
the test of time because leaders within the System have continued to honor a “System First”
approach where solutions always include the question: “What’s best for the System?”
The results are staggering. The McDonald’s System has expanded to more than 100 countries and
more than 35,000 restaurants serving more than 68 million customers a day. McDonald’s has also
set the food industry standards for food quality, safety and assured supply. McDonald’s food was
titled as “safer than a school kid’s lunch,” with quality standards that are five to 10 times safer
than state standards for school meals. The USDA has promoted McDonald’s as having the
toughest food safety standards in the United States.
Simply put, customers know they will get the same consistent food and service from Arkansas to
Alaska and from Argentina to Azerbaijan.
What is fascinating is that McDonald’s achieves success from a 100% outsourced supply chain.
Kroc decided to use an outsourced model for his operating plan from the very inception of
McDonald’s. The decision was simple. First, he didn’t have the funds to build his own vertical
supply chain. But lack of funds wasn’t the only reason. As a salesman calling on other restaurant
chains, he had seen many cases where companies forced their franchised restaurants to buy
goods from the company.
Kroc despised the short term thinking that virtually all of his competitors used. For Kroc, success
was determined over the long term. Kroc’s ultimate desired outcome was profitable, individual
stores serving consistent, quality products. Finding suppliers who would be partners in the
process was the key.
Kroc was determined to work with suppliers that had the same long-term thinking. This meant
all three “legs of the stool,” owner/operators, suppliers and McDonald’s employees, must have
“what’s best for the System?” as the primary consideration. Partnership and commitment to
mutual goals are more important than the lowest pricing.
It is long-term thinking that actually drives suppliers to innovate. And innovation ultimately
makes McDonald’s cost structure significantly better than the competition.
While Kroc set the tone over 50 years ago, his legacy remains.
To this day, “System First” has become shorthand for the long-term win-win behavior
demonstrated by all three legs of the stool. The “System First” philosophy is institutionalized
within McDonald’s and its suppliers, standing the test of time as new leaders, new suppliers and
new restaurant owner/operators enter the System.
Marion Gross, senior vice president and chief supply chain officer, North America, cites the
System as a huge competitive advantage for McDonald’s supply chain. “Our unique supply chain
model is based on an exceptional set of operating principles that create long-term wealth and
competitive advantage for everyone involved by mitigating costs, preventing safety issues, and
producing quality and innovative products that delight customers in a uniquely McDonald’s way.
The result is increased customer value, better brand health and stronger business performance.”

THIRD PARTY CERTIFICATION: It is no small task to become a McDonald’s supplier. Many have
been with the company for decades and produce product exclusively for the company, while
others have additional clients but contribute a significant portion of their operations to dedicated
McDonald’s production.

All suppliers must be willing and able to meet McDonald’s stringent food safety and quality
standards, which include dedicated production lines, storage facilities and production formulas.
The McDonald’s system requires constant quality checks throughout the supply chain process
and proven traceability programs, at least one step back to the ingredient supplier, and in some
cases, tracking all the way back to the farm. The suppliers are expected to audit their own
ingredient and raw material suppliers to ensure that those producers upstream also meet the
high food safety and quality requirements of the company, which includes the implementation
of Hazard Analysis and Critical Control Points (HACCP) and allergen control programs.

Having an adequate HACCP program is the cornerstone of McDonald’s’ food safety program for
its suppliers, and the minimum requirement to work with the company, noting that McDonald’s
was an early adopter of the HACCP food safety system model. “We want to see their food hazard
prevention, control and sanitation programs in action. We want to see that they work and adhere
to local, state and federal regulations in addition to our specific requirements.”

To verify that vendor quality assurance and food safety programs are working effectively and
meet the restaurant chain’s rigorous specifications, third party auditors and company
representatives regularly tour suppliers’ facilities to observe food safety and sanitation programs
as they are executed. As a part of verifying the adequacy of a production plant’s sanitation
practices, auditors conduct thorough reviews and risk assessments of each supplier’s HACCP
program, considering how the HACCP plan was developed, how the hazard analysis was
conducted, how the process critical control points were identified, and whether the program is
aligned with McDonald’s expectations for quality and safety. The facility’s HACCP program is
further evaluated to assess how the program works in the production environment under varying
workload conditions and to verify that it is being implemented across the facility at all times.
Additionally, auditors will swab processing equipment, food-contact surfaces and nonfood-
contact surfaces such as floor drains to check the level of cleanliness and hygiene of the
production environment and periodically take equipment apart for further hygiene monitoring
inspections.

McDonald’s also works with third party auditors to conduct announced and unannounced audits
in the facilities of all of its direct suppliers about twice a year. If issues or gaps in food safety or
quality systems are found, McDonald’s works with the supplier to resolve potential problems
before they ever interfere with product safety and quality.

To accommodate and adhere to McDonald’s food safety and quality requirements, most of the
company’s suppliers have dedicated quality assurance staff on-site for the McDonald’s brand
products they produce. In return, McDonald’s encourages suppliers to share ideas and to
constantly challenge the way the company and other suppliers think about quality and food
safety. “They allow us to offer suggestions on how to enhance quality throughout processing,”
says Wendy Davidson, group vice president of food service for Tyson Foods, the Springdale, AR-
based supplier of chicken and other protein-based products to McDonald’s worldwide. “It’s very
collaborative. Without this kind of interactive relationship, it would be much more challenging.”
OSI’s HACCP and traceability program begins when the raw beef arrives at the door from the
slaughterhouse. All certified drivers undergo background checks before being allowed to deliver
or receive product for OSI. Every 2,000-lb. truckload of beef is sealed with a traceable,
unbreakable bolt that contains a code matched to the bill of lading, verifying which
slaughterhouse it’s from and that it hasn’t been tampered with.

If the bolt matches the bill of lading, it is cut with a custom cutting tool. The beef is unloaded and
the barcode of each box is scanned into an enterprise-wide tracking software system, where it is
given a new tracking number that includes the date, location and time each container is received,
and the shelf life of the product. Random loads are sampled for foodborne bacteria, such as
coliforms, E. coli and Salmonella.

Once approved, the meat is placed in a 45F storage area within 35 minutes of arrival to maintain
temperature control. OSI has a 3.5-million-lb. freezer capacity with flowthrough design for first
in, first out (FIFO) processing, to reduce the holding time of any batch of meat.

Throughout processing, there are up to 100 quality checks per hour to ensure that every product
meets McDonald’s specifications. Raw meat is regularly checked for temperature to ensure it
stays at safe levels. Tests also include ratio of lean to fat meat in the beef mixes, patty size and
thickness, flavor, aroma, tenderness and juiciness, as well as product and routine environmental
microbiological testing.
Once an hour, a batch of product is randomly pulled and cooked in a standard McDonald’s
kitchen, which is set up in the processing facility, to ensure final product has the right level of
taste, aroma, moisture, look and feel. The kitchen includes McDonald’s patented clamshell grill
to cook all sandwich meats. In the clamshell, meat is placed on the bottom half of the grill first,
then the top half, which is also a cooking surface. The clamshell is closed, guaranteeing the meat
is cooked through from top to bottom. The grill has a set time and temperature requirement and
the clamshell cannot be opened or the patty removed until sensors read that these time and
temperature requirements have been reached.
Certification In Pakistan: McDonald’s is halal certified in Pakistan and their products do not
contain any traces of pork or alcohol.

SELECTING THE SUPPLIER: Along with a willingness to meet McDonald’s strict criteria, suppliers
also have to be able to prove they can meet demand. This is a key issue for McDonald’s, which
can’t change its menu to meet seasonal or geographical changes and must be able to supply
30,000 restaurants year-round. It is especially tricky with products such as fresh produce, which
typically have short shelf lives and limited growing seasons. “We need guaranteed year-round
supply and quality,” notes Mitch Smith, McDonald’s USA director of quality systems, who says
the recent launch of the company’s Fruit & Walnut Premium Salad and Apple Dippers took
months of sourcing research. “A main menu item has to be identical in any season. We can’t
change apple varieties or use produce that has crop damage.”

The color, cut, texture, freshness and mix of all products must meet exact expectations. That
translates into millions of pounds of produce that must be accessible for McDonald’s to meet
demand. Last year alone, McDonald’s sourced 80 million pounds of lettuce, 1.5 billion pounds of
potatoes, 30 million pounds of tomatoes, and 54 million pounds of apples.

Similarly with meat products, such as chicken filets and beef patties, the cut, size, shape,
tenderness and moisture level of each patty or nuggets must be identical. To achieve that,
McDonald’s has invested great effort over the years in creating a production system that delivers
the same quality and consistency of product, from each batch and every supplier.

CONSLUSION AND SUGGESTIONS:

Together, McDonald’s, it’s owner/operators, and their suppliers have created a system to be
reckoned with a system that continues to set records after 50 years. Many have credited
McDonald’s with transforming the food industry. But ask anyone at McDonald’s and they will tell
you they could not do it alone. The trust in the system inspires collaboration that is unparalleled
in other supplier relationships that drive process and product innovations on a regular basis.
Through effective Supply Chain McDonald’s operates in a famously competitive market and
delivers good value for consumers.

 Not by searching on the commodity market for the lowest cost suppliers.
 Not at the expense of safety or quality. It operates an extremely strict auditing regime.
 Not by pressurizing suppliers. It believes in a policy of paying for performance and long-
term sustainability for suppliers.
 The secret is a lean and efficient chain in rigorouys measurement, the spreading of
knowledge and a real sense of teamwork.

REFERENCES:
https://www.mcdonalds.com
https://www.mcdonalds.com.pk
https://www.docstoc.com