INDIAN INSTITUTE OF FOREIGN TRADE

McDonalds:Supply Chain Management

INDIAN INSTITUTE OF FOREIGN TRADE

NEW DELHI

Submitted To:  Submitted By:Prof. Nitin Seth  Hitesh Bharti

EPGDIM-2012-14

ACKNOWLEDGEMENT

The satisfaction and euphoria that accompany the successful completion of any work would be incomplete unless we mention some of the persons, as an expression of gratitude, which made it possible, whose constant guidance and encouragement served as a back on light and crowned the efforts and success. We take this opportunity of expressing our gratitude to Prof.Nitin Seth, who has always been of immense help during the making of this project, which helped us a great deal in enhancing our knowledge by virtue of practical application. Her guidance and support carried us all through the preparation of this project. We regret any inadvertent omissions.

TABLE OF CONTENTS

Introduction…………………………………………………….01

It starts with……………………………………………………01

Some important facts…………………………………………02

Indian markets…………………………………………………02

Supply chain is………………………………………………...03

Supply chain in McDonalds India……………………………04

McDonalds distribution centre……………………………….04

Concepts of cold chain………………………………………..05

Steps involved in cold chain concept………………………..06

List of suppliers and how cold chain concept works……….07

Different items are sourced from………………………….…09

Three logistical drivers………………………………………..10

Three cross functional drivers………………………………..10

Pull/push process………………………………………………11

Supply chain process………………………………………….12

In Jaipur we are at...…………………………………………...13

INTRODUCTION

McDonalds Is …….

McDonalds is a name which is today synonymous with the fast food. McDonald’s is a fast food chain with restaurants all over the world with headquarters in Oakbrook’s, Illinois, US. It serves burgers and other fast food customized to local tastes. 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. In India, McDonald's had a very well-orchestrated supply chain, called the 'Cold Chain'.

IT STARTS WITH…….

In 1954, Ray Kroc, 52, distributor of milkshake maker- multi-mixer, went to see McDonald’s brother’s hamburger stall in California.

With an opportunity, he thought to open several of such restaurants so as to sell his multi-mixer milk shake machine.

SOME IMPORTANT FACTS……

In year 2004, McDonald’s was the largest marketer of fast food in the world.31000+ restaurants.47 million customers served daily.1999- 8th most valuable brand.2000- Ranked among top 100 firms in the world.

INDIAN MARKET………

It’s a huge sub-continent.India is 4 times more populated than the US.India has 300 million strong middle class people.India is one of the largest economy.Incorporated in 1993, MIPL is McDonalds India’s wholly owned subsidiary.In India, McDonalds open its first restaurant in 1996 at Vasant Vihar, South Delhi.

50:50 joint venture with-

(1) North- Connaught plaza restaurants( owned by Mr. Vikram Bakshi) and

(2) West- Hardcastle restaurants (owned by Mr. Amit Jatia).

A SUPPLY CHAIN IS ……

A Supply Chain is a system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer. Supply chain activities transform natural resources, raw materials and components into a finished product that is delivered to the end customer.

Supply Chain Management involves the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, and customers. Supply chain management integrates supply and demand management within and across companies. Supply Chain Management is an integrating function with primary responsibility for linking major business functions and business processes within and across companies into a cohesive and high-performing business model. It includes all of the logistics management activities noted above, as well as manufacturing operations, and it drives coordination of processes and activities with and across marketing, sales, product design, and finance and information technology.”

Internal Supply Chain

SUPPLIERS CUSTOMERSPurchasing Production Distribution

The primary objective of management is to fulfil customer demands through the most efficient use of resources, including distribution capacity, inventory and labour.

SUPPLY CHAIN IN McDonald’s INDIA…….

In a fast food business, supply chain is of highest importance. It helps in minimizing cost, cut down the delivery time, improve the profits and at the same time maintain the highest standards. The importance of supply chain can be understood by the fact that before setting up their first restaurant in India, McDonald’s infused around Rs. 400 crores in the supply and delivery chain. McDonald’s India source all its products and its raw materials from India only. McDonald’s develops local businesses that supply them the products and that too of highest standards. Today McDonald’s have around 38 suppliers and that too on the long term basis.

McDonald’s DISTRIBUTION CENTRES……

Noida and Kalamboli (Mumbai)……………..1996Bengaluru……………………………………..2004Kolkata…………………………………………2007

1st distribution agreement was done by Radhakrishana group, a group engaged in food business in the year 1993 and it was their 1st distribution centre.CONCEPT OF COLD CHAIN ………………

A Cold Chain is a temperature-controlled supply chain. An unbroken cold chain is an uninterrupted series of storage and distribution activities which maintain a given temperature range. It is used help extend and ensure the shelf life of products such as fresh agricultural produce, processed foods, photographic film, chemicals and pharmaceutical drugs. This concept of cold chain in food industry and that too on such a large scale was started by McDonald’s only. This concept was unique in India and to start this concept, it took around 6 years. It benefited both farmers as well as the consumers, as they are getting the fresh, best quality and great value food. With this concept McDonald’s cut down its wastage and able to maintain its freshness and nutritional value of raw material.

STEPS INVOLVED IN COLD CHAIN CONCEPT…….ProcurementWarehousingTransportationRetailing

All the above activities took place in temperature controlled atmosphere.

Picture of a temperature controlled truck.

STEPS INVOLVED IN COLD CHAIN CONCEPT……

McDonald's finding the factor of cold room being vital ensured that even before vegetables from farms entered the refrigerated zones, they were locked in a pre-cooling room to remove field heat. Vegetables were placed in the pre-cooling room within half an hour of harvesting where rapid cooling decreased the field temperature of Vegetables to 2ºC within 90 minutes. Then a large cold room (a refrigerated van) was used for transportation to the distribution centres. In the van the temperature and relative humidity of crop was maintained at 1-4ºC and 95per cent, respectively and the flavours and freshness are locked At the suppliers' level, care was 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. The iceberg lettuce from Ooty, mutton patties from Hyderabad and sesame seed buns from Punjab were all delivered to Radhakrishna Foodland Private Limited (RFPL) distribution centre (cold storage) in its refrigerated vans. RFPL stored the products in controlled conditions in Mumbai and New Delhi and supplied them to McDonald's outlets on a daily basis. By transporting

the semi-finished products at a particular temperature, the cold chain ensured freshness and adequate moisture content of the food. The specially designed trucks maintained the temperature in the storage chamber throughout the journey. Drivers were instructed specifically not to switch off the chilling system to save electricity, even in the event of traffic jam.

LIST OF SUPPLIERS AND THE DISCRIPTION SHOWING HOWCOLD CHIN CONCEPT WORKS AND CONTRIBUTE TOWARDSEFFICIENCY…….

Dynamix dairy industry (cheese) Trikaya agriculture (iceburg lettuce) Vista processed food pvt ltd. (chicken and veg range of products) Radhakishana food land(distribution centre- Delhi and Mumbai) Amrit food(long life UHT milk and milk products for frozen desserts)

DYNAMIX DAIRY INDUSTRY (SUPPLYING CHEESE)

Firm from Baramati, Maharashtra Milk collection centres with bulk coolers International standard and processing facilities Stringent quality control measures

All activities from procurement of milk to changing it into cheese and then to serve that cheese in the restaurant is all under temperature control atmosphere

TRIKAYA AGRICULTURE (SUPPLYING ICEBURG LETTUCE)

Advanced agricultural practices helps them to grow speciality crops like lettuce and herbs.

Pre cooling room and large cold room for post-harvest.

Refrigerated transportation.

VISTA PROCESSED FOOD PVT. LTD. (FOR SUPPLYING FROZEN CHICKEN AND VEG PRODUCTS)

For chicken, temperature maintained is -35 degrees Celsius. Refrigerated transportation.

RADHA KRISHNA FOODLAND (DISTRIBUTION CENTRE)

Specialized in handling large volumes. Activities involved are procurement, quality inspection, storage,

inventory management, deliveries, data collection, recording and reporting.

One stop shop for all distribution management services. Both dry and cold storage facility.

AMRIT FOODS

An ISO 9000 firm Supplies long life UHT milk/ milk products for desserts.

DIFFERENT ITEMS ARE SOURCED FROM DIFEERENTGEOGRAPHY IN INDIA……..

BUNS-Shah Bector & Sons, Maharashtra and Cermica, LudhiyanaBATTER & BREADING- Cremica, LudhiyanaVEGETABLE PATTY- Kitran Foods, Taloja, MaharashtraCHEDDAR CHEESE- Dynamix Dairy, Baramati, MaharashtraSEASAME SEED- Gaziabad, UPSPL VEG EGGLESS SAUCE- Quaker, Cermica, Ludhiyana

THREE LOGISTICAL DRIVERS…….

 McDonalds: Supply Chain Management

1. Facilities- they are the actual physical location in the supply chain network where the product is stored, assembled, or fabricated. The two main facilities are production sites and the storage sites. In McDonalds, because the products are perishable, storage time was minimal so as to reduce the wastage.

2. Transportation- it is the process where the inventory is moving from place to place. Refrigerated vans are used here in this case.

3. Inventory- it includes raw materials, work in progress, and finished goods within a supply chain.

THREE CROSS-FUNCTIONAL DRIVERS……

1. Sourcing- who will perform which activity (production, storage, transportation, and distribution) in a supply chain. This activity was taken care by McDonald’s corporation.

2. Information- it includes data and analysis related to facilities, inventory, transportation, cost, prices and customers in the whole supply chain. This activity was done by Radhakrishana food land that acts as their distribution centre.

3. Pricing- how much a firm could charge for a particular goods and services that it makes available in the supply chain. Here it was done by the McDonald’s only.

PULL/PUSH PROCESS

Pull processes are initiated by a customer order while the push processes are initiated by the anticipation of customer order. McDonald’s use both pull as well as push process, to a certain extent push is created and after that level the pull created by the firm did its task. One important question can be asked to what level that push can be applied. The products will be pushed to the restaurants where the customers automatically demand that product and hence a pull is created.

Various suppliers supply the material

Fig. showing the boundry of pull and push, push last till the product reaches the restaurant and pull

starts when a customer orders the product.

SUPPLY CHAIN PROCESS CYCLE……..

The processes in the supply chain are divided into a series of cycles, each performed at the interface between 2 successive stages of supply chain

Product deliver to distribution center

Product deliver to restaurant

Customer order at restaurant

Push stops Pull starts here

CUSTOMER ORDER CYCLE

CUSTOMERS

IN Jaipur WE ARE AT……..

MI RoadGaurav TowerQueens Road22 Godam Puliya

21 IN UTTAR PRADESH

Noida (5),Ghaziabad (4),Mathura (1) (Highway and DriveThru),Kanpur (2),Meerut (2),Lucknow (3),Agra (1),Allahabad (1),Varanasi (2)

79 IN NORTH AND EAST33 in Delhi22 in Uttar Pradesh11 in Haryana - Faridabad (3), Manesar (1) (Highway and Drive - Thru),Gurgaon (5), Karnal (1) (Highway and Drive - Thru), Panipat (1) 7 in Punjab - Chandigarh (2), Ludhiana(2), Doraha (1) (Highway and Drive -Thru), Jalandhar (1), Patarsi (1) (Highway and Drive - Thru)

1 in Uttaranchal - Dehradun (1)1 in West Bengal – Kolkata (1)1 in Himachal Pradesh- Jabli (1)

53 IN WEST AND SOUTH

32 in Maharashtra – Mumbai (23), Pune (8), Nasik (1)7 in Gujarat – Ahmedabad (4), Vadodara (2), Surat (1)7 in Karnataka – Bangalore (7)4 in Andhra Pradesh – Hyderabad (4)3 in Madhya Pradesh– Indore (3)

Resources: http://www.mcdonaldsindia.com/ , en.wikipedia.org