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Mcdonald’s India: Optimizing the French Fries

Supply Chain
BY GROUP 8
CHINMAY BAJAJ 180103068
KESHAV SINGH BHADORIA 180101129
SHREYASH GYAN 180103207
PARTHSARTHY SINHA CHOUDHARY 180101061
VISHWENDRA SINGH 180101122
AKSHAYA BHUVANESWARAN 180102011
Q1. What were the pitfalls of the initial attempts by McDonald’s India
to create its’ French fry supply chain?
 While India was third largest producer of potato in the world, less than
1% of the potatoes were process grade
 McDonald’s had to create backward linkages all the way to the farm
level, hence spending over $100mn even before the stores were
opened, thus having to absorb all the supply chain cost
 In order to supply French fries, McDonalds's initially created joint
venture between International French fry Supplier Lamb Weston and
India based Tarai foods
 The joint venture’s agricultural techniques were unable to produce
potatoes of right size and containing ideal amount of solids, which
produced oily and limp fries
 To avoid the delay in opening of stores, McDonald's realized importing
frozen fries was the best option for the time being
Pitfalls of the initial attempts by McDonald’s India to create its’
French fry supply chain
 But problems continued as the process for obtaining an import
license was complex and time consuming
 After 6 months, the Indian government allowed the imports, but
the import quantity was restricted up to 800 metric tonnes of
french fries
 Import duties were very high- 56%
 Lead time of import from US was very high- 60 days
 Seeing the restrictions, McDonald's invited another international
supplier, McCain so that it can also import 800metric tonnes of
frozen fries
Factors which enabled McCain’s success

 McCain India’s first employee was an agronomist and its second employee was a
supply chain manager thus giving them a better understanding of agronomy
 McCain had to bring in potato germplasm( a collection of genetic resources that
could be used to grow suitable potatoes locally)
 McCain learned that cultivating potato seeds in high elevations was ideal, so its
instituted a Shepody potato seed multiplication valley in 13000 –foot high Spiti
Valley
 Vista food’s excess capacity helped McCain with enough potato volume to build
up small businesses with local farmers and build their trust
 The patty supplier Vista’s excess capacity was utilized , McCain was able to test
the Indian market with small-scale production, and McDonald's found a route for
developing local supplies of French fries making it a win-win situation for all
Q2.How did farmer collaboration and capability building help
promote McDonald’s growth and quality objectives?

 Regional trials helped to locate ideal growing area and the best type of
potato, resulted in Gujarat selected as prime growing area
 McCain established on-acre demonstration farm which helped the
farmers to fully understand how to grow the crop
 Close relationship with farmers and diverse supply base helped ensure
a secure supply
 Farmers got a much better price in comparison to selling in the local
mandi, so they ensured that the quality of the potato is up to the mark
 Guaranteed sales, increase in yield with better agricultural
equipment's and practices provided by McCain and reduction in water
consumption made life easier for the farmers
 By 2011, 75% of Mcdolnald’s India supply was manufactured locally
Q3.Risks in Macfry Supply Chain model

 Natural calamities like droughts, hailstorms or improper rainfall can destroy


the crops
 Indian farmers still rely predominantly on monsoon for irrigation
 Irregularity in output from various farmers
 Risk of spoilage of raw potatoes and processed frozen fries while transit
 Risks involving proper storage of the frozen fries
 Improper forecast of supplies requirement
 Excess output will also have to be bought by Mcdonald’s
How can McDonald’s address the competitive threats

 By incentivizing the farmers better than other firms


 Long term contracts with big farmers so that they don’t switch to serving
other competitors
 By keeping the research results of ideal potato variant confidential and
asking the farmers to do the same
Q4.Is it better to push for 100% localization using one supplier
or to use a multi supplier strategy by continuing to import some
supply?

 A multi supplier strategy would be more preferable as Indian


farm outputs gets hit badly in case of natural calamities or failed
monsoons
 Having multiple suppliers keeps the bargaining power in hand of
the company
 Continuing to import supplies from international suppliers will
help maintain relations and increase import in adverse situations
Q5.Would vertical integration strengthen McDonald's ability to
have assured supply, or weaken it?

 Vertical integration would strengthen McDonald's assured supply as


the farmers would have assurance of their output being brought by
McDonalds
 Diversified supply will ensure failure of one or two farmers won’t
make much of a difference in overall supplies
 However, McDonald's shouldn’t totally rely on local suppliers and
should be open towards relation with other suppliers
Thank You

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