CASE 1: McDonald’s case study

McDonald‟s is the world leader in fast food.Their presence in 118 countries with 33,000 restaurants glorifies its position as world leader and as fast food giant. This huge network is not easy to manage where guest expectations are clean, hygienic, tasty and quick food every time. The credit of this successful availability goes to the unique supply chain management and control over this entire huge network. McDonald‟s is present in more than 40 cities of India with 250 eating outlets and adding more every now and then. This huge supply chain is entirely outsourced without any legal contact with them. Some unique features of this supply chain managements are lean management, multi-layered supply-chain, cold chain, Hub and Spoke system. For training their staff company takes all its measure through intensive programmes like Supplier Quality Management Systems (SQMS) and the Distributor Quality Maintenance Program (DQMP). The explained model will help to understand the flow of supply chain.

INTRODUCTION

McDonald‟s is a limited menu restaurant is characterized by speed of operations. McDonald‟s is the world leading retailer with more than 33,000 restaurants in 118 countries serving more than 67 million customers each day.Internationally, no doubt McDonald‟s is considered the largest food service retailer in the world. The first restaurant was established in 1955 in Des Plaines, Illinois, USA. The strength of McDonald‟s India employees amounts 9,000 people including restaurant staff. But the surprise lies in its unique and intricate supply chain network which is managed by just five people across the whole country. The supply-chain network of McDonald‟s is of its

BAHRIA UNIVERSITY (KARACHI CAMPUS)

Department of Electrical Engineering

Final Exam Assignment - Spring 2020

(HSS 456 Organizational Behavior)

Class & Section BEE 4(A,B,C) Total Marks: 50

Course Instructor: _Engr.Umair Shahid_________ _ Given Date: 1/07/2020

Student’s Name: ____________________ Submission Deadline: 1/07/2020

Enrollment No: _____________________

Note:

1. Official submission mechanism is on LMS(08:00-1600)

2. You need to solve two case studies. First read the cases of organizations then write precise answers

by using concepts of OB. Support your answers with examples. General answers will NOT be

accepted. You need to apply OB concepts in these cases.

3. Cheating/Plagiarism is strictly prohibited.

4. If any two or more assignments will found same. All will be cancelled. You need to show your skills!

own kinds: 100 percent outsourced Lean with no back-up staff and no frills. The company is enjoying growth of 30-40 percent every year . The credit goes to the proper research work done before launching McDonald‟s. The experts set together and coordinated groundwork was done to ensure the successful functioning of its demand and supply system. It was from 1990 onwards, expert teams happened to check the strength of logistics industry, the reliability of its transport sector, and resource availability. The result was an extremely effective supply-chain at optimal level in place despite of weak infrastructure. In context to Indian market special menus with religious and cultural sentiments were designed and in six years time the company was ready with its entire supply chain. McDonald’s which is known for its beef burgers free of beef and pork in Indian subcontinent. McDonald’s supply chain is both critical and multi-layered. There are two categories in food ingredients supply; Tier-I and Tier-2 suppliers as reflected from figure 1. In Tier-I there are 14 core suppliers-provide processed products e.g. Vegetable and chicken patties comes from Vista Processed foods Pvt Ltd. , French fries, potato wedges and hashbrowns by McCain Foods Pvt. Ltd. And so on. In Tier-2 suppliers there are growers and processors who provide lettuce and potato, poultry items and coating systems that are used for coating the chicken and vegetable patties. The flow of ingredients are from Tier-2 to Tier-I suppliers who process them. Now, the fleet of refrigerated trucks transport these processed foods to the company’s Distribution Centers(DC‟s). These trucks have been specifically maneuvered for variability of McDonald’s products. These are Multi-temperature and single temperature trucks into practice where 250 McDonald’s restaurants are provided on time fast delivery. This is not unidirectional, it also include the significant aspect of return logistics. Hence the empty bottles and racks are available for further processing. Plastic crates are used for buns to ensure their quality. With four Distribution Centers across the country all 250 restaurants are served effectively. And every new outlet addition is capably handled by these DCs within in ten days in the country.

OUTSOURCED BUSINESS The essence of the effective supply-chain model is undoubtedly attributed to its unique concept of outsourcing. The company has a 100 percent outsourced supply chain, which is a rare case in industry giants. But McDonald‟s has complete control over its functioning. The performances of outsourced companies are monitored on Key Performance Indicators (KPIs).McDonald‟s has a total of 40 suppliers, in which 14 are the core suppliers, known as Tier-1 suppliers, they supply directly to the fast food chain.

The rest are Tier-2 suppliers. Relying on local players, most of the suppliers are local. Some internationally famous foreign players like McCain Foods India are also the part of supply team. McCain set up its Indian business when McDonald‟s ventured into the fast food business in the country. For supplier to remain in the main stream, the terms of work are very rigorous. It‟s a whole lot of responsibility with qualitative assurance lies on suppliers. A company‟s stellar credentials are not enough; the supplier‟s job does not end when the product leaves his premises, rather it ends only when the customer consumes it. McDonald‟s expects its suppliers to personally ensure the quality of their products to skirt the risk factor. Coca Cola, the beverage partner impart water management knowledge to the restaurant staff to ensure potable quality of drinking water.

FAITH IS THE KEY McDonald‟s has no legally signed agreements with its suppliers. It is a simple handshake relationship‟ with the suppliers. The policy with suppliers is very clear; one product-one supplier relationship. The policy has been proven as long-term relationships at every time.” The fast food chain sells 30 or 35 independent Stock Keeping Units (SKUs) at its outlets. With various combinations (a meal can be small, medium or large, while a Coke can also be sold as regular, medium or large), there are 100-150 SKUs which are sold to customers. Limited SKUs,have ensured speedy service and ease to maintain stock keeping.

The major demand (80%) is fulfilled by 14 core suppliers and whenever addition is there in restaurant line those 14 suppliers are the first choice. SOLE DISTRIBUTION PARTNER The entire distribution of McDonalds‟ products in India is handled by Radhakrishna Foodland Pvt. Ltd, the only distribution partner. RKFL manages the four DCs and since it has a transport division, handles the truck movement in the supply-chain right through the country (Figure-2). McDonald‟s exhibits control on its distribution partner to meet its standards of „cold, clean and on-time delivery. RKFL experts manages daily activities of raising purchase orders to suppliers, invoicing, keeping track on working capital management, timely delivery, payments, etc. Any item required, is sourced directly from RK. There are only two products, buns and Cokes, which are sent directly to the restaurants. Buns have a limited shelf life, hence they are sent directly to the outlets. Coca Cola has its own distribution system which ensures quick dispatch of its products.As with its suppliers, McDonald‟s has no legally documented Service Level Agreements (SLAs) with RKFL. For distribution partner also McDonald‟s has set KPIs (Key Performance Indicators). The DCs are assessed on several factors like administration efficiency the total number of cases managed per man hour,warehouse efficiency,overtime as a percentage of the total number of hours worked and in the case of transportation,the number of cases handled per trip,truck utilization, etc.

REFRIGERATED MOVEMENT OF PRODUCTS The movement of edible goods is through a system of cold chain where fleets of truck transport all the items, capable to carry different items all together as there are compartments created to store frozen products at -180C to -250C, chilled products from 10C-40C and dry products at ambient temperatures. Another feature is that truck containers are made with two side doors in addition to the rear door. The side doors are used to unload products without disturbing the products in the other temperature zones. The entire effectiveness of supply-chain is based on the concept of „pull-supply‟ chain. The restaurant issues orders to the Distribution Center which, in turn, routes the order to the supplier and only then does the supplier produce it. The concept is also known as “made to order”. The supplier thus maintains barely any extra stocks; only if there is a contingency, like the overhaul or servicing of machinery, will the supplier produce surplus stocks. According to RK Foodland, the fill rate to store is 99.8 percent. DEMAND FORECASTING:

Demand forecasting for long term is based on an efficient concept known as 31Q system—3 stands for the three years that the fast food chain will keep checking its plans, 1 represents the detailed forecast of the next year and Q symbolizes the quarterly monitoring of these forecasts. While preparing annual budget suppliers becomes a part of budgeting process. Usually, the restaurants give a three-day to one-week forecast to the Distribution Center. The DC, in turn, has a three-month rolling forecast with the suppliers which enable them to plan their production schedules meticulously.With 250 restaurants scattered across the country, lead times for delivery assume critical importance. Every restaurant manager knows the exact time of arrival of

each product which enables the supply chain team to work backwards to ensure timely distribution.With a maximum inventory of ten days in its system, McDonald‟s maintains an efficient inventory turn ratio of 36. FOOD SAFETY & HACCP Food safety is another critical area for quality standard. For this Hazard Analysis Critical Control Point (HACCP) certification which ensures food quality is applicable. This is an industry level certification and is applicable on all the suppliers of the fast food chain. Apart from HACCP,there areother food safety systems like the Supplier Quality Management Systems (SQMS) and the Distributor Quality Maintenance Program (DQMP) are also in practice. For processing and manufacturing plants SQMS is applicable.The SQMS is a worldwide mandate for all McDonalds‟ suppliers and includes essentials of the HACCP control system, while also contriving several principles of its own. The DQMS audits and checks the warehouses of the chain. Auditors worldwide are also trained on its SQMS and DQMP programs. Independent auditors then audit plants and warehouses and allot scores to McDonalds‟ facilities globally to ensure highest standards. QUALITY ASSURANCE Taste of the food products is another parameter of Quality. For this McDonald‟s has developed a Sensory Program. The centralized laboratory for this program is located in Hong Kong which prepares sensory experts. These personnel come both from the suppliers‟ and Quality Assurance teams. Every batch of a food product that gets manufactured at a supplier‟s plant is checked by an approved sensory panel at the plant and scores are allotted to the product. Only a product with minimum score is shipped out of the factory. Other measures are also taken in the form of at random checks of outlets. Also, every quarter or half year, members of the management do a product cutting‟ with key suppliers—fry a product, check its taste and allot scores—to check ifthe product scores are moving in the right direction northwards. And lastly, samples of the products that are manufactured in the country are shipped to the central laboratory at Hong Kong which evaluates the products.

TECHNOLOGY AT ITS BEST The entire system of supply chain is powered by technology to make it smooth and effortless. Suppliers are using SAP while Distribution Centers are on RAMCO Marshall ERP with Cobra software. These systems are used to atomized upload of store orders. For assisting in day to day functions of store, technologies have been developed e.g. track sales, enables restaurants to schedule staff and send forecast orders to DCs, etc. The company is tapping the high growth opportunities with customer satisfaction criteria effectively and in this effort McDonald‟s added Mcdelivery, an innovative option which delivers meals to the customer‟s doorstep. This service has grown at stratospheric levels by more than 400 percent.

CONCLUSION McDonald‟s Supply Chain is quite uniquely handled with least number of employees on McDonald‟s payroll. The control on outsourced entities is commendable. With ever growing business of fast food McDonald‟s has laid down its systems efficiently and expanding at enormous speed. The model can be replicated in other sectors as well. Questions

1) After reading above case highlight the major problems in Mc Donald’s as organization and give critical analysis/views with solution.

(CLO 3/PLO 12/10 Marks)

2) What is TQM (Total Quality Management). How Mc Donald can use it to increase its profitability. How do you conceptualize the value of McDonalds as organization.Support your answer with OB concepts. (CLO 1/PLO 9/10 Marks)

3) How can McDonalds integrate/add value by using “Outsourcing” concept. How can McDonalds supply chain improve by using leadership and communication skills. (CLO 2/PLO 10/5 Marks)

CASE 2: Motivation through Leadership

The Case Study of Ms Zee, MBA

Motivation is the inner state that causes an individual to perform and ensure the accomplishment of some objectives. Motivation cannot be seen but it is inside everybody and it triggers the level of performance / work output in achieving their objectives. The higher the motivation levels the higher the result of the employee’s work output. Because the result of the employee that counts, Motivating employees is of the number one priorities to achieving organization’s objectives. Plainly put, understanding an employee’s need is a key in order to nurture an individual’s motivation level and a good manager needs to focus on this. Being able to understand one’s need and know how to satisfy the need proves essential for a manager to motivate its employees.

Ms Zee’s family business is involved in the furniture business, manufacturing and distributing to furniture companies around Johor and Selangor. The base of her business is in Teluk Ramunia, Johor which is located approximately 130km from Johor Bahru and 60km from Kota Tinggi the nearest town. Her father named the business Lenthall. Lenthall has developed from a small two story building company to a big organization with a factory spanning 2 acres of land and employing more than 70 workers.

Ms Zee’s father has no qualification and has risen from ground to become one of the leading entrepreneurs in the furniture business in Johor. Her father’s autocratic leadership which depends on his authority and power as business owner limits his effectiveness as a leader. Lenthall has stop flourishing for the past 5 years of its life where the customer based is shrinking and the furniture design has not changed.

Ms Zee is convinced that with her MBA degree that she have, she can turn around the company to embrace the new millennium with innovative and creative design. She will combine both autocratic and democratic leadership as she does not want to limit her effectiveness as a leader and a motivator using the Tannenbaum & Schmidt continuum. She is also confident that the employees that she has are capable to help her achieve this by practicing the motivational and Influential skills she learnt during her study.

The only stumbling block would be her father’s previous autocratic leadership which has nullifies and blocked the innovative and self development of its employees. Autocratic leadership is least desirable when building human relationship as one person has control over all of the workers and no one is permitted to make any suggestions or offer any opinion despite the fact that it may benefit the group. The communication line is also one way where the leader tells you what to do and only highlights the employee’s mistake.

Graham (1995) suggested that specific leadership styles motivate employees differently and encourage specific sets of responses. Time is changing and she needs to embrace

and catch up with the new market demands for new furniture design and concepts. Her father tends to ignore his employee’s input and ideas and assume all his employees as mere followers and is unable to contribute ideas and believe in Douglas McGregor’s Theory X where all assumptions are “bad”.

Ms Zee furniture business is divided into 5 divisions which is Administrative (Human Resource & Finance), Procurement, Logistic & Distribution, Warehouse & Production and Design & Engineering. Under her are 5 managers reporting directly to her and is in charge of their own division.She started with her Admin division as this department is in charge of providing salary and basic needs to all her employees. She discussed with her admin managerial team and using the Maslow theory she is trying to improve what Lenthall can offer to its employees. Maslow explains that by satisfying the human physiological needs, security and social needs in order of hierarchy will motivate an employee.

The higher the needs are satisfied the more motivated the employee would be. The current benefit package seems to concentrate on extra monies if an employee performs an overtime work. Ms Zee quickly realizes that this is only beneficial to the direct labour which works in the warehouse. Her father satisfy himself by seeing all his workers work until late of the night. Ms Zee disagree, she prefers productivity over quantity of worked hours. Thus, the overtime pay rate is reduced significantly while the basic rate is increased significantly for the direct labours. Her finance presented her with the calculation and it is only 2% increase of the total expenditure and Ms Zee quickly agrees.

She is confident that this will prove motivating and will provide her with a good result. The workers will inherently be happy as they will be able to work less hours but will be receiving better pay. Ms Zee also proposed for reward scheme to increase the productivity level of her workers.Ms Zee then discussed on relieving some of her authorities to her direct managers in charge of the divisional department in order to provide self esteem and self-actualization to its employees. Prior to this, all decisions are solely by her father. This will provoke a long term motivator in her direct managers as suggested by Maslow. The managers, having more authority at hand will definitely be getting the job satisfaction and the feeling of appreciated and belonging to the company. The managers need for power will definitely be satisfied as suggested by McClelland Acquired Needs Theory.

She also introduces flextime for her employees where an outgoing permit concept is implemented. All employees that have to go out during working hours will get an outgoing permit and signature from their direct supervisor will be allowed a release of 2 hours.Ms Zee then visited her procurement department. Previously all Lenthall sourcing is done by direct negotiation with a supplier from Sarawak. She realizes that this is financially a constraint and the prices are usually higher from the market value. Furthermore, her design & engineering department usually have to compromise on their requirement to accept whatever the sole supplier have to offer. This happened as her father’s previous tie with the supplier is close bonding.

Job Enrichment as suggested by Herzberg is a process of incorporating motivators into a job situation. Texas Instruments, Volvo, IBM, MMTC and many others reported success in motivating organization members through job enrichment program. Ms Zee also allows for job rotation for young executives looking for promotion in her organization by completing rotation.

Ms Zee found out that Lenthall’s logistic & distribution division constitute mostly workers with the age of 35 and above and are mostly with a family to support. Lenthall have 8 lorry drivers and are working long hours every day. She decided to employ an additional 3 employees to assist the existing task force. Despite the fact that Lenthall is only supplying to Selangor and Johor will change as Ms Zee is planning to expand Lenthall’s business cover the whole of Peninsular. She also decided to increases the incentive if a destination requires more than 6 hours of driving.This reward will surely have a positive reinforcement on her workers as their need for cash and incentive is higher in order to provide for their family.

Ms Zee also decided to revamp her warehouse and production line. Previously one worker will do the entire cycle of chain from cutting, fitting, assembling, polishing and fittings the furniture. She decided to makes jobs simpler and specialized to increase the productivity and turns the existing setup into a furniture assembly line.One of the most important changes required in Lenthall is at Ms Zee’s design & engineering department. Ms Zee introduced a new setup where custom made furniture’s is constructed upon request from customers. She also encourages her employees to be more creative by providing monetary incentives. If a design sells well, the employee would be given incentive of one ringgit for furniture sold (monetary incentives).

Ms Zee knows that to motivate her employees, she will keep five specific principles of human motivation:

1. Felt needs motivates the behavior in satisfying the needs

2. Degree of motivation is determined by individual perceived value and probability of the result of the behavior

3. Perceived value of a reward is determined by both intrinsic and extrinsic rewards that result in need satisfied and is a motivational factor

4. Individuals can only accomplish a task if they understand what the task requires and have the ability to perform the task and will feel motivated

5. The perceived fairness of a reward influences the degree of satisfaction generated when the reward is received (Certo & Certo, 2006)

On an overall basis, Ms Zee has given a new breath of air for Lenthall. Her employees are all capable and have been working in Teluk Ramunia for years. Citing Argyri’s maturity-immaturity continuum Ms Zee need to utilize the fact that her subordinate is well ready and is aspired to occupy better position with more room for power and self decision. Argyri’s maturity-immaturity concluded that as individual mature they will have increasing needs, behave in different ways, have deeper and lasting interest and is more willing to take control over their own destiny like from an infant growing to be a full adult.

In her inauguration speech, she made it clear to all the employees that she is dedicated and committed to bring change to the company and to embrace the future. She proclaims that the time has come for a change and will need the full commitment from each employee.

Quoting Victor Hugo dictum that “Greater than the tread of mighty armies is an idea whose time has come”, Ms Zee is set to transform her company and motivate its employees. Within a year, Ms Zee successfully doubled her company’s income, minimizes expenses and expanded throughout Peninsular of Malaysia and also Sabah & Sarawak.

Questions:

4) Discuss how she could motivate the staff and get the company going again. Contribute your views and opinions.

(CLO 3/PLO 12/10 Marks)

5) How do you resolve conflict at organization level in this case by using OB concepts. Write name of OB theories that you will use in this case to add value in this organization. (CLO 1/PLO 9/10 Marks)

6) How do you control behavior of your employees in this case by influencing

motivational and leadership concepts. Explain by applying theories. (CLO 2/PLO 10/5 Marks)