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Material Management of McDonalds

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DECLARATION


I, NEHA DATTANI of LORDS UNIVERSAL COLLEGE,
TYBMS (Semester V), hereby declare that I have completed this
project on MATERIAL MANAGEMENT OF MCDONALDS IN
INDIA in the Academic Year 2009-2010.

The information submitted in this project is true and original to the
best of my knowledge.








SIGNATURE OF THE STUDENT


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CERTIFICATE

I, PROF. VIPIN SABOO hereby certify that NEHA DATTANI of
LORDS UNIVERSAL COLLEGE of T.Y.BMS (Semester V) has
completed the project on MATERIAL MANAGEMENT OF
MCDONALDS IN INDIA in the academic year 2009-2010.

The information submitted in this project is true and original to the
best of knowledge.







SIGNATURE OF THE PROJECT GUIDE


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ACKNOWLEDGEMENT

I would like to thank the University of Mumbai and Lords Universal College for
giving me this opportunity to research and make this project. I would also like
to thank my Project Guide Prof. Vipin Saboo for his sincere support and
interest.

Also, Special Thanks to:
Prof. Shikta Roy
Principal, Lords Universal College

Prof. Neha
BMS Co-ordinator, Lords Universal College

Prof. Hitesh Thakkar
Professor (HRM & RM), Lords Universal College





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EXECUTIVE SUMMARY

Dissertation Title:- Material Management of McDonalds in India.
Faculty Guide: Prof. Vipin Saboo.

Name of student: Neha Dattani.


In India day-by-day many multi-nationals are entering the market in
various different field of business. And most importantly the customers are very
excited about it because our country is actually getting benefitted by the arrival of
these MNCs. In todays scenario common man has become too busy to cook at
home, they prefer fast food or ready-made food.

The entrance of McDonalds in India in October 1996 at Basant Lok and
its expansion and success started touching skies. McDonalds is loyal to all its
customers.

This project gives a brief about the material management of McDonalds.
The most important reason/motive behind studying this is that how did they
manage to provide the international standard and quality products in India and
how did they succeed in handling their raw material as the food available in
McDonalds is so fresh and tasty.

All the raw material is produced in India itself and it is further processed to
bring that unique taste of McDonalds and then supplied to the different
franchises through refrigerated transportation on the right time.

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Contents Page No.

Acknowledgement 4
Executive summary 5
Table of Contents 6
Ch.1. Project Motive 7
1.1. Why did I select this topic?
1.2. Objectives of the project
Ch.2. Introduction of Material Management 8
Ch.3. Introduction of McDonalds 13
Ch.4. McDonalds Working process 16
Ch.5. Material management of McDonalds 18
Ch.6. Organisational structure of McDonalds 21
Ch.7. McDonalds Indian Supply Chain 23
Ch.8. McDonalds Suppliers 30
Ch.9. Directors Statement 40
Ch.10. McDonalds Indias Cold Chain 41
Ch.11. Inventory 44
Ch.12. Execution of a new product 49
Ch.13. SWOT Analysis of Materials 50
Ch.14. Findings of the study 51
Ch.15. Conclusion 54
Ch.16. References 55
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Ch. 1. Project Motive

Why did I select this topic?

Following are the reasons for selecting the topic Material Management of McDonalds
for 100 marks project:
Managing the material department of any manufacturing organisation is vital for
each and every firm so that to have an idea about it by studying this topic.
Any mistake or carelessness in managing and keeping a track on the materials to
be bought and processed and maintained can bring the company into losses and
stoppage as well.
In order to gain in depth knowledge of one of the most important aspects of a
manufacturing company I selected this topic of Material Management of
McDonalds because food industry is very booming.

Objectives of the project

This project is made with certain objectives which are as follows:

To learn the material management process of manufacturing organisation.
To know how McDonalds succeeded in its material operations in India.
To study how important is a material department in any organisation.
To learn the roles and functions played by a material department.
To analyse safety measures taken in maintaining the quality of raw material.
To maintain the level of cost in handling the material right from ordering till
processing.
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Ch. 2. Introduction of Material Management

Materials management is the branch of logistics that deals with the tangible
components of a supply chain. Specifically, this covers the acquisition of spare parts
and replacements, quality control of purchasing and ordering such parts, and the
standards involved in ordering, shipping, and warehousing the said parts.

Areas of Concentration
Goals
The goal of materials management is to consolidate and efficiently handle core
services. It creates truck deliveries and service vehicle routes that reduce conflicts for
vehicles and pedestrians. Delivery sites and loading docks are more effective and
reduce redundancy. Cost is reduced when it comes to solid and hazardous waste
removal, storage, and recycling. Utility infrastructure and service equipment relocation
can improve aesthetics.

Quality Assurance
A large component of materials management is ensuring that parts and materials
used in the supply chain meet minimum requirements by performing quality assurance
(QA). While most of the writing and discussion about materials management is on
acquisition and standards, much of the day to day work conducted in materials
management deals with QA issues. Parts and material are tested, both before purchase
orders are placed and during use, to ensure there are no short or long term issues that
would disrupt the supply chain. This aspect of material management is most important
heavily automated industries, since failure rates due to faulty parts can slow or even
stop production lines, throwing off timetables for production goals.

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Standards
The other major component of materials management is standards compliance.
There are standards that are followed in supply chain management that are critical to a
supply chain's function. For example, a supply chain that uses just-in-time or lean
replenishment requires absolute perfection in the shipping of parts and material from
purchasing agent to warehouse to place of destination. Systems reliant on vendor-
managed inventories must have up-to-date computerized inventories and robust
ordering systems for outlying vendors to place orders on. Materials management
typically insures that the warehousing and shipping of such components as are needed
follows the standards required to avoid problems. This component of materials
management is the fastest changing part, due to recent innovations in SCM and in
logistics in general, including outsourced management of warehousing, mobile
computing, and real-time logistical inventories.

Promoting Sustainability
Many business and institutional campuses have cluttered, noisy, and oftentimes
inefficient service environments. Delivery trucks compete with pedestrians, loading
docks are in plain sight, trash dumpsters sprout up, and lobbies, hallways, and stairwells
are cluttered with unplanned storage. With forethought and creativity, these systems can
reduce energy use and carbon emissions, minimize traffic congestion, streamline
operational flows, and enhance esthetics.

Improving circulation infrastructure
Redundancy can be reduced and effectiveness is increased when service points
are clustered to reduce the amount of redundancy. An effective materials management
program can also resolve island approaches to shipping, receiving, and vehicle
movement. Solutions can include creating a new central loading location, as well
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consolidating service areas and docks from separate buildings into one. Developing
better campus circulation infrastructure also means re-evaluating truck delivery and
service vehicle routes. Vehicle type, size, and schedules are studied to make these more
compatible with surrounding neighborhoods. This will reduce truck traffic, creating a
safer environment for pedestrians and a more attractive environment for other uses.

Materials Management Week
Each year, an entire week is dedicated to celebrating resource and materials
management professionals for their outstanding contributions to healthcare and the
overall success of the supply chain. Sponsored by the Association for Healthcare
Resource & Materials Management (AHRMM), National Healthcare Resource &
Materials Management Week (MM Week) provides an opportunity to recognize the
integral role materials management professionals play in delivering high-quality patient
care throughout the health care industry. In 2009 Material Management Week is
October 4-10 October.

Benefits
An effective materials management plan builds from and enhances an
institutional master plan by filling in the gaps and producing an environmentally
responsible and efficient outcome. An institutional campus, office, or housing complex
can expect a myriad of benefits from an effective materials management plan. For
starters, there are long-term cost savings, as consolidating, reconfiguring, and better
managing a campus core infrastructure reduces annual operating costs. An institutional
campus, office, or housing complex will also get the highest and best use out of campus
real estate.
An effective materials management plan also means a more holistic approach to
managing vehicle use and emissions, solid waste, hazardous waste, recycling, and
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utility services. As a result, this means a greener, more sustainable environment and a
manifestation of the many demands today for institutions to become more
environmentally friendly. In fact, thanks to such environmental advantages, creative
materials management plans may qualify for LEED Innovation in Design credits.
And finally, an effective materials management plan can improve aesthetics.
Removing unsafe and unsightly conditions, placing core services out of sight, and
creating a more pedestrian-friendly environment will improve the visual and physical
sense of place for those who live and work there.

Dredged Material Management
Three management alternatives may be considered for dredged material: open-
water disposal, confined (diked) disposal, and beneficial use. Open-water disposal is the
placement of dredged material in rivers, lakes, estuaries, or oceans via pipeline or
release from hopper dredges or barges. Confined disposal is placement of dredged
material within diked nearshore or upland confined disposal facilities via pipeline or
other means.
Potential environmental impacts resulting from dredged material disposal may
be physical, chemical, or biological in nature. Because many of the waterways are
located in industrial and urban areas, sediments often contain contaminants from these
sources. Unless properly managed, dredging and disposal of contaminated sediment can
adversely affect water quality and aquatic or terrestrial organisms. Sound planning,
design, and management of projects are essential if dredged material disposal is to be
accomplished with appropriate environmental protection and in an efficient manner.

Beneficial Use
Ten broad categories of beneficial uses have been identified, based on the functional
use of the dredged material or site. They are:
Habitat restoration/enhancement (wetland, upland, island, and aquatic sites
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including use by waterfowl and other birds).
Beach nourishment.
Aquaculture.
Parks and recreation (commercial and noncommercial).
Agriculture, forestry, and horticulture.
Strip mine reclamation and landfill cover for solid waste management.
Shoreline stabilization and erosion control (fills, artificial reefs, submerged
berms, etc.).
Construction and industrial use (including port development, airports, urban, and
residential).
Material transfer (fill, dikes, levees, parking lots, and roads).
Multiple purpose.














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Ch. 3. Introduction of McDonalds:
McDonalds is actually U.S. based organisation but it started spreading branches
all over the world with the arrival in India.

McDonalds India:
McDonalds in India is a locally owned and managed company run by Indians,
employing local staff, procures from local suppliers to serve its customers. McDonalds
India opened its first family restaurant at Basant Lok in Oct, 1996; today it has 132
Restaurants across India. This vibrant decade has seen McDonald's evolve Indian
menus, Indian sensitivities and yet remain as globally innovative as ever. This journey
has seen McDonald's develop a rich brand identity amongst its customers and
employees as well as partners alike.
At McDonalds India we have had a single formula: providing 100% total customer
satisfaction and the formula for achieving this goal in our restaurant operation is the
long-standing commitment to the McDonalds Promise.
They vowed to give its customers high quality products, served quickly and with
a smile, in a clean and pleasant environment, and all at a fair price. Quality, Service,
Cleanliness and Value (QSCV) became the philosophy that drove McDonalds
business.
McDonalds worldwide is well known for the high degree of respect to the local
culture. McDonalds has developed a menu especially for India with vegetarian
selections to sit Indian taste and culture. In line with its respect for local culture, India is
the first country in the world where McDonalds does not offer any beef or pork items.
McDonalds has also re-engineered its operations to address the special requirements of
vegetarians. Special care is taken to ensure that the vegetable products are prepared
separately, using dedicated equipments and utensils. This separation of vegetarian and
non-vegetarian food is maintained throughout the various stages of procurement,
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cooking and serving. So much that the mayonnaise and the soft serve are also 100%
vegetarian. Also in India, only vegetable oil is used as a cooking medium.

QSCV
McDonalds Quality Management instils the culture of quality through such
principles as being customer driven, managing with facts, valuing people, and
continually improving every aspect of our business.
Service that is fast and friendly and has always been a foundation for success at
McDonalds.
Cleanliness for us means having the cleanest and freshest facilities from the
kitchen to the rest rooms and parking lots.
Value at McDonalds means the total experience ......... great food, friendly folks,
a clean environment, quick and accurate service and fun!
In keeping with McDonalds commitment worldwide, McDonalds India serves
only the highest quality products. The attention to food quality started long before the
first restaurant opened. McDonalds India has established closed relationships with
local suppliers who provide McDonalds with the highest quality and freshest
ingredients to make its products.

Company Profile:
McDonald's India Culturally
Sensitive
McDonald's worldwide is well known for the
high degree of respect for the local customs
and culture. McDonalds has developed a
menu especially for India with vegetarian
selections to suit Indian tastes and
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preferences. Keeping in line with this, McDonald's does not offer any beef or pork
items in India. In the last decade it has introduced some vegetarian and non-vegetarian
products with local flavors that have appealed to the Indian palate. There have been
continuous efforts to enhance variety in the menu by developing more such products.
McDonald's has also re-engineered its operations repeatedly in its 11 years in India
to address the special requirements of a vegetarian menu. Vegetable products are 100%
vegetarian, i.e,
They are prepared separately, using dedicated equipment and utensils.
Only pure vegetarian oil is used as a cooking medium.
Cheese and sauces are completely vegetarian and egg less.
Separation of vegetarian and non-vegetarian food products is maintained
throughout the various stages of procurement, cooking and serving.

Restaurant Count













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Ch. 4. McDonalds Working Process
Diagrammatically the working process of McDonalds can be represented as follows:












Buying:
McDonalds India today purchases more than 96% of its products and supplies
from Indian suppliers from Indian suppliers. Even their restaurants are constructed
using local content in materials.
The philosophy at McDonalds is to develop a collaborative approach with their
suppliers. The relationship between McDonalds and its India suppliers gets the
opportunity to expand his business, have access to the latest in food technology.

Processing:
McDonalds has also re-engineering its operations repeatedly in its 11 years in
India to address the special requirements of a vegetarian menu. Vegetable products are
100% vegetarian, i.e.,
They are prepared separately, using dedicated equipments and utensils
Only pure vegetarian oil in used as a cooking medium.
Cheese and sauces are completely vegetarian and eggless.
Buying
Processing
Selling
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Separation of vegetarian and non-vegetarian food products is maintained
throughout the various stages of procurement, cooking and serving.

Selling:
The sales of McDonalds are extremely good as it provides best quality at a
reasonable rate. It has created a brand image and set the customers mind to buy its
products. They take great efforts to ensure that their vegetarian products are kept
distinctly from their non-vegetarian products till they are served to their customers. All
their vegetarian products are 100% vegetarian.

















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Ch. 5. Material Management of McDonalds:



Economic make or buy:
McDonalds follows the principle of make & then sell as it buys the raw
materials and puts it into a process to get the final finished product and then sells it to
the consumer which is economical for both consumers as well as producers.

Standardisation:
Serving the customers great tasting, high quality food is the top priority. All
menu items are prepared for the customers under a carefully monitored process using
specialised equipment. For example, they conduct a series of tests and restaurant audits
everyday to ensure that the procedures are being followed and the high standards are
being met.
Objectives
of
McDonald'
s Material
Dept.
Standardisation
Development
of good
records
Regulating
Inventory
Good relation
with supplier
Product
improving
Favourable
reciprocal
relation
Achieving the
objectives
Economic
make or buy
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Development of good records:
By not only providing quality goods but also rendering best services
McDonalds has developed a long list of good records with the customers. Even with its
employees and suppliers it has maintained good relationships and goodwill in the
market of hotel and food industry.

Regulating inventory:
Since the records of the transactions of McDonalds are kept, they can point out
the need for regulating, modification or adoption of new inventory strategies.

Good relation with suppliers:
They have committed long-term relationships with their suppliers. Through
openness and trust they are developing a strong supply chain that is sustainable and
industry leading.

Product improvement:
A key part of McDonalds philosophy is its continuous improvement, not only in
the restaurants but with its primary and secondary suppliers as well. As performance
trends prove the value of this approach. As per the customers needs and expectations
they have improved their quality as and when required.

Favourable reciprocal relations:
Favourable reciprocal relation refers to the relation maintained by the suppliers
and consumers towards McDonalds. Supplier is maintaining good relationship by
providing raw materials at the time of emergencies and similarly consumers maintain
such relation by giving proper feedback and response to them.

Achieving the objectives:
They believe in gaining all the objectives of their material management for ggod
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quality products and better services.
Thus, the basic objective of McDonalds material department is to buy and standardize
the product, maintain good relation with both consumer and supplier. They provide
quality service at the price of the right quantity at the right time and the right place.





















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Ch. 6. Organizational structure of McDonalds:


The organizational structure of McDonalds material department is a combined
set up of materials as well as finance. The head of the franchise appoints two managers
under him, one for the material management and the other for finance management. The
appointed managers have to perform the assigned task as follows:

The two senior departmental managers i.e. the material manager and the finance
manager, working under the head of McDonalds, manage all the areas of a particular
zone assigned to them.

Each area manager managing their different franchise looks after purchasing of
raw material, processing of the same to get the finished product then storing the raw
material and packing the final product for final sale. He even manages to maintain the
machine as well as utensils which are delicate.
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All the area-wise general managers have to consult the senior departmental
managers for the supply of materials and payment as well. And the two departmental
managers have to keep on informing the head of McDonalds regarding the business.

This entire material set up of McDonalds follows the rule of Combined
material management.

















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Ch. 7. McDonalds India Supply Chain:

Supply Chain is one of the critical factors for the smooth functioning of any
business. And when we are talking about fast food business with McDonalds as the
subject of the study it can expect a Supply Chain model of one of the highest precisions.
It is this unmatched Supply Chain Structure, which not just ensures on time delivery of
raw materials and supplies to McDonalds but also enables it to cut down on its cost and
maximize profitability along with maintaining highest quality standards of its products.
The level of commitment of McDonalds can be gauged from the fact that even before it
set up its first restaurant in the country it infused Rs 400 Crore to set up its delivery
mechanism. McDonalds initiative to set up an efficient supply chain and deploy state-
of-art technology changed the entire Indian fast food industry and raised the standards
of performance to international levels.

As already mentioned, McDonalds had been working on its supply chain even
before it opened its first joint in the country. McDonalds, an international brand which
was trying to make inroads into the country, developed its Indian partners in such a
manner that they stayed with the company from the beginning. The success of
McDonalds India was achieved by sourcing all its required products from within the
country. To ensure this, McDonalds developed local businesses, which can supply it
highest quality products. Today, McDonalds India works with 38 different suppliers on
a long term basis and several other stand alone restaurants for its various other
requirements. McDonalds distribution centres in India 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. As distribution
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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'.

Cold Chain was one of the unique concepts of McDonalds supply chain in India,
on which it had spent more than six years to get the system into place. This system
brought about a veritable revolution, immensely benefiting the farmers at one end and
enabling customers at retail counters get the highest quality food products, absolutely
fresh and at great value. Through its unique cold chain, McDonalds has been able to
both cut down on its operational wastage, as well as maintain the freshness and
nutritional value of raw and processed food products. This has involved procurement,
warehousing, transportation and retailing of perishable food products, all under
controlled temperatures. The following list of suppliers, who build up the major supply
chain of McDonalds, reveal how this Cold Chain works and contributes towards the
efficiency of McDonalds.

Potato farming in Gujarat:
Sourcing the right potato
Even prior to its entry into India,
McDonalds was committed to working with
local suppliers and farmers to source all its
requirements. The company therefore spent 6
years and around Rs.450 crore to set up the food
supply chain even before opening its first
restaurant in the country.
India despite being the worlds second
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largest producer of food, losses nearly Rs.50,000/- crore worth of food produce due to
wastage at various levels, especially due to lack of proper infrastructure for storage and
transportation. McDonalds India has pioneered the cold chain management system
wherein the freshness, crispness and the nutritional value of vegetables and processed
products are retained.
In 1991, McDonalds was looking for a particular variety of potato for
manufacturing its world famous French fries. One of McDonalds suppliers - Lamb
Weston - invested heavily in setting up production lines to process these potatoes to
make the fries. However production was discontinued, as the right quality of potatoes
could not be sourced.
The right quality of potato in India was unavailable as farmers used seeds from
the preceding crop, which in turn resulted in a single variety and poor quality potatoes.
McDonalds needed the process-grade variety of potato for its products, which are as
per McDonalds international quality standards.
The variety of potato required by McDonalds had to have a certain length, high
solids content and low moisture content while the ones that were available were of
table-grade variety. Nonetheless, as per its initial commitment to local sourcing,
McDonalds and its supplier partner, McCain Foods Pvt. Ltd., began to work closely
with farmers in Gujarat and Maharashtra to develop process-grade potato varieties.
McCain Foods Pvt. Ltd. is the worlds largest French Fry Company in the world.
Established in 1957, today it is a brand that is known and respected in more than 100
countries, generating worldwide sales of more than $5.5 billion. It has more than 55
processing plants on 4 continents (29 of which are French fry and potato speciality
facilities) and exports to more than 80 countries worldwide.
Leaders in agronomy, technology and innovation, McCain Foods Pvt. Ltd.
partnered with McDonalds to work with farmers in Gujarat (specifically the towns of
Deesa and Kheda) to interact with agronomists and field assistance to demonstrate the
best practices right from better agronomy techniques like irrigation system, sowing
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seed treatments, planting methods, fertilizer application programmes and better storage
methods for the produce. In addition to this, the farmers also benefits through
incremental monetary gains as they sell directly to McCain Food Pvt. Ltd. instead of
commission agents. The result of these efforts has been that now the Gujarat potato
crop has been utilised to make McDonalds Chatpatey Potato Wedges.

McDonald's-Outsourcing the ingredients
Cheese Dynamix Dairy Industries Ltd., Pune
Dehydrated onions Jain Foods, Jalgaon
Iceberg lettuce Trikaya Agriculture, Pune; Meena Agritech, New Delhi;
Ooty Farms and Orchards, Ooty
Chicken patty Vista Foods, Taloja
Veg. Patty, Veg. Nuggets,
Pineapple pie, Apple pie
Kitran Foods, Taloja
Chicken (dressed) Riverdale, Talegaon
Buns Cremica Industries, Phillaur
Eggless mayonnaise Quaker Cremica Pvt. Ltd., Phillaur
Sesame seeds Ghaziabad
Fish fillet patties Amalgam Foods Ltd., Kochi.
Vegetable for the patties Finns Frozen Foods, Nasik and Jain Foods, Jalgaon
Mutton and Mutton Patties Al Kabeer, Hyderabad

Their experience also tells us that many companies, for want of a cost-effective
and reliable logistics solution, end up deciding not to market their products which are of
a perishable nature in certain markets, thus losing out on potential revenue
opportunities. And because currently, there is no reliable service provider to cater to
this need, companies have to move goods either by air, which is expensive, or through
bulk carriers with very little control on the delivery schedule. Given the current
scenario, combined with their domain expertise in the logistics & distribution area, they
have launched a new service - Fresh Rush. Fresh Rush is a temperature controlled
transportation service addressing the needs of small volume cargo.



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Fresh Rush Features
Multi temperature products, such as Frozen (below 18C) and Chilled (1C to
4C) can be transported
Flexibility of load movement - A minimum of 500 kgs to maximum of 5000 kgs
can be transported
In transit temperature tracking
Fixed schedule of pickup and delivery
Well trained and experienced manpower
Adherence to strict hygiene standards
Consignment can be tracked through GPS system
1. Food Park, Kalamboli
First of its kind in India
Designed as per global standards
The centre procures, value adds, stores
and distributes various kinds of
perishable and non-perishable food products

Food Park Features
Spread over 33,000 sq meters
Multi Temperature Zones
Integrated Facility Storage and Value Addition capabilities under one roof
Ensured / Guaranteed Food Safety
Paradigm shift in the way food is handled in the supply chain in India
First of its kind in the region
Benchmarked against global standards
Codex / USDA / PFA compliant
Scalable
Dedicated storage for specific categories
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Sanitation / Hygiene standards Trash handling
Air / Water Quality Treatment Plant / ETP
Ripening Rooms, Crate Wash Facilities, Blast Freezer, Flake Ice Machine
Value Added Services Processing of Vegetables & Fruits, Meat, Sea Food and
Poultry
Controls Building Management System (BMS)
100 % Power Back Up

Food Park Capacity
Capacity to manage over 6000
SKUs
Can store 70,000 cases with 1,700
pallet positions and over 4,000
pick faces
Processing
Vegetable & Fruits 21 tonnes per day
Meat 3 tonnes per day
Fish 3 tonnes per day
Blast Freezing 6 tonnes per day
Ice Machine 2.4 tonnes per day

2. Kanjur Marg DC
Spread over 3,500 sq meters
Dry Provisions DC
Capacity to manage over 9000 SKUs
Can store 80,000 cases with 1400 pallet position and 3,600 pick faces


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3. Delhi DC (Noida)
Dedicated to operations in the North
Highly functional DC
Chiller / Freezer / Dry Storage
Capacity to manage 576 pallet positions

McDonalds Strategies:
It understands customers needs like:
What customers want? (Product and Price)
When customers want? (Time)
Where customers want? (Place)
Why customers want? (Purpose/Frequency)
How customers want? (Convenience)











Best
Product
(Quality)
At lowest
price
(Cost)
Fastest
Delivery
(Time)
Customer
Satified
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Ch. 8. McDonalds Suppliers:
As McDonalds products (Bread, Cheese, Vegetables, Milk, Mayonnaise, Meat,
etc.) are highly perishable, so they require it daily but they purchase on weekly basis as
per the requirement. Since the material is perishable and it is bought weekly, so they
have to arrange cold storage facility for the materials.
Since the different material is produced at different places and they have to
transport it to the specific zone, they have a single main warehouse for a particular
zone. The area managers have their own warehouses for storing as they purchase
weekly from the zonal warehouse.
All the suppliers are HACCP certified. The suppliers of the above mentioned
raw materials are as follows:

Trikaya Agriculture- Supplier of Iceberg Lettuce (a kind of
vegetable)
McDonalds India benefits
other Indian business through
local sourcing. Worldwide, too,
McDonalds India had brought
benefits consistently to the
community by working with
local businesses, which could
grow as McDonalds grew. By
forming partnership with the
local suppliers, based on trust
and mutual desire to grow, McDonalds has set the stage for enormous success of a
large number of companies from which it purchases supplies and services.
Working with these local suppliers, McDonalds and its international supplier
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network have helped transfer advanced technology and state-of-the-art procedures in
the areas of agriculture, food processing, warehousing and distribution, restaurant
equipment manufacturing, restaurant operations and other disciplines related to the food
service industry to them.
For example, McDonalds partnership with local produce suppliers has stimulated
the introduction of new farming techniques and widened geographic areas of
production. Agricultural suppliers to the company are now employing the most current
farming practices resulting in better cropping patterns, greater yields and higher farm
income and increased jobs with the rural farming sector.
One of the best examples of this supplier development is Trikaya Agriculture.
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:
Drip and sprinkle irrigation in raised farm beds with fertilizer mixing plant.
Pre-cooling room and a large cold room for post harvest handling.
Refrigerated truck for transportation.
Depending on the area, the consumption of the Iceberg Lettuce differs.
On an average 30kgs of Iceberg lettuce is required in each franchise every
day.
A specialized nursery with a team of agricultural experts.
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. 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
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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 kilometres 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 Bread
range of products:
A joint venture with OSI Industries Inc., USA,
and McDonalds India Pvt. Ltd. produces a range of
frozen chicken and bread. A world class infrastructure
at its plant at Taloja, Maharashtra, has:
Separate processing lines for chicken and
bread.
Capability to produce frozen foods at a
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temperature as low as 35 degree Celsius to retain total freshness.
International standards, procedures and support services.
Chicken is transported in refrigerated trucks and the bread is transported at a
freezing temperature trucks well packed in plastic bags.
McDonalds purchases 4000 million rupees of chicken
each year. Thats not all. McDonalds also purchases 156
million dozen eggs; and 60 million gallons of milk. In
fact, they are aggressively working with farmers and
ranchers, on a state and national level, to strengthen their
relationship. As bread is highly perishable and gets spoilt.
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
McDonalds 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
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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.

Dynamix Dairy Supplier of
Cheese:
Towards fulfilling its commitment to
sourcing almost all of its products from
local suppliers, McDonalds has identified
local Indian business, which shares its level
of commitment and dedication in satisfying
customers by supplying them the highest
quality products.
The relationship between McDonalds and its Indian suppliers benefits both the
parties. For McDonalds world-class products of the highest quality are readily
available from local sources. For the suppliers it is an opportunity to expand their
business, have access to the latest technology and exposure to advanced practices; in
addition to the ability to grow as McDonalds expands in India. Through McDonalds,
the suppliers also get access to overseas markets to export their products.
One of the best examples of this supplier relationship is evident in the case of the
multi crore Dynamix Group, McDonalds supplier of cheese in India. Dynamix has
brought immense benefits to farmers in Baramati, Maharashtra by setting up a new
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.
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Capability to convert milk into cheese, butter/ghee, skimmed milk powder,
lactose, casein & whey protein and humanized baby food.
Strigent quality control measures and continuous research & development.
Cheese, milk and other milk products are also transported in refrigerated tracks
as well as stored in cold storage even in the franchises.
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 McDonalds 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
kilometres 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 McDonalds
restaurant hundreds of kilometres 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.

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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 600 litres/hour for
producing homogenized UHT (Ultra High
Temperature) processed milk and milk products.
Strict quality control supported by a fully equipped quality control laboratory.
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.
The relationship between McDonald's and its Indian suppliers is mutually beneficial.
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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.

Radhakrishna Foodland Distribution Centre:

An integral part of 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 facilities to store and transport perishable products at
temperatures up to -22 Degrees Celsius.
Effective process control for minimum distribution cost.
Capacity to handle large volumes.
Maintain open communication lines with customers, suppliers and all other
business associates.
Invested ERP software to bring in efficiency, speed and accuracy into the
system.
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
38 | P a g e

On-Time Delivery' and plays a very vital role in maintaining the integrity of the
products throughout the entire 'cold chain'. From this evolved the mission statement
To ensure that all McDonalds restaurants are supplied without interruption,
conforming to acceptable standards at local costs to the system. 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. The Distribution Centre
(DC) is responsible for procurement, quality inspection programme, storage, inventory
management, deliveries to the restaurants and data collection, recording and reporting.
Value added services like repacking of promotional items are also carried out at the DC.
The DC plays a vital role in maintaining the integrity of the products throughout the
entire cold chain the distribution system that ensures the product, which arrive at
McDonalds restaurants from suppliers all over India, are absolutely fresh and as per
McDonalds Quality Standards. All these operations need to manage in most cost-
effective manner. The operations and accountings are totally transparent and are subject
to regular audit.

Local Sourcing
McDonald'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
39 | P a g e

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.
McDonald's India today purchases more than 96% of its products and supplies
from Indian suppliers. Even our 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.
All 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.



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Ch. 9. Directors Statement :
Vikram Bakshi (Managing Director India) says:
For all those opposed to the import of foreign culture as represented by
McDonalds, here is food for thought. The fast food chain that serves five crores
customers per day across the globe and is planning its largest growth this year in India
(40 outlets in 2009) after touching the figure of 131 in 12 years in the country, the
beauty of its burger is that it represents national integration on a platter.
Each McDonalds burger requires nine different ingredients which, its India
Managing Director Vikram Bakshi points out, are sourced from 35 suppliers across the
country. The sesame seeds come from Ghaziabad in UP, the buns are sourced from
Noida and Khapoli in Maharashtra, the vegetable sauce comes from Phillaur in Punjab,
the cheddar cheese from Baramati in Maharashtra, and the butter and bread from
Ludhiana in Punjab. As for its trademark iceberg lettuce, it comes from farmers in
Ooty, Pune and Dehradun.
This is not all, says Bakshi, as he unfolds the companys plans to have a massive
cold chain infrastructure in place to deliver farm fresh vegetables. This will achieve the
bigger goal of capping losses of farmers, he points out. The amount of fruit wasted in
India because of lack of post-harvest infrastructure results in losses which equal the
fruit consumption of entire Europe, he adds.
The huge costs of over Rs 30,000 required to set up such an infrastructure in
India have even prompted companies in the food retail business to approach the Prime
Minister. Already 90 per cent of our raw material is sourced from India. Our efforts at
growing potatoes in Gujarat after developing the varieties in Solang Valley in Himachal
will see us even meeting the need for our iconic golden French fries from India, says
Bakshi.


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Ch. 10. McDonaldss Indias Cold Chain:
A unique sense of dedication and commitment characterizes McDonalds India
a commitment to be driven by the leadership of local owners. Commitment to provide
quality products and fast friendly services at a real value to support other Indian
business through local sourcing and imparting new skills and to generate local
employment by being a part of the local culture. This commitment has translated into
enduring benefits to the businesses at the grass root level, in the areas of introduction
into new crops, new agricultural practices and food processing methods and procedures.
McDonalds unique cold chain, on which the QSR major has spent more than
six years setting up in India, has brought about a veritable revolution, immensely
benefiting the farmers at one end and enabling customers at retail counters get the
highest quality food products, absolutely fresh and at great value.
Explaining the concept, Mr. Amit Jatia, Joint Venture Partner and Managing
Director, McDonalds Western India, said, Every year, Rs.50,000 crore worth of
food produce is wasted in India because of lack of proper infrastructure for storage and
transportation under controlled conditions. These range from physical damage and
vermin infestation to improper temperature, humidity and air-flow.
McDonalds, through its unique cold chain, has been able to both cut down on
its operational wastage, as well as maintain the freshness and nutritional value of raw
and processed food products. This has involved procurement, warehousing,
transportation and retailing of perishable food products all under controlled
temperatures.
Setting up this extensive cold chain distribution system has involved the transfer
of state-of-the-art food processing technology by McDonalds and its and its
international suppliers to pioneering India enterprises who, today, are an integral part of
McDonalds cold chain.

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From Field To 2 degree C In 90 Minutes
Trikaya Agriculture, a major supplier of iceberg lettuce to McDonalds India, is
one such enterprise that is an intrinsic part of the cold chain. Exposure to better
agricultural management practices and sharing of advanced agricultural technology by
McDonalds 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
McDonalds expertise in the area of agriculture, Trikaya Farms in Talegaon,
Maharashtra, is now able to grow this crop all the year round.
McDonalds has provided assistance in the selection of high quality seeds,
exposed the farms to advance drip-irrigation technology, and helped develop a
refrigerated transportation system allowing a small agri-business in Maharashtra to
provide fresh, high quality lettuce to McDonalds urban restaurant locations thousands
of kilometres 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
degree C and 4 degree 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 degree 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 McDonalds
Middle East and Asia Pacific operations. McDonalds expertise in packaging, handling
and long distance transportation has helped Trikaya to do trial shipments to the Gulf
successfully.

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In addition to export, McDonalds 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 Food Pvt. Ltd., McDonalds 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 McDonalds 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
temperature as slow as 35 degree 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.













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Ch. 11. Inventory :

Inventory cost:
Inventory as a percent of overall business continues to decline. As product line
proliferate, inventory carrying costs become significant. Retail and Wholesale firms
place pressure on supply chain members to significantly reduce inventories. Physical
inventories are needed on the inbound and outbound sides of a business.
Types of inventory include cycle stocks, in process or in transit stock, safety
stock, seasonal stock, speculative stock and dead stock. Types of inventory costs
include carrying cost, order/recorder cost. Inventory carrying cost is comprised of
capital cost, storage space cost, inventory service cost, inventory risk cost.
Capital costs are expressed as percentage of product value and are based on
value of average inventory. The rate is most appropriate.

Inventory turnover:
A ratio showing how many times a companys inventory is sold and replaced
over a period.
Generally calculated as: Sales/Inventory
However, it may also be calculated as: Cost of Goods sold/Average Inventory
Although the first calculation is most frequently used. COGS (cost of goods
sold) may be substituted because sales are recorded at market value, while inventories
are usually recorded at cost.
This ratio should be compared against industry averages. A low turnover implies
poor sales and, therefore, excess inventory. A high ratio implies either strong sales or
effective buying.
High inventory levels are unhealthy because they represent an investment with a
rate of return of zero. It also opens the company up to trouble should prices begin to
fall.
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Inventory of McDonalds:
Inventory is the total amount of goods and/or materials contained in a store or
factory at any given time. Store owners need to know the precise number of items on
their shelves and storage areas in order to place orders or control losses. Factory
managers need to know how many units of their products are available for customer
orders. Restaurants need to order more food based on their current supplies and menu
needs. All of this business relies on an inventory count to provide answers.
The word inventory can refer to both the total amount of goods and the act of
counting them. Many companies take an inventory of their supplies on a regular basis in
order to avoid running out of popular items. Others take an inventory to insure the
number of items ordered matches the actual number of items counted physically.
Shortages or overages after an inventory can indicate a problem with theft (called
shrinkage in retail circles) or inaccurate accounting practices.


Ordering cost is any expenditure which is incurred for placement of order.
Some farms deliberately hold inventory in order to reduce the ordering cost. It also
includes the other various related activity involved in the ordering process. It includes
cost for receiving source, purchases, and order inspection, set up and binding cost.

Carrying cost involved in holding and maintaining goods or raw material before
Ordering
cost
Carrying
cost
Inventory
Cost
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and after the production. There are exceptions for items that are subject to special
consideration for purposes of quick obsolescence or high degree of theft, losses by fire,
floods, humidity, etc. so such items should be carried properly.

Ordering cost
Nature of ordering costs
Marketing information System (MIS) costs for inventory stock level tracking.
It includes preparing and processing purchase orders and receiving reports.
Inspecting and preparing inventory for sale.

Determining the Ordering/Reordering Point
The goal of McDonalds is to achieve the EOQ units to arrive as the Balance-on-Hand as
0. The reorder point should equalize the minimum amount of inventory to last during
the replenishment or lead time. This can be explained with help of the following
formula:
ROP = [Lead time Length (in days) x [Demand per day (in units per day)]
For Example: Assume 300 days per year.
Lead time length = 7 days
Demand per day = 60,000/300
= 200 units per day.
Therefore, ROP = (7 days) x (200 units per day)
= 1400 units.

Fixed Order Interval
Involves ordering of inventory at fixed or regular intervals
Amount order depends on how much is on-hand at the time of ordering (NOT EOQ).
Does not require close surveillance of inventory levels.
Inventory monitoring less expensive.
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Over time, it results in higher safety stock levels.

Carrying cost
Nature of Carrying cost
Items were basically similar carrying costs should use the same estimate of carrying
costs per rupee.
There are exceptions for items that are subject to special consideration for purposes of
quick obsolescence or high degree of theft, etc.
Calculating the Cost of Carrying Inventory
Step 1- Identify the value of the item stored in inventory (e.g. Rs.10,000).
Step 2- Measure each individual carrying cost component as a percentage of product
(e.g. 25%).
Step 3- Multiply overall carrying cost (as a percentage) times the value of the product
(e.g. Rs.10,000 times 25% = Rs.2,500) inventory carrying cost per year.
Measure Carrying Cost Components
For example: Capital Cost = 20%
Storage Space = 8%
Inventory Service = 4%
Total = 38%
Now, Multiply Percent by Value
For example: Value = Rs.500 per item
Inventory Carrying Cost = Rs.500 x 38% = Rs.190 item/annum.

Safety Stock
Safety stock is the remaining inventory between the times that an order is placed
and when new stock is received. If there are not enough inventories then a shortage may
occur. Safety stock is a hedge against running out of inventory. It is an extra inventory
48 | P a g e

to take care on unexpected events. It is often called buffer stock. The absence of
Inventory is called a shortage.
In McDonalds they do keep safety stock but to a small quantity as the material
is soon to get spoilt. They use the safety stock first when the new order is received and
then the new one.





















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Ch. 12. Execution of a New Product :

Any new product at McDonalds passes through many stages before it is finally
launched in its retail avtar. We do not randomly pick up the products from the
McDonalds international offerings but focus on our research and development for
products, said Mr. Amit Jatia, managing director, Hard Castle Restaurants, a
franchisee of McDonalds India.

Based on its menu vision, McDonalds makes a prototype and rotates it for
feedback within its own set up. After making suitable changes, the product is tested
with focused groups. Subsequently, alternations are made if necessary, supply lines
established and then the product is finally launched in the restaurant.

In fact, McDonalds India is the first chain in the world to develop a coffee
machine with Coke for its Georgia coffee. The launch of McCurry Pan - a baked dish in
Ahmedabad. McDonalds India is seriously exploring petrol pumps to expand its
network. Gas stations would be one of the major drivers of the retail expansion of the
company in future. Gas stations would come up in a big way as the result of the golden
quadrilateral project and McDonalds could set up its outlets there. They have worked
with BPCL and HPCL and are in talks with IOC for the same.







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Fresh forever
Best Quality Commitment
Reasonable Prices
Strength
Unstable demand
Highly responsive chain
Domestic market saturation
Inflexibility
Increase in Prices of Raw material
Weakness
To Farmers to cultivate new crops and getting trained to meet
the required standards.

Opportunity
Loss due to natural calamities
Loss due to spoilage
Low amount of sales than expected
Threats
Ch. 13. SWOT Analysis of Materials








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Ch. 14. Findings of the study

1. Every organisation, no matter how big or small in size,has its own forecasting
techniques.This is because without forecasting the demand and supply requirements,
the orders cant be fulfilled. Similarly, for order processing, Mc Donalds forecast its
requirements on a daily basis.
The study that we did in Indore, where there are three outlets of Mc Donalds,
each one in a multiplex, revealed that their forecasting depends on a few factors like the
upcoming movie release in that week and its response.
Likewise, we conducted this study in the month of March and the demand during
this time is affected by the school and college examinations.The demand for different
departments also vary from one outlet to another.

2. Mc Donalds has its outlets in different parts of the globe.
In India too, Mc Donalds has numerous outletsin different cities, but they do not
have any local vendor.
They have a fixed vendor, that is The Radhakrishna Foodland, which caters the
range of 230 products that Mc Donalds require.
The Radhakrishna Foodland not only process the fooditems but also handle the
logistics partially.The delivery center is at Mumbaiwhere from the required stock is
transported to different locations.
The concerned person told us, that due to the ephimeral shelf-life of tomatoes, it
i sthe only commodity that they make purchase from local markets; specifically of four
to five inches diameter which undergoes a thorough sanitization process, only after
which it is used.


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3. Every organisation has its inventory cycle.The Mc Donalds outlets do keep a safety
inventory.
They keep the buffer stock for a period of three days,and their stock is stored at
the outlets itself. Every product used in preparing the menu items come with an expiry
date, like the French-fries served in Mc Donalds has a life of two hundred and seventy
days. But once the menu items are cooked,they are not kept for more than ten minutes,
after which they are dumped as waste.
There are daily product safety checklist which is maintained manually as well as
with the help of computer softwares too,helping the staff in assessing the stock quantity
at the end of each day.

4. Radhakrishna Foodland had been working with Mc Donalds for the past ten yearsand
the trems abd conditions for choosing the network design was decided by the
headquarters of Mc Donalds itself.The food items are transported via air conditioned
trucks having different chambers.Each chamber is designed for the different kind of
stock at different temperature levels,as per the suitability and requirements of the
stock.All the raw material comes in a frozen form.The trucks have pre-defined
destinations to reach each day.The sources at Mc Donalds told u sthat the trucks from
Mumbai reach Indore on Monday,Pune on tuesday, Hyderabad on wednesday and so on
at Bangalore and Gujarat too.
The items which are to be procured from foreign territories comes to India via
ships, like the french fries are obtained from new Zealand via shipments.

5. They do assess their daily requirements via safety checklists.The rounding and
scheduling of ouput and input is done manually and through computer based softwares
too.


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6. Mc Donalds does not have any third party logistics.

7. With the evolvement of the new technologies and convenient softwares, the
conventional methods of maintaining suplly chain records are now a passe`.
Mc Donalds too use a standardized visual Foxpro based program via which the
outlets are linked with the head office and the Radhakrishna Foodland too.

8. Mc Donalds believe in the saying "Customer is the King" and thus the the complaints
, if any, from the customers end are duly heard and resolved as per the need of the
situation.

















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Ch. 15. Conclusion

As the research and study has show the important functions and roles of a
Material Department in any organisation, proper measure should be taken to manage
the material department as it is the highest contributor of cost. Therefore companies
should take systematic efforts to handle this department and hence preplanning is must
and market research and development helps to reach to that perfection.
When it comes to food industry, customers want the food to be tasty, fresh and
of good quality and hence handling, processing and managing the material come into
picture. Once these parameters are met at the right time at the right place, the
customer is satisfied.
This can be concluded by stating that each and every department in an
organisation plays a crucial role and by managing the key part of Material in the
organisation reduces the cost factor.









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Ch. 16. References

Bibliography:
Newspaper:- The Economic Times
Times of India
Books:- Principles of Management (Philip Kotler)
Research Methodology (C.R.Kothari)
Webliography:
www.quickix.com
www.information.com
www.wikipedia.com