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McDonalds is a fast food chain with restaurants all over the world. McDonalds is world’s leading food service retailer with more than 31,000 restaurants in 119 countries serving more than 50 million customers each day. In India, McDonalds is a joint-venture company managed by two Indians. While Amit Jatia, M. D. Hardcastle Restaurants Pvt. Ltd owns the spearheads McDonalds in west and south India, McDonalds restaurants in north and east India are owned and managed by Vikram Bhakshi’s Connaught Plaza Restaurants Pvt.
Ltd. Celebrating over 12 years of leadership in food service retailing in India, McDonalds now have a network of over 160 restaurants across the country.
It serves burgers and other fast foods customized to local taste . Its philosophy has been ‘ one world, one burger’, which meant that the burger must be consistent in terms of cost and quality. To meet such high standards, it was essential to have an excellent supply chain management system. Big Mac's supply chain success
The seed of McDonald's success was sown in 1990 - six years before it started its actual operations.
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Sanjeev Bhar traces its supply chain management that played a vital role in its growth. About two decades ago, the QSR wouldn't have meant much to the Indian F&B segment. Today, the acronym has been seamlessly absorbed in the industry lingo. McDonald's, arguably, one of the first brands that left a strong imprint on the Indian QSR history, has much to do with this. And its success is credited to its well-established supply management chain.
According to Vikram Bakshi, managing director and joint venture partner of McDonald's India (North & East), the company invested about Rs 400 crore even before its first restaurant commenced operations in October 1996. "We had to ensure that we had the back-end linked up to the farm level for delivery commitment. " The company also deployed the latest state-of-the-art food processing technology for having a sound supply chain. The transition towards the latest technology, which has been subsequently noticed in other QSRs as well, changed the Indian fast food scenario to match international standards.
Tracing its success path McDonald's had been working critically on its supply chain part. Considering, an international brand trying to make inroads into the Indian consciousness, its Indian supplier partners were developed in such a manner that made them stay with the company from the beginning. The success of McDonald's India is a result of its commitment to sourcing almost all its products from within the country. For this purpose, it has developed local Indian businesses, which can supply them the highest quality products required for their Indian operations. Read about egislation that relates to recording storage and sharing of information
As per today's standings, McDonald's India works with as many as 38 Indian suppliers on a long-term basis, besides several others standalone restaurants working with it, for various requirements. In the supply chain management for a QSR, the distribution centres hold special place for bringing food right to the outlet counters. For McDonald's India, the distribution centres came in the following order: Noida and Kalamboli (Mumbai) in 1996, Bangalore in 2004, and the latest one in Kolkata (2007).
McDonald's entered its first distribution partnership agreement with Radha Krishna Foodland, a part of the Radha Krishna Group engaged in food-related service businesses. The association goes back to July 1993, when it studied the nuances of McDonald's operations and requirements for the Indian market. Better facilities and infrastructures were created along with new systems by them to satisfy McDonald's high demands, which finally culminated into an agreement with McDonald's India, for Radha Krishna Foodland to serve as distribution centres for restaurants in Delhi and Mumbai.
As distribution centres, the company was responsible for procurement, the quality inspection programme, storage, inventory management, deliveries to the restaurants and data collection, recording and reporting. Value-added services like shredding of lettuce, re-packing of promotional items continued since then at the centres playing a vital role in maintaining the integrity of the products throughout the entire 'cold chain'. The operations and accounting is totally transparent and is subject to regular audits.
McDonald's had worked aggressively to attain the right suppliers and systems that ensured that 90 per cent of yield was indigenous before the doors were opened to consumers. The only products that they used to import were oil and fries, for which they have had made arrangements to manufacture the oil in India. They ensure that the products developed locally abide by global McDonald's standards. Over the last 10 years, the company has gained experience and adopted procedures that helped in maintaining a continuous supply of food products irrespective of the climatic conditions.
Their logistics and warehousing system is robust that prepares them to deliver products at the same temperature throughout, without a single break in the cold chain. Key suppliers for McDonald’s India The relationship between McDonald's and its Indian suppliers is mutually beneficial. As McDonald's expands in India, the supplier gets the opportunity to expand his business, have access to the latest in food technology, exposure to advanced agricultural practices and the ability to grow or to export.
There are many cases of local suppliers operating out of small towns who have benefited from their association with McDonald's India. All suppliers adhere to Indian government regulations on food, health and hygiene while continuously maintaining McDonald's recognized standards. As the ingredients move from farms to processing plants to the restaurant, McDonald's Quality Inspection Programme (QIP) carries out quality checks at over 20 different points in the Cold Chain system. Setting up of the Cold Chain has also enabled it to cut down on operational wastage.
Hazard Analysis Critical Control Point (HACCP) is a systematic approach to food safety that emphasizes prevention within its suppliers' facility and restaurants rather than detection through inspection of illness or presence of microbiological data. Based on HACCP guidelines, control points and critical control points for all McDonald's major food processing plants and restaurants in India have been identified. The limits have been established for those followed by monitoring, recording and correcting any deviations. The HACCP verification is done at least twice in a year and certified. . Dynamix Dairy Industries (Supplier of Cheese): Dynamix has brought immense benefits to farmers in Baramati, Maharashtra by setting up a network of milk collection centres equipped with bulk coolers. Easy accessibility has enabled farmers augment their income by finding a new market for surplus milk. The factory has: * Fully automatic international standard processing facility. * Capability to convert milk into cheese, butter/ghee, skimmed milk powder, lactose, casein & whey protein and humanized baby food. * Stringent quality control measures and continuous Research & Development. Read about test for presence of protein in food
From farm two degrees Celsius in 90 minutes is the first step to quality. For example, the Rs 262-crore Dynamix Dairy Industries, located in Baramati in Pune district of Maharashtra, manufactures cheese slices for McDonald’s at 10 metric tonnes per month. Dynamix has helped set up 15 bulk cooling centres throughout the district from which it purchases milk. Each cooling centre, which is equipped with modern measuring and testing equipment and a large cooling tank, is not more than a few kilometers away from local dairy farms.
A farmer can deliver milk even twice a day on his bicycle and get a printed receipt on the spot, which also lists the quality of the milk supplied by him as per fat content, colour and solids content. If the milk is sub-standard or adulterated, it is rejected on the spot. A batch of milk can vary from one litre to 10 litres, or more. Each batch is mixed in one large stainless steel cooler and chilled immediately to two degrees Celsius to stop bacterial growth and preserve freshness.
From this point onwards, until just before the burger is actually served in a McDonald’s restaurant hundreds of kilometers away, the temperature is never allowed to increase. When the refrigerated milk arrives at the Dynamix plant at Baramati, the milk in every single tanker is thoroughly tested and rejected if found sub-standard, adulterated or contaminated. The sophisticated testing lab can check fat content with an accuracy of 0. 1 per cent. It can even detect minute traces of pesticides or antibiotics administered to cows.
This instant feedback and the rejection of the entire tanker-load forces farmers to follow the best practices in terms of animal husbandry, use proper feeds, cut down on the indiscriminate use of pesticides and animal medicines and completely stop even the slightest attempts at adulteration. 2 . Trikaya Agriculture (Supplier of Iceberg Lettuce): Implementation of advanced agricultural practices has enabled Trikaya to successfully grow specialty crops like iceberg lettuce, special herbs and many oriental vegetables. Farm infrastructure features:
Exposure to better agricultural management practices and sharing of advanced agricultural technology by McDonald's has made Trikaya Agriculture extremely conscious of delivering its products with utmost care and quality.
Initially lettuce could only be grown during the winter months but with McDonald's expertise in the area of agriculture, Trikaya Farms in Talegaon, Maharashtra, is now able to grow this crop all the year round. McDonald's has provided assistance in the selection of high quality seeds, exposed the farms to advanced drip-irrigation technology, and helped develop a refrigerated transportation system allowing a small agri-business in Maharashtra to provide fresh, high-quality lettuce to McDonald's urban restaurant locations thousands of kilometers away.
Post harvest facilities at Trikaya include a cold chain consisting of a pre-cooling room to remove field heat, a large cold room and a refrigerated van for transportation where the temperature and the relative humidity of the crop is maintained between 1? C and 4? C and 95% respectively. Vegetables are moved into the pre- cooling room within half an hour of harvesting. The pre-cooling room ensures rapid vacuum cooling to 2? C within 90 minutes. The pack house, pre-cooling and cold room are located at the farms itself, ensuring no delay between harvesting, pre-cooling, packaging and cold storage.
With this cold chain infrastructure in place, Trikaya Agriculture has also a plan to export this high value product to other international markets, especially to McDonald's Middle East and Asia Pacific operations. McDonald's expertise in packaging, handling and long-distance transportation has helped Trikaya to do trial shipments to the Gulf successfully. In addition to export, McDonald's assistance has enabled Trikaya Agriculture to supply this crop to a number of star-rated hotels, clubs, flight kitchens and offshore catering companies all over India.
Vista Processed Foods Pvt. Ltd. (Supplier of Chicken and Vegetable range of products including Fruit Pies) A joint venture with OSI Industries Inc. , USA, McDonald's India Pvt. Ltd. and Vista Processed Foods Pvt. Ltd. , produces a range of frozen chicken and vegetable foods. A world class infrastructure at their plant at Taloja, Maharashtra, has: Separate processing lines for chicken and vegetable foods. Capability to produce frozen foods at temperature as low as -35 Degree Cel. to retain total freshness. International standards, procedures and support services. Vista Processed Foods Pvt. Ltd. McDonald's suppliers for the chicken and vegetable range of products, is another important player in this cold chain. Technical and financial support extended by OSI Industries Inc. , USA and McDonald’s India Private Limited have enabled Vista to set up world-class infrastructure and support services. This includes hi-tech refrigeration plants for manufacture of frozen food at temperatures as low as - 35° C. This is vital to ensure that the frozen food retains it freshness for a long time and the 'cold chain' is maintained. The frozen product is immediately moved to cold storage rooms.
With continued assistance from its international partners, Vista has installed hi-tech equipment for both the chicken and vegetable processing lines, which reflect the latest food processing technology (de-boning, blending, forming, coating, frying and freezing). For the vegetable range, the latest vegetable mixers and blenders are in operation. Also, keeping cultural sensitivities in mind, both processing lines are absolutely segregated and utmost care is taken to ensure that the vegetable products do not mix with the non-vegetarian products.
Now, at Vista, a very wide range of frozen and nutritious chicken and vegetable products is available. Ongoing R&D, both locally and in the parent companies, work towards innovation in taste, nutritional value and convenience. These products, besides being supplied to McDonald's, are also offered to institutions like star-rated hotels, hospitals, project sites, caterers, corporate canteens, schools and colleges, restaurants, food service establishments and coffee shops. Today, production of better quality frozen foods that are both nutritious and fresh has made Vista Processed Foods Pvt. Ltd. a name to reckon within the industry.
Radhakrishna Foodland (Distribution Centres for Delhi and Mumbai): An integral part of the Radhakrishna Group, Foodland specializes in handling large volumes, providing the entire range of services including procurement, quality inspection, storage, inventory management, deliveries, data collection, recording and reporting.
Salient strengths are :A one-stop shop for all distribution management services.
Dry and cold storage facility to store and transport perishable products at temperatures upto -22 Degree Cel. Effective process control for minimum distribution cost. McDonald's local supply networks through Radhakrishna Foodland, which operates distribution centres (DCs) for McDonald's restaurants in Mumbai and Delhi. The DCs have focused all their resources to meet McDonald's expectation of 'Cold, Clean, and On-Time Delivery' and plays a very vital role in maintaining the integrity of the products throughout the entire 'cold chain'. Ranging from liquid products coming from Punjab to lettuce from Pune, the DC receives items from different parts of the country.
These items are stored in rooms with different temperature zones and are finally dispatched to the McDonald's restaurants on the basis of their requirements. The company has both cold and dry storage facilities with capability to store products up to -22? C as well as delivery trucks to transport products at temperatures ranging from room temperature to frozen state.
Amrit Food (Supplier of long life UHT Milk and Milk Products for Frozen Desserts): Amrit Food, an ISO 9000 company, manufactures widely popular brands – Gagan Milk and Nandan Ghee at its factory at Ghaziabad, Uttar Pradesh.
Strengthening the backbone Suppliers are proclaimed to be the backbone of any good business as they are the individual units that build supply chain. On them depends the health of the overall business cycle.
Highlighting McDonald's role in developing its supply chain network, Bakshi says, "Cremica Industries (which provide liquid condiments, batter and breading), for example, worked with another McDonald's supplier from Europe to develop technology and expertise that allowed the company to expand it business from baking to providing breading and batters to McDonald's India and other companies as well. " Another benefit in the company's favour was its expertise in the areas of agriculture, which allowed it, along with its suppliers, to work with farmers in Ooty, Pune, Dehradun and other regions to cultivate high quality iceberg lettuce.
Bakshi says, "There has been a substantial effort on sharing advanced agricultural technology and expertise with farmers/suppliers like utilisation of drip irrigation systems (for less water consumption), better seeds and agricultural management practices for greater yields. " Another area of concern is the sensitive price indexes of the food materials that McDonald's uses and to tackle price fluctuations, the company goes with yearly rate agreements with suppliers. McDonald's took special care in identifying the positives of their suppliers and added their expertise to improve on their existing standard.
Trikaya Agriculture, a major supplier of iceberg lettuce to McDonald's India, is one such enterprise that is an intrinsic part of the cold chain. "Initially, lettuce could only be grown during the winter months but with McDonald's intervention, it is now able to grow the crop throughout the year," says Bakshi. Also, some of its suppliers with concerns over cultural sensitivities, segregated with a separate work force for the vegetarian and non-vegetarian processing lines.
Refrigerated vans for McDonald's| National inbound - Supplier to DC: 20 vehicles + 2 for Kolkata
Incorporating chill zones Setting up extensive cold chain distribution system forms the lifeline of any fast food business. In this regard, McDonald's incorporated state-of-the-art food processing technology along with its international suppliers to pioneering Indian entrepreneurs, who are today an integral part of the cold chain, avers Bakshi.
He says, "We have imparted technical training to all our suppliers on how to operate the imported machineries, educated them on the McDonald's philosophy of Quality, Service, Cleanliness and Value (QSCV) in order to provide standardised food to our customers. " The 'cold chain', on which the QSR major has spent more than six years for setting up the same in India, has brought about a veritable revolution, immensely benefiting the farmers at one end and enabling customers at retail counters.
McDonald's finding the factor of cold room being vital ensured that even before vegetable from farms enters the refrigerated zones, they are locked in a pre-cooling room to remove field heat. Vegetables are placed in the pre-cooling room within half an hour of harvesting where rapid cooling decreases the field temperature of vegetables to 2?C within 90 minutes. Then a large cold room (a refrigerated van) is used for transportation to the distribution centers. In the van, the temperature and relative humidity of crop is maintained at 1-4?C and 95 per cent, respectively and the flavours and freshness are locked at -35°C.
Even in this field, McDonald's takes the big pie of credit for developing the concept of cold chain. Bakshi claims, "Prior to McDonald's arrival in India, the concept of a cold chain for the distribution of food and dairy products from the farm to the end supplier, in predetermined and stringently enforced climactic and hygienic conditions, was at a very nascent stage of development. For five years prior to opening our first restaurant, McDonald's pioneered the effort to develop this aforementioned cold chain so that our high standards would be assured.
Various Indian and international players later adopted this system to deliver quality fresh produce to consumers. " McDonald's also kept a tab on quality control. McDonald's, as a rule, throws away burger puffs kept for more than 30 minutes after the final preparation during service. To avoid any wastage, Bakshi says, "The crew is trained and equipped to forecast the requirements at various stages of the day. At the suppliers' level, care is taken to guard against any possible contamination or interruption in the cold chain that can break the link and have a detrimental effect on the quality of our product. Conclusion All these suppliers shared McDonald’s commitment and dedication for satisfying customers by supplying them the highest quality products. They work cohesively to ensure that the final product reached the customer consistently each time and every time. At their level, every care is taken to guard against any interruption in the cold chain which can break the link and have a detrimental effect on the quality of the product. And more products reaching the market fresher and quicker not only benefit the economy but also help the farmer earn more.
Mcdonalds Supply Chain Strategy. (2020, Jun 02). Retrieved from https://studymoose.com/mcdonalds-supply-chain-strategy-essay
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