N.G.Bedekar College Thane (W)

T.Y.B.M.S A Project study on Logistics of McDonalds

Submitted by:- Darius D’souza 121

Prathamesh Patil 131

Pratiksha Deshmukh 134

Submitted to:- Prof. Murlidharan

Contents

Introduction History of McDonald Company overview Supply Chain Porter Value chain analysis Distribution Strategy Distribution Process Improving Logistics at McDonalds

Conclusion

ACKNOWLEDGEMENTOn the completion of this project, we wish to great

fully acknowledge, by taking this opportunity to

express our sincere gratitude to Prof.

Murlidharan for his guidance and useful

suggestions that proved very useful in this project.

Once again we thank all the people who have

directly or indirectly helped us in this project.

Lastly, we sincerely thank all our friends who

have always given their encouraging support

and have been a great help all the time at

various stages of development of this project.

History of McDonald’s

 McDonald's has come a long way ever since it’s beginning in 1955. Here are a few milestones of the McDonald's journey ... 

1955Ray Kroc opens his first restaurant in Des Plaines, Illinois and the McDonald's Corporation is created.

1957 Quality, Service, Cleanliness and Value (QSC& V) becomes the company motto.

1959 The 100th McDonald's opens in Chicago.

1961 Hamburger University opens in Elk Grove, near Chicago.

1963 One billion hamburgers sold. Ronald McDonald makes his debut.

1964 Filet-O-Fish sandwich is introduced.

1965 McDonald's Corporation goes public.

1967 The first restaurants outside of the USA open in Canada and Puerto Rico.

1968 The Big Mac is introduced. The 1,000th restaurant opens in Des Plaines, Illinois.

1983Chicken McNuggets is introduced.New Hamburger University campus opens in Oak Brook, Illinois. Set in 80 wooded acres. Training is provided for every level of McDonald's management worldwide.

1984 50 billionth hamburger sold. Ronald McDonald Children's Charities is founded in Ray Kroc’s memory to raise funds in support of child welfare.

1989 McDonald's is listed on the Frankfurt, Munich, Paris and Tokyo stock exchanges.

1990 McDonald's opens in Pushkin Square and Gorky Street, Moscow.

1993 The first McDonald's at sea opens aboard the Silja Europa, the world's largest ferry sailing between Stockholm and Helsinki.

1994 Restaurants open in Bahrain,

1972 A new McDonald's restaurant opens every day. The Quarter Pounder is introduced.

1973 Egg McMuffin is introduced.1974 The first Ronald McDonald

House opens in Philadelphia. The Happy Meal is launched.

Bulgaria, Egypt, Kuwait, Latvia, Oman, New Caledonia, Trinidad and United Arab Emirates, bringing the total to over 15,000 in 79 countries on 6 continents.

1996 McDonald's opens in India – the 95th country.

Company Overview

McDonald's - A Global PhenomenonMcDonald's opened its doors in India in October 1996. Ever since then, their family restaurants in Mumbai, Delhi, Pune, Ahmedabad, Vadodara, Ludhiana, Jaipur, Noida Faridabad, Doraha, Manesar and Gurgaon have proceeded to demonstrate, much to the delight of all our customers, what the McDonald's experience is all about.Their first restaurant opened on 15th April 1955 in Des Plaines, Illinois, U.S.A. Almost 50 years down the line, we are the world's largest food service system with more than 30,000 restaurants in 100 countries, serving more than 46 million customers every day.

Locally OwnedMcDonald’s in India is a 50-50 joint venture partnership between McDonald’s Corporation [USA] and two Indian businessmen. Amit Jatia’s company Hardcastle Restaurants Pvt. Ltd. owns and operates McDonald's restaurants in Western India. While Connaught Plaza Restaurants Pvt. Ltd headed by Vikram Bakshi owns and operates the Northern operations.Amit Jatia and Vikram Bakshi are like-minded visionaries who share McDonald's complete commitment to Quality, Service, Cleanliness and Value (QSC&V). Having signed their joint-venture agreements with McDonald's in April 1995, they trained extensively, along with their Indian management team, in McDonald's restaurants in Indonesia and the U.S.A. before opening the first McDonald’s restaurant in India.

Respect for local cultureMcDonald's India has developed a special menu with vegetarian selections to suit Indian tastes and preferences. McDonald's does not offer any beef or pork items in India. Only the freshest chicken, fish and vegetable products find their way into their Indian restaurants.In addition, they've re-formulated some of their products using spices favoured by Indians. Among these are McVeggie™ burger, McAloo Tikki™ burger, Veg. Pizza McPuff™ and

Chicken McGrill™ burger. They've also created eggless sandwich sauces for their vegetarian customers. Even their soft serves and McShakes™ are egg-less, offering a larger variety to their vegetarian consumers.

International StandardsMcDonald's India's local suppliers provide them with the highest quality, freshest ingredients. Complete adherence to the Indian Government regulations on food, health and hygiene is ensured, while maintaining their own recognized international standards. Fast, friendly service - the hallmark of McDonald's restaurants the world over is the mantra they abide by.Stringent cleaning standards ensure that all tables, chairs, highchairs and trays are sanitized several times each hour. Such meticulous attention to cleanliness extends beyond the lobby and kitchen to even the pavement and immediate areas outside the restaurant.

Their Philosophy"They take the burger business more seriously than anyone else." When McDonald's founder, Ray Kroc made that memorable statement, he was letting the world in on the philosophy and secret behind McDonald's phenomenal success. Their vision to be India’s "best" quick service restaurant experience is supported by a set of principles and core value.

The principles that guide them … Quality, Service, Cleanliness & Value - It is an unflinching

McDonald's ideology that our customers must always get quality products, served quickly and with a smile, in a clean and pleasant environment; and all at a fair price

They are committed to exceeding our customers' expectations in every restaurant every time.

They have a passion and a responsibility for enhancing and protecting the McDonald's brand.

They believe in a collaborative management approach, employing a mutually respectful business philosophy,

They will seize every opportunity to innovate and lead the industry on behalf of their customers.

Supply Chain

OverviewDid you know that every year, Rs. 50,000 crore worth of food produce is wasted in India? This is mainly because of the lack of proper infrastructure for storage and transportation under controlled conditions. McDonald's is committed to providing quality products while supporting other Indian businesses. And so, they spent a few years setting up a unique Supply Chain, even before they opened their first restaurant in India.A Supply Chain is a network of facilities including - material flow from suppliers and their "upstream" suppliers at all levels, transformation of materials into semi-finished and finished products, and distribution of products to customers and their "downstream" customers at all levels. So, raw material flows as follows: supplier - manufacturer – distributor – retailer – consumer. Information and money flows in the reverse direction. The balance between these 3 flows is what a Supply Chain is all about.When there is a balance in the finished product ordering, the Supply Chain operates at its best. Any major fluctuation in the product ordering pattern causes excess / fluctuating inventories, shortages / stock outs, longer lead times, higher transportation and manufacturing costs, and mistrust between supply chain partners. This is called the Bullwhip Effect.

Depending on the situation, the Supply Chain may include major product elements, various suppliers, geographically dispersed activities, and both upstream and downstream activities. It is critical to go beyond one’s immediate suppliers and customers to encompass the entire chain, since hidden value often emerges once the entire chain is visualized.

Supply Chain

Overview Cold Chain LocalSourcing Suppliers

Cold ChainThe Cold Chain is necessary to maintain the integrity of food products and retain their freshness and nutritional value.  The Cold Chain is an integral part of the Supply Chain.Setting up the Cold Chain has involved the transfer of state-of-the-art food processing technology by McDonald's and its international suppliers to pioneering Indian entrepreneurs, who have now become an integral part of the Cold Chain.The term Cold Chain describes the network for the procurement, warehousing, transportation and retailing of food products under controlled temperatures.  McDonald’s restaurants store products to be used on a daily basis, within a temperature range of –18ºC to 4ºC. About 52% of our food products need to be stored under these conditions before they are used.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 centers. In the van, the temperature and relative humidity of crop was maintained at 1-4ºC and 95 per cent, respectively and the flavors and freshness are locked at -35°C. 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 their 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.

Below mentioned is the data about Refrigerated vans for McDonald's distribution

Vital Links in our Cold ChainAll suppliers adhere to Indian government regulations on food, health and hygiene while continuously maintaining McDonald's recognised 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 us to cut down on operational wastage

Hazard Analysis Critical Control Point (HACCP) is a systematic approach to food safety that emphasizes prevention of illness or presence of microbiological data within our suppliers' facilities and our restaurants rather than its detection through inspection. 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 HACCP verification is done at least twice in a year and certified.

Local SourcingMcDonald's has always been committed to sourcing its requirements from local suppliers and farmers. This assurance is rooted in the philosophy of our company's founder, Ray Kroc. He firmly believed in mutual benefits arising from a partnership between McDonald's and the local businesses, thus ensuring that McDonald's commitment to growth was mirrored by that of its partners.

In keeping with this belief, we have carefully identified local Indian businesses that take pride in satisfying customers by presenting them with the highest quality products. Adherence to Indian Government regulations on food, health and hygiene were a top priority.

Type Route QuantityNational inbound Suppliers to Distribution Center 20 vehiclesOutbound North Distribution Center to restaurant 13 vehiclesOutbound West Distribution Center to restaurant 11 vehiclesOutbound South Distribution Center to restaurant 1 Vehicle

McDonald's India today purchases more than 96% of its products and supplies from Indian suppliers. Even their restaurants are constructed using local architects, contractors, labour and maximum local content in materials.

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, get 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.

Suppliers

Trikaya Agriculture - Supplier of Iceberg Lettuce.Successfully grows speciality crops like iceberg lettuce, special herbs and many oriental vegetables.  Farm infrastructure features:

A specialized nursery with a team of agricultural experts. Drip and sprinkler irrigation in raised farm

beds with fertilizer mixing plant. Pre-cooling room and a large cold room for post harvest

handling. A large cold room and a refrigerated van for transportation

where the temperature and the relative humidity of this crop is maintained between 1º C and 4º C and 95% respectively.

Vista Processed Foods Pvt. Ltd. - Supplier of Chicken and Vegetable range of products. A joint venture with OSI Industries Inc., USA, and McDonald's India Pvt. Ltd. Vista Processed Foods Pvt. Ltd. produces a range of frozen chicken and vegetable foods. A world class infrastructure at its 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 Celsius to retain total freshness.

International standards, procedures and support services.

Dynamix Diary - 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 humanised baby food. Stringent quality control measures and continuous

Research & Development.

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. Its plant has:

State-of-the-art fully automatic machinery requiring no human contact with product, for total hygiene.

Installed capacity of 6000 litres / hour for producing homogenised UHT (Ultra High Temperature) processed milk and milk products.

Strict quality control supported by a fully equipped quality control laboratory.

Radhakrishna Foodland - Distribution Centre.An integral part of the Radhakrishna Group, Foodland specialises 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 up to – 22 C.

Effective process control for minimum distribution cost.

Porter Value Chain Analysis of McDonald’sThe goal of these activities is to offer the customer a level of value that exceeds the cost of the activities, thereby resulting in a profit margin for McDonalds.

The primary value chain activities are:

Inbound Logistics: the receiving and warehousing of raw materials and their distribution to manufacturing as they are required.

Operations: the processes of transforming inputs into finished products and services.

Outbound Logistics: the warehousing and distribution of finished goods.

Marketing & Sales: the identification of customer needs and the generation of sales.

Service: the support of customers after the products and services are soldto them.

These primary activities are supported by:

Technology development: technologies to support value-creating activities.The value chain model is a useful analysis tool for defining a firm's corecompetencies and the activities in which it can pursue a competitive advantage as follows:

Cost advantage: by better understanding costs and squeezing them out of the value-adding activities.

As Per the Porter's 5 Forces analysis McDonalds deals with factors outside an industry that influence the nature of competition within it, the forces inside the McDonalds influences the way in which the firms compete, and so the industry’s likely profitability is conducted in Porter’s five forces model. A business has to understand the dynamics of its industries and markets in order to compete effectively in the marketplace. So McDonald’s rivalry in this competitive market is blooming.

Distribution Process at McDonaldsSuppliers 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. Benefit in McDonald’s favor 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. There was substantial effort on sharing advanced agricultural technology and expertise with farmers/suppliers like utilization of drip irrigation systems (for less water consumption), better seeds and agricultural management practices for greater yields.McDonald's incorporated state-of-the-art food processing technology along with its international suppliers to pioneering Indian entrepreneurs. They had imparted technical training to all their suppliers on operation the imported machineries, educated them on the McDonald's philosophy of Quality, Service, Cleanliness and Value (QSCV) in order to provide standardized food to our customers.

Distribution Strategy at McDonald’s IndiaMcDonald'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. For this purpose, it has developed local Indian businesses, which can supply them the highest quality products required for their Indian operations. In the supply chain management, the distribution centers 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. 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 their restaurants in Delhi and Mumbai. As distribution centres, the company was responsible for procurement, the quality inspection program, 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 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 had made arrangements to manufacture the oil in India. They ensured that the products developed locally abide by global McDonald's standards.

Improving Logistics At Mcdonalds

Logistics is the integration of the activities that procure materials, transform them into intermediate goods and final products through manufacturing and assembly, and deliver them to customers. Comprising all movement of materials from incoming shipments, inventory, production and the final delivery to consumers, logistics managers are responsible for the right goods being where they need to be at the right time. For a firm as large as McDonald’s logistics is an area where proper planning results in increased efficiency. Because of its size, little improvements in the way it handles materials adds up. Conversely, a few, seemingly simple lapses can cost the company millions.Purchasing is the most costly activity in most firms. For the fast food industry, the cost of purchases as a percentage of sales is often substantial. Because such a huge portion of revenue is devoted to purchasing, an effective procurement strategy is vital. Purchasing provides a major opportunity for management to reduce costs and increase contribution margins. Because the cost and quality of goods sold is directly related to the cost and quality of goods purchased, McDonald's must examine a number of strategies for effective purchasing. Because of the perishable nature of food, a system of just-in-time ordering and delivery is most effective for the company. For such a system to work, solid ties must be forged with a lot of suppliers. Ordering huge quantities of beef, chicken, and vegetables and expecting them to arrive at the shortest possible time requires coordination with capable suppliers.The company stands to gain the most with improvements in production – the actual preparation of food. Raw agricultural materials arriving at its commissary must be turned into buns, hamburger patties, french fries and McNuggets™ with minimal

waste. It must then carry over this practice of efficiency into its outlets. Also, managers at McDonald's must decide...

Conclusion

All the suppliers shared McDonald's commitment and dedication for satisfying customers by supplying them the highest quality products. They worked 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 interruptions 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.