Organization Name: Mc Donald’s
Web Reference: McDonalds, Forbes, Wikipedia
In this week’s blog I write about Mc Donald’s, the most recognizable and successful fast food chain in the world. McDonald’s has over 36,000 locations serving approximately 69 million customers in over 100 countries each
day. More than 80% of McDonald’s restaurants worldwide are owned and operated by independent local franchisees while the rest are corporately operated and owned. The company’s marketing and branding strategy of McDonald’s is based on uniformity and no matter where in the world you will always be able to order the most iconic menu items such as the Big Mac. This type of consistency around the world is why the company is so successful. However, McDonald’s global consistency relies a lot on their supply chain management to help run things smoothly in each store.
McDonald’s success is found in their “system” philosophy which can be 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. If one leg fails, the entire structure is weakened or can fail. Company employees, franchise owner/operators and suppliers each support the weight of McDonald’s equally. This way everyone can benefit from the system and prosper. McDonald’s and its most strategic suppliers have a deep commitment to each other to continually deliver value for McDonald’s System. Suppliers are confident the McDonald’s business is not vulnerable to competitors’ price-cutting and arbitrary changes.
In Canada, McDonald’s works with more than 100 leading Canadian suppliers to source their food for their restaurants. Their annual purchase from suppliers in Canada is more than $760 million in food and materials from over 100 suppliers in Canada. McDonald’s suppliers include leading Canadian companies such as Coca-Cola, Danone, McCain, Minute Maid, Mother Parkers, Nestle, Quaker and Saputo.
McDonald’s established its Global Sustainability Framework in 2014 to set sourcing goals for five of their six priority products — beef, packaging, fish, coffee and palm oil. The Company is working with suppliers, industry groups and non-governmental organizations (NGOs) to develop a common set of guiding principles and best practices for sustainable poultry — poultry being their sixth priority product. McDonald’s plans to finalize these global principles in 2016.
The Company helped found the Global Roundtable for Sustainable Beef (GRSB) to bring together key players in the beef value chain around a common purpose to help ensure that all aspects of the beef value chain are environmentally sound, socially responsible and economically viable. McDonald’s aims to purchase a portion of their beef from verified sustainable sources beginning in 2016.
In August 2015, McDonald’s announced the availability of a new premium hamburger—the Mighty Angus—the first new premium burger the Company has added to its permanent menu since 2012 in Canada. The 100% pure Angus beef is sourced from Canadian farms. The Company is also funding a beef sustainability pilot project in Canada. Through the work of the Canadian pilot, McDonald’s is on track to purchase a portion of its beef from sustainable sources in 2016 as part of its broader aspirational goal to source all of its food and packaging sustainably.
The reason for McDonald’s implementing more sustainable supply chain for sourcing their food is to extend responsibility for product quality into social and environmental performance to provide better and consistent value to their customers. Interpersonal trust and working to standards are both important to building more sustainable local and many conserved food supply chains, which is why McDonald’s is developing stronger bonds with farmers and food suppliers to get a customer centric competitive advantage.
McDonald’s E-Procurement System and Social Media
Back in June 2000, McDonald’s and Accel-KKR, Inc. formed a partnership to establish eMac Digital, a new company designed to accelerate the development of global Internet related businesses. The reason for doing so was to focus on business-to-business opportunities that drive efficiencies, maximize cost savings and create new markets and distribution channels. Initially, eMac Digital helped leverage McDonald’s strengths by creating, developing and investing in new enabling platforms that helped McDonald’s reduce transaction costs, communicate more effectively within the company and improved quality of operations using eMac Digital’s technology. How eMac Digital helped provide better value in the supply chain was by building an e-procurement platform for McDonald’s and their suppliers to help manage information, transactions, sales, orders, and other functions. The e-procurement system allows all of McDonald’s franchises across the globe to buy everything they need to run their restaurants and communicate what supplies they need from suppliers through the network. According to Barry Edwards, senior director of worldwide supply chain management at McDonald’s, their e-procurement system help cut labour costs by 85 per cent and e-auctions had reduced supply prices by up to 15 per cent.
Lessons for Others
McDonald’s supply chain management relies on their three-legged stool philosophy, developing new sustainable food sources, and e-procurement system in order to fill their demand of Big Macs and fries at their restaurants, throughout the world. Their supply chain runs effectively because of their e-procurement system which can meet daily demand of 69 million customers.
What other companies can learn is that collaboration is needed from everyone involved in the supply chain in order to create value to the end consumer. Not only that, but communication needs to be quick, concise, and interconnected just like McDonald’s e-procurement system.
Submitted By: Benjamin Wong, SMBP, University of Waterloo
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