MCDONALD’S SUPPLY

CHAI LOGISTICS
PRESENTED BY
MUHAMMAD ALI
INTRODUCTION

• Beginning of Franchising in 1950

• Currently Expanded to 100 Countries
• 69 Millions Customers Around the Globe
• Over 14,000 McDonalds in USA
• Over 37,000 McDonalds in World
• 550 Million Big Macs Sold Every Year
• 9 Million Pounds of French Fries are Sold Everyday
• 60 Million People Downloaded McDonalds App
• McDonalds Outsources 100% of the Supply Needs
THE VERTICAL INTEGRATION BY MCDONALDS

• Vertical integration can keep costs down and profits up.

• Each and every product used by McDonalds is the result of their own production via
contracts with multiple suppliers.
• So every product they sell is owned by them including the suppliers.
• They have taken control of their supply chain nicely.
• One of the clear advantages to their supply chain system is that they have control.
SUCCESS OF MCDONALDS

• McDonalds hires 1 million workers annually

• They have a workforce that is 1.5 million strong and a net worth of about $105 Billion
Dollars.
• Establishing a supply chain where everyone wins.
• One of the key reasons for McDonalds successful supply chain is their vested interest model.
• In traditional models, suppliers and business receive value from each other but in McDonalds
approach suppliers and business create value together.
• Their model promotes growth not only of the restaurants but for the suppliers as well.
SUCCESS OF MCDONALDS CONTD

• McDonalds philosophy is based on The Three-Legged Stool approach designed by

McDonalds founder Ray Kroc.
• He established trust with his suppliers by developing a winning strategy where each “leg”
of the franchise was heavily dependent on the other to succeed.
• The First Leg of the stool is McDonalds employees.
• The second leg is the franchise owners.
• The third leg are the trusted suppliers.
• If one leg fails, the stool collapses.
THE WHAT’S IN IT FOR ME SYSTEM

• They made suppliers interested in seeing a company succeed.

• WIIFWe (what’s in it for we) is the backbone of the entire “system” at McDonalds.
• Bringing value to everyone involved in the process.
• By approaching suppliers with a plan that helps them to enjoy more profits and steady growth.
• For example, suppliers do not have to worry about asking for increases for products, that is already
built into the contract.
• Instead of viewing producers as simple suppliers, they are viewed as business partners and collaborators.
• Everyone works together toward one common goal, success!
RULES TO MANAGE THEIR SUPPLY CHAIN

1. Focus on outcomes not on transactions-instead searching for better prices,

McDonalds focuses on building long term business partnerships.
2. Trust the suppliers to deliver the QSC&V (Quality, Service, Cleanliness & Value)
standards that McDonalds have set and do not worry about how they will do it.
McDonalds does not micromanage suppliers.
3. Set clearly defined outcomes that are measurable-everyone must be on the same
page.
RULES TO MANAGE THEIR SUPPLY CHAIN CONTD

4. Pricing model/incentives for cost/service trade-offs-this is one of the most important

rules to McDonalds model, everyone must be making money.
5. Govern for insight not oversight- establish peer-to-peer relationships that are there to
provide insight and not micromanage.
WHAT’S BEST FOR THE SYSTEM

• Before a supply decision is made at McDonalds, it is reviewed to determine if it is best

for the system.
• The system works, and no one wants to change that.
• Changes are made but never without determining if it is best for the system first.
CONCLUSION

• There are a few take a ways from an examination of McDonald’s supply chain.
1. You must have a lot of volume to take full advantage of this model.
2. If you treat people well, many times they will remember and treat you well back even
in business.
3. Ray Kroc may have only been a traveling salesman, but he understood intimately what
it took to get people to work hard for you and believe in your vision.
• Supply system that is based less on business smarts and more on people smarts and core
values that depend on treating people fairly.