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Supply chain management of McDonalds

McDonald's has established an extensive supply chain and distribution network in India to source and deliver ingredients for its restaurants. Key aspects of its system include: 1) Establishing geographically diverse suppliers that meet stringent quality standards. 2) Using an e-procurement system called Emac Digital to facilitate ordering from major and small suppliers. 3) Maintaining a cold chain through centralized distribution centers and temperature-controlled transportation. 4) Outsourcing logistics and distribution to partners like AFL Logistics and Radhakrishna Foodland Ltd. to ensure nationwide coverage.

Business◦Technology◦
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Supply Chain Management•
SUPPLY CHAIN MANAGEMENT& DISTRIBUTION MANAGEMENT Perishable Products (Restaurant Chain)
Presented by: P.Saravanan SS10-12/Finance IIPM,Chennai
McDonald’s History • It started as a drive-in-restaurant in the late 1940’s. • In 1966, McDonald’s was listed on the New York Stock Exchange. • In June 1967, McDonald’s opened its first restaurant outside U.S in Canada • In 1996, McDonald’s entered India in a joint venture.
McDonald's In India • 1996 - First restaurant opens in India, at Basant Lok,Vasant Vihar, New Delhi. • McDonald's India is a 50 – 50 JV partnership between McDonald’s Corporation (U.S.A) and two Indian businessmen Amit Jatia (Hardcastle Restaurants Private Limited, Mumbai)and Vikram Bakshi (Connaught Plaza Restaurants Private Limited, Delhi). • Two separate operations in Northern & southern India. • Partners and their management teams trained extensively in Indonesia & the U.S. • Approximately 75% of the menu available in McDonald’s in India is Indianized and specifically designed to woo Indian customers.
PLACE Location Tier 1 cities • Big family size restaurants: • High density marketplaces • Shopping Malls • Railway Stations/Metro Stations Tier 2 Cities • National Highways (Drive In’s) Channels • Franchise Model • Company Owned Flagship Outlets Coverage • Pan India Presence
Co -BRANDING • McDonald’s has major tie-ups with various companies as their co-branding strategy • Few are: – Coco-cola – Barbie – Cadbury – Hotwheels
Supply Chain Management
McDonald’s SUPPLY CHAIN • McDonald’s Supply chain is based on the three-legged stool concept : Suppliers Company Franchisees
Vital links of Mc Donald’s cold chain. Procurement • McDonald's spent a few years setting up a unique Cold Chain. warehousing • The Cold Chain is necessary to maintain the integrity of food products and retain their freshness and Transportation nutritional value. Retailing of food product
• McDonald’s took 4 years and around Rs 450 crores to set up the food supply chain even before opening its 1st restaurant. • McD India has pioneered the cold chain management system. • They provided assistance in the – Selection of high quality seeds – Drip-irrigation technology – Refrigerated transportation system
E-Procurement • E-procurement (electronic procurement) is the purchase and sale of supplies,Work and services through the Internet as well as other information Enterprise Resource Planning. • e-procurement is a Web site that allows qualified and registered users to look for buyers or sellers of goods and services. • Buyers or sellers may specify costs or invite bids online. • Customers can Qualify for volume discounts or special offers on the web.
How McDonald’s Uses E- procurement Systems • Emac Digital: (Internet procurement site designed for McDonald's Corporation's 27,000 franchises ) • Emac Digital Company is E-Procurement website which is jointly owned by McDonalds and Accel-KKR Internet Co.
• It is a procurement hub launched in 2001 allow all of McDonald's franchises across the globe to buy everything needed to run their restaurants. From uniform to HamBurger
• Aside from being faster and more convenient for franchisees, the procurement site also allow business owners to buy supplies and materials at a discounted price, ultimately reducing costs for McDonald's. • E-Procurement allows 85% cut in costs according to McDonald’s supply chief Edwards.
Benefits For the Suppliers • McDonald’s works with two types of suppliers. Major Suppliers Small Suppliers
Major Small Supplier Suppliers Emac Digital
McDonalds E-Procurement Model Global Franchises Place Orders Supply Received Emac Digital Suppliers Logistics
IP (Internet protocol) technology • The quicker connection would also allow McDonald's to track purchases and offer customer loyalty programs. • it will connect headquarters with stores. • Replacing traditional and old Dial-up Networking. • McDonald's can collect data much faster
SUPPLY CHAIN INTEGRATION
Geographically Diverse suppliers: Ensuring stringent quality standards
SUPPLIERS 1.Dynamix Dairy Industries (Supplier of Cheese)  Fully automatic international standard processing facility.  Network of milk collection centres equipped with bulk coolers.  Dedicated quality program.  Dedicated R&D centre
2.Trikaya Agriculture (Supplier of Iceberg Lettuce) • Specialized nursery with a team of agricultural experts • Drip and sprinkler irrigation in raised farm beds with fertilizer mixing plant. • The pack house, pre-cooling and cold room are located at the farms itself to ensure no delay.
3.Vista Processed Foods Pvt. Ltd (Supplier of Chicken and Vegetable products) • World class infrastructure and support services. • Separate processing lines for chicken and vegetable foods. • Hi-tech refrigeration plants for manufacture of frozen food at temperatures as low as -35⁰C.
4. Amrit Food • Supplier of long life UHT Milk and Milk Products for Frozen Desserts
OUTSOURCING THE INGREDIENTS ITEM PLACE Cheese Dynamix Dairy Industries Ltd., Pune Dehydrated onions Jain Foods, Jalgaon Iceberg lettuce Trikaya Agriculture, Pune Chicken patty Vista Foods, Taloja Veg. Patty, Veg. Nuggets, Pie’s Kitran Foods, Taloja Chicken (dressed) Riverdale, Talegaon Buns Cremica Industries, Phillaur Eggless mayonnaise Quaker Cremica Pvt. Ltd., Phillaur Sesame seeds Ghaziabad Fish fillet patties Amalgam Foods Ltd., Kochi. Finns Frozen Foods, Nasik and Jain Vegetable for the patties Foods, Jalgaon Mutton and Mutton Patties Al Kabeer, Hyderabad
Logistics • AFL Logistics – 50:50 JV between AirFreight and FX Coughlin of USA- McDonalds international logistics partner – 100 sales items in the restaurant – 400 SKUs in the warehouse – 200 restaurants per DC (~180 DCs globally) – Delivery frequency: ~3/wk, higher in urban areas – 2-3 stops per route – Exclusive distributors (3PL) – Strong quality focus (Cold Chain, HACCP, QIP)
Transportation • The DC receives items from different parts of the country. • The items are stored in rooms with different temperature zones and are finally dispatched to the McDonald's restaurants on the basis of their requirements.
Transportation • The company has both cold and dry storage facilities with capability to store products up to -22º C as well as delivery trucks to transport products at temperatures ranging from room temperature to frozen state. • The specially designed trucks maintained the temperature in the storage chamber throughout the journey.
Distribution • Matching supplier production with deliveries to meet schedules and restaurant needs • 3 centralized distribution centers at Mumbai, Delhi and Kochi • Emphasis on economies of scale – High storage volumes • QIP (Quality Inspection Program)
Distribution • HACCP (Hazard Analysis Critical Control Point) – Food safety standards emphasizing prevention of faults rather than detection through inspection • No Knife in restaurants
Radhakrishna Foodland Ltd • Distribution Centres and cold storages. • Completely dedicated distribution and supply chain. • Specialized in providing services • procurement • quality inspection • storage • inventory management • deliveries • data collection • recording and reporting
Radhakrishna Foodland Ltd • Dry and cold storage facility – Transportation trucks maintained at 22⁰ C – Implemented ERP software.
McDonalds Distribution systems McDonald uses three types of Distribution strategy – Franchising – Licensing – Joint ventures
Franchising McDonald require franchising from countries on conditions like this • The entrepreneur should be trained. • 45000$ in franchise fees which is higher than other fast-food companies • Total investment would range from 1 million to 1.8 million • After setting the entrepreneur will have to pay 12.5 % as royalty tax • Contract wll be for 20 years • Cash liquidity should be around 250000
McDonalds Distribution systems • Samsung Corby Crave Hit McDonald’s: – The joint promotion aims to generate excitement among the youth and providing them a feel of the touch phones and boosting their comprehension. • McDonalds have license on Airports, Railways etc.
McDonalds Distribution systems • Joint venture • GAM Corp (Private) Ltd is a joint venture company of McDonald’s Corporation USA. Mc Donald’s is world’s leading Fast Food chain having over 30,000 restaurants world wide • Other than this “TOYS R US” is another joint venture
Process:
Supply chain management of McDonalds