McDonalds Operations Management - Case Study Example

MCDONALD’S Student’s name Code & Course Professor’s name University City Date Contents 1.Introduction 3 Background 3 Performance Objectives 3 2.Capacity Planning and Stock Management 4 Stock management 5 Stock Control Charts 6 Types of Stock 6 Benefits 7 3.Process Panning, Selection, and Service Design 7 Importance of Planning Process 8 McDonald’s Process 8 Service Process Design 9 4. Facilities, Facility layout, and location Planning 10 Definition Facility Layout 10 Description of facility layout 10 Factors considered while planning location 11 5. Quality management and Quality Control 11 Importance of Quality Management 11 McDonald’s Quality Control 12 McDonald’s 1. Introduction Background As such, the company manages its businesses as divergent geographical segments. McDonald’s operates in the global restaurant industry. Due to its franchise approach it generates its income in two ways; sales through the company’s owned 20 % business and fees from restaurants operated by the franchise. Revenues collected from the various franchise include royalties, rents, and initial fees. Evidently, most of their agreements have a 20 years term. It further owns about 45 % of the land where its restaurants rests; having about $ 5 million in land asset. The company’s geographical segments include; i. United States 35 % ii. Europe 41 % iii. Asia/Pacific 19 % iv. And other regions account for 5 % The company’s strength of alignment among its suppliers and franchises has been key to the company’s success. Through various leveraging systems, McDonald’scan identify, implement and scale its ideas in meeting the consumer’s changing preferences and needs. Its business models enable the company to deliver locally relevant restaurant experience to the customers as an integral part of the communities they serve. Performance Objectives The customer focused “Plan to Win”strategy offers a proficient framework that aligns the business to local adaptations. McDonald’s continually focuses on three global growth priorities namely, its menu, broadening accessibility and customer experience. The company’s initiatives support these priorities that are executed on the Plan’s five Pillars – Products, People, Place, Price, and Promotion. These strategies are aimed at enhancing the customer’s experience and building a shareholder’s value over its long term plan. The “Plan to Win” strategy is aimed towards the improvement of its operational efficiency in the existing restaurants and continued focus on its brand image. The strategy to focus on their brand has helped it increase its menu variety and beverage choices along with added extended and convenience hours. The company’s core goals focus on offering quality, service, cleanliness and value for the customers. Placing the customer’s experience first, is the company’s core value. The company demonstrates appreciation through the provision of high quality foods and superior services to the customers. McDonald’s furthers in offering opportunity, nurturing talent, rewards achievement, and developing leaders. 2. Capacity Planning and Stock Management Simply put, capacity planning is the process of determining a company’s changing demands for its product. As such, it creates the maximum capability in production, and it is defined in terms of the output units, compounded by its product and services mix. Nevertheless, capacity planning is a long term strategic planning which enhances resource allocation and positively affects the products’ lead times. Eventually, it improves customer responsiveness and creates the firm’s to compete in the globalworld. This strategy is the second most important approach in decisions garnered towards the comprehension of the company’s capacity planning. It further helps in the control in dealing witheffective capacity planning of McDonald’s operations. This way, it enhances and responds to the demand. Hence the operation manager can focus on the medium term, short term and long term decision of capacity management. Tentatively, this is referred to as the aggregate planning and control since it is instrumental in dealing with different operations. The capacity planning for short and medium term planning is adjusted accordingly within the fixed physical limits that are dictated by the long term capacity. McDonald’s operations are set to be high in the preparation of the food items and ensure appropriate ingredient allocation for the different menus. In this regard, the management can efficiently meet the consumers’ needs in ensuring the process of food preparations. The operations manager sets the capacity in meeting the speedy demands during the peak hours. For instance, in the case of a reduced stock of buns the restaurant may not be able to sell the hamburger stock conveniently. Stock management One of McDonald’s challenge emanates from stock management. Essentially, stock management consolidates the creation of a balance between meeting the customer’s needs whilst minimizing its waste. Simply put, holding too much stockresults to losses. Hence McDonald’s uses a lean stock control to save up costs. Dependent communication between the central Restaurant Supply Planning team and the individual restaurant facilitate the management of stock more effectively (Mcshane, 2012). A mixture of the stock controllers together with the employees forms the central team. The team consists of 14 regional plannerswho functionsin 80 restaurants. Factors that could significantly affect the customer’s number and the individual restaurant are logged in by the team thatis taken into consideration during forecasting. Plannerssimply function along with the stock control systems, in ensuring that sufficient raw material leaves the McDonald’s distribution centers. This ensures that the restaurant can produce meals that satisfy and meet the customer’s forecasted demand. The forecast iscalculated using; i. Store’s historic product mix data ii. National causal factor such as dates of events. iii. Information from the stores affecting demand such as road closures The planners effectively use the data in preparing McDonald’s forecast. Analyzing factors such as weather affects and the demand for particular products including salads and McFlurrys complement the available information. As such, the forecast becomes efficient, and the accurate hence decreases the costcost of wastage and affiliated practices. Stock Control Charts McDonald’s Manugistics uses a two years’ worth of product mix history that develops the restaurant’s forecast. It consolidates a time series analysis, where the planner applies a casual factor for the start and end date of a specific promotion. Any stock management systems are as good as the data provided. For instance, the operation’s manager records the opening and closing stock of pertinent food items. The manager further uses a web based communication tool known as the Weblog to view and amend store order proposals. Weblog creates a proposal for the manager to analyze and amend where necessary. Types of Stock Simply put, a stock is any physical product that a company buys, creates or sells. All its products are handled on a First In, First Out basis. For any business, three business stock are paramount. Raw Materials These are ingredients that produce the end products. These includes beef patties, paper cups, buns, salad ingredients and packaging. These products are delivered within 3-5 times weeks. These products arrive in three sections namely frozen, ambient and chilled. Work-in-progress These are products that are in the process of being made. A Big Mac include two beef patties, cheese, onions, bun, pickles and a small amount of seasoning. These products are combined just before the customers’ orders the items. Finished products At any time,McDonald’s will have finished products that are ready for sale such as Big Macs, side salads, and Fileto-Fish. Benefits The centralized stock management system is essential at various levels hence, it positively improves its efficiency and customer experience. The restaurants avoid running out of stock; therefore, the customers can conveniently rely on the services offered. Since the system effectively saves time, the ordering process is efficient and meets the restaurant’s present stock availability. Consequently, less waste implies a considerable reduction in food costs. Further, the amount of stock order for any promotion is accurate based on the past performance. Hence, stocks can be reduced automatically at the end of the sales in reducing too many stocks. The franchise can thus operate effectively. 3. Process Panning, Selection, and Service Design Importance of Planning Process This is the process that firms will use in achieving its desired goals (Mankins, 2005). Through divergent aspects of planning, it enables business managers to foresee the future changes whilst the prevailing economic market in the food industry– in line with decisions that help improve its revenue base. On the other hand, the establishment of goals is crucial since its helps maintain McDonald’s focus on available opportunities. The planning process is instrumental for McDonald’s since, it can determine its future direction given the changes in consumer preference and market dynamics. Nevertheless, process planning helps McDonald’s improve its market performance and optimize its resource allocation in improving its performance. Hence, it maximizes its propensity for success. McDonald’s Process McDonald’s in the global market has adhered to the global competitive strategy that consolidates cost leadership through focusing on the operation efficiency and product standardization. Nonetheless, in order to adapt to the changing market dynamics,the franchise uses different strategies in maintaining its competitive edge. Further, its processes are centered towards the provisioning of fast and effective services that significantly improves customer experience and retention. Nevertheless, its planned objectives center on the company’s competitiveness and agility in the market. Its processes are attuned to different consumer preference but maintains quality in all the products offers at all its chains. An effective planning process, therefore dictates its success. Process Selection At McDonald’s, the process selection starts with the products flow. The products are precooked awaiting its completion upon customer order request. The restaurants have a high flexibility – essential toMcDonald’s success – compounded by a high production volume. McDonald’s classification is typified by the Customer order consisting of Make to Order because it is an MTO process. The restaurant’s MTO production cycle and order fulfillment starts with customer order, subsequently followed by the receiving order design. An essential part in the process is to reduce the product’s delivery times, otherwise known as the lead time. Service Process Design McDonald’s process design starts from a service product bundle. Initially,McDonald’simplemented a service process which employed the Fordism technique in theassembly line when producing a number of burgers; that were stored until a customer placed an order. The employees would simply deliver the food product upon request. However, this encouraged waste and it lacked the freshness. A lean production has however been implemented given the amplified recession and the need to reduce the cost. Essentially, the lean production necessitates the inclusion of communication, efficient resources and continuous improvement (Seddon, 2009). Under this process design, the employee judges the demand of the products and the places the order to balance the inventory. The made to stock approach maintains inventory in peak and off peak times and minimal cooking time. This not only reduces its production time, buts also guarantees the freshness of the food product (Business Insider, 2011) 4. Facilities, Facility layout, and location Planning Definition Facility Layout America’s engine was the proffered décor needed for the McDonald’s theme facility. In achieving this high tech industrial look, McDonald’s had to creatively work with Raymond Design, Atlanta, and consolidated shiny surfaced materials; polished chrome and the brightly colored ceramic tiles (James, 2009). In this regard, some form of nostalgia was achieved through the utilization of depicting classic automobiles at the restaurants Drive in. Its facility offered a D/MA a design challenge that created a setting and kitchenlayout that can accommodate large volumes of patrons using limited space. Great considerations and design inputs were used on all floors and the space in the most efficient manner (Collier, 2009). Evidently, its dramatic metal, double arch emblem takes advantage of the world wide recognition of the restaurant’s logo. Description of facility layout In order to improve its efficiency that the company has effectively utilized available space. Drive through windows have been established where customers can accessibly place orders at the convenience of their vehicles. Over the years,McDonald’s has shifted to different design layouts from redesigning of its kitchens to the creation of three separate dining sections. In excess of 30,000 McDonald’s outlets around the globe, have different dining zones. The linger zone is composed of the comfortable armchairs with Wi-Fi connections for the young adults (Collier, 2009). The “grab and go” sections have tall counters and bar stools for its customers who eat alone. Lastly, the “flexible zone” typified by comfortable and casual setting for families and large groups (Collier, 2009). Factors considered while planning location Site selection is an important aspect when considering the location of the restaurants. A common approach used by McDonald’s is the development of a checklist that offers the relevant factors that dispel the proffered location for the restaurants. These common checklists include information of the socioeconomic and demographic compositions, existing outlets and competition. Site specific factors include parking facilities, traffic count and ease of ingress and egress. The value of location is analyzed from four factors namely; i. Accessibility to the resident population ii. The accessibility to people moving and gather errands other than shopping iii. The location’s physical desirability from the grade or level standpoint, size and shape, appearance and distinct environment However, general analysis are done in the location inclusive of the population, potential competition, growth and economic conditions. 5. Quality management and Quality Control Importance of Quality Management Continuous Improvement The key to McDonald’s value is the customer confidence in its capability to experience quality service and products. Quality management offers a platform where McDonald’s can gauge its performance in achieving customer satisfaction. Customer satisfaction plays an essential role in retaining McDonald’s customers and improves its brand image. In order to compete in the restaurant market, McDonald’s has to offer a more consistent value and quality to its owners and customers. Such objectivesnecessitate for a continuousimprovement process in provisioning total quality management (Mcshane, 2012). In order to get the attention it seeks, McDonald’s concentrates in provisioning of quality services and products to all its customers. Further, continuous improvement is realized through analysis of past experiences and improvement of the present services (Olorunniwo, 2002)). McDonald’s Quality Control The Franchise has gone to extraordinary levels in ensuring its provision for quality control. This control system is achieved through different approaches. First is its 600 page operation and training manual which offers in in-depth procedures for the company’s standards that deal with different challenges in the business (Olorunniwo, 2002). Prospective franchise must attend a two week rigorous course at Hamburger University, where they learn McDonald’sfood and menu. This commitment offers a high attrition rate where McDonald’s can select highly motivated individuals. Its architectural designs are carefully controlled to the point of proffered measurements to the point of exact measurement to create uniform designs. On the other hand, all its products and equipment must be purchased from approved suppliers. The McDonald’s Supplier Quality management Systems applies to the companies that supply food products to the company. The standards intend to ensure quality of the food s comply with the highest quality. Once the store is open, for example, the owner is compelled to agree to the franchise agreement that details the owner’s obligation in upholding quality. As such, quality control is maintained by its field consultants who periodically inspects the restaurants. For instance, McDonald’s Australia is continuously inspected by VNZ against ISO 17020. Reference List Business Insider. 2012.15 Facts About McDonald's That Will Blow Your Mind. [Online] Available at .Accessed on 26th Dec 2014. Collier, D., and Evans, J., 2009. OM 4 ed. Cengage learning Food Service, 2014. McDonald’s. [Online]. Available at . Accessed on 26th Dec 2014 Mankins, M., and Richard, S., 2005. TurningGreat Strategy Into Great Performance, Harvard Business Review, pp.65-72 Mcshane, S., & Mary, V., 2012. Organizational Behavior. 6th Ed.McGraw-Hill/Irwin. Olorunniwo, F, and Maxwell, K 2002, ‘Services Marketing’, Services Marketing Quarterly, Vol 29, Issue 2, pp: 79-92, 2002. Robbins, S., and Sanghi, S., 2007. Organizational Behaviour. New Delhi: Pearson Education. Seddon, J., O'Donovan, B., &Zokaei, K., 2009. Rethinking Lean Service. Management Services, 54, 1-15. Read More