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McDonalds Restaurant
STAT 2800
Survey of Operations Management
Project II
Dr. Rotimi Aderohunmu
November 15, 2004
By:
Stephanie Earley
Matt Kellond
Heather Kraich
Eddie Phillips Rabab Sadeq
Thuy Van
Operation Management Project 2
TABLE OF CONTENTS
Introduction........................................................................................................................4
Operations Competitive Strategy
Main Competitive Bases ..........................................................................................4
Strongest Priority .....................................................................................................7
Strategy Changes .....................................................................................................8
Quality Management
Speed......................................................................................................................11 Quality
Inspections ................................................................................................12 The 5
Ps ................................................................................................................14
Training..................................................................................................................15
Raw Materials
Arrival and Maintenance........................................................................................16 Grade
"A" Beef and Other Meats ..........................................................................16
Produce ..................................................................................................................18
Supply Chain
Examination of Supply Chain................................................................................18 Supply
Chain Efficiency ........................................................................................19 Quality Along
Supply Chain..................................................................................20 Share
Costs.............................................................................................................21
Forecasting
Aspects of Forecasting...........................................................................................21
Listening to Customers ..........................................................................................22
Forecasting Success and Failure ............................................................................23
Conclusion ........................................................................................................................24
Appendices
Appendix 1, TTL Control Chart ............................................................................25
Appendix 2, KVS Control Chart............................................................................26
Appendix 3, Data for Control Charts.....................................................................27
Appendix 4, McDonalds Hierarchy......................................................................28
Appendix 5, Process Chart for Preparing a Hamburger ........................................29
Appendix 6, Illustration of a McDonalds Supply Chain ......................................31
Appendix 7, Interview with Ronald Lessnau.........................................................32
Bibliography .....................................................................................................................36
Page 1 of 36
EXECUTIVE SUMMARY
To sustain its viability in a competitive market, the McDonalds Corporation sets its overall
goal of "making its customers happy." To reach this broad goal, McDonalds mainly
focuses on competitive bases of speed, cost, and nutrition. The corporation also recently
created dramatic strategy changes to its stores internal processes by introducing the Made
for You System, and McDonalds also created a Revitalization Plan which encompasses all
areas of the business to make its customers happy.
Quality management at McDonalds is one of the major factors that make the corporation
one of the most successful fast food restaurants in the world. The corporation uses
computerized information systems and strict corporate quality standards to maintain
quality at their restaurants. To enforce the standards, the corporation undertakes exhaustive
inspections on each restaurant two times per year. Also, thorough training processes ensure
that all McDonalds employees have the proper knowledge to meet the corporations
standards, which will in turn make their customers happy.
Many suppliers aid McDonalds success by supplying their raw materials efficiently and on
time. McDonalds reassures that their product is fresh by choosing suppliers near the
restaurants, to minimize transport time. To ensure quality of products and reduce cost
between the restaurants and their suppliers, the McDonalds Corporation publishes specific
guidelines to ensure that the restaurants receive the best quality materials.
McDonalds ensures consistent products by enforcing strict standards and frequently
inspecting its suppliers. The corporation participates in a very efficient supply chain
network. The corporation also takes advantage of long-term relationships with suppliers to
ensure consistent products. McDonalds also takes active steps to avoid bad products and
reduce overall costs.
Forecasting is in large part down by the corporation as their responsibility to the
franchisees and share holders. McDonalds uses qualitative forecasting methods by
gathering information from customers, employees, and experts, via written surveys and
other correspondence. Forecasting has given the corporation opportunity to excel in
creating new innovations, creating localized meal selections, and generally making the
customer happy.
In summary, the entire McDonalds corporation revolves around its goal to make its
customers happy. McDonalds works toward this broad goal with strong competitive bases,
quality management, an efficient supply chain with quality products, and continuous
forecasting.
Operation Management Project 2
Page 2 of 36
Operation Management Project 2
Page 3 of 36
INTRODUCTION
McDonalds, founded by Ray Kroc, is now one of the most popular fast food
restaurants across the world. Theyve proudly served more than 46 million customers in
59 different countries and currently have more than 30,000 different locations worldwide
("Food Service"). The fast food industry is booming at a rapid rate, especially the health
conscious food options. With this in mind, McDonalds has a strategic plan to stay on
top of their competitors by providing consumers with affordable prices, great service, and
more healthy meal options. McDonalds is competitive in many categories, including
price, quality, management and employee training. Consumers trust McDonalds
products because they use many of the same trusted brands that families buy at local
grocery stores. The only difference is that their shopping cart is a whole lot bigger. This
report details McDonalds competitive strategy, quality management, raw materials,
forecasting, and supply chain.
OPERATIONS COMPETITIVE STRATEGY
Main Competitive Bases
McDonalds Corporation competes in a challenging market segment by providing
need-satisfying products to customers. In this segment, ineffective competitors often fail
without proper strategies (Kerin). To sustain its viability, the McDonalds Corporation
employs an effective competitive strategy to make it stand out against competitors such
as other fast food restaurants. Although McDonalds competes on several bases,
including speed, cost, and nutrition, their strongest priority is "making customers happy"
("McDonalds Worldwide" 3). The company recently made drastic changes to its
Operation Management Project 2
Page 4 of 36
process by introducing the Made for You system (Chase).
Speed
McDonalds competes on several bases mainly to make their customers happy by
providing speedy, affordable, and nutritious foods. Through extensive market research
and survey, the organization discovered that its customers desire speed as one of the
restaurants top priorities. Therefore, McDonalds vision aims to "provide fast, friendly
and accurate service" ("McDonalds Worldwide" 5). McDonalds realizes that specific
targets are necessary to measure the performance of speed, and continuously takes
relevant measurements to compare actual performance with desired targets Specific
measurements are detailed later in this report in the "Quality Management" section. To
achieve efficient service times, the company utilizes proven, standardized training
processes for its employees and new drive-thru layouts to reduce service times. Along
with speed, McDonalds also competes by offering prices at a low cost.
Cost
To offer high quality products at low cost requires efficient processes throughout
the entire McDonalds organization. Once again, this goal is built into their vision
statement when they claim that "We will be the most efficient provider so that we can be
the best value to the most people" ("McDonalds Worldwide" 5). McDonalds
incorporates several avenues to provide great value to its customers:
One strategy that the company has employed for many years is the value meal.
The value meal allows customers to buy a sandwich, french fries, and beverage at
a discount when purchased together. McDonalds restaurants offer seven to
twelve value meals, both for their lunch menu and breakfast menu.
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More recently, McDonalds began offering a dollar menu, consisting of many
individual items costing only $1.00 each. First tested in southern California, the
dollar menu has proved to be very successful and has been since incorporated to
many individual stores (Zuber 2).
Some individual franchise owners choose to offer daily specials of special menu
items, such as "$0.39 hamburger Wednesdays," or other similar specials. Big
Mac Mondays are a popular regional promotion.
Nutrition
McDonalds third main competitive base is nutrition. The organization
understands that health trend is an increasingly popular trend therefore; the organization
has recently focused extraordinary efforts to promote their new nutritious choices.
Although not specifically built into the organizations vision, McDonalds has already
introduced many options to achieve this goal:
In the United States, "Go-Active" meals have been offered within the last few
years. These meals include a salad, bottled water, and a step-o-meter" to help
customers keep track of how many steps they take a day.
Other countries have seen similar healthy options. The United Kingdom saw fresh
fruit bags, containing apples and grapes, as an alternative to french fries
("McDonalds Worldwide" 12).
Not only does McDonalds care about its customers, but it is also considerate of
its employees health. In Europe, the organization worked with external
nutritionists to develop an "Employee Guidebook" which contains tips and
nutrition information for healthy lifestyles ("McDonalds Worldwide" 13).
Operation Management Project 2
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McDonalds has assembled their Global Advisory Council on Balanced
Lifestyles. This council consists of exercise & obesity specialists,
environmentalists, and other professionals to ensure that McDonalds takes
appropriate steps in helping its customers achieve optimal health.
The company is also utilizing technology to their advantage. The current
McDonalds website lets a user select any combination of menu items, place the
items in the online bag, and conduct a nutritional analysis on their selections. The
user can break down the analysis even further than a menu item, down to
individual condiments, including ketchup, pickles, etc. ("Bag a McMeal").
Not only has the company introduced many steps to ensure nutrition, but it will
strive to continue the trend toward nutrition. McDonalds plans to: add additional healthy
menu options (fruits and vegetables); increase nutrition awareness among McDonalds
employees; and conceive new ways to deliver nutrition information to its customers, as
well as other actions ("McDonalds Worldwide" 13).
Strongest Priority
"At McDonalds, making customers happy is what our business is all
about. And we know it takes a lot to make that happen. We work hard to provide every
customer with a choice of meals and an experience that
exceeds their expectations."
The preceding statement is the quote which introduces McDonalds Worldwide
Corporate Social Responsibility Report (2004). Although the company strives to
compete on several bases, their ambient goal is making customers happy. They reach this
