McDonalds Operation Management

McDonalds Operation centeringIn todays business environment, trading operating theatres management is apply by companies not only to be competitive, further as well to consider that their bearings atomic number 18 met at a cheapest speak to. This will consist of a strike off of planned activities that would convert various inputs into swells and go.This stem provides an analysis of McDonalds and organisations trading exploits Management, Operational Strategy, unconscious process and product digit, deliver Chain Management, inventory control, JIT and Total Quality Management which include all the different processes and techniques to enhance the value of products and run that McDonalds provide to its guests at the acceptable cost.McDonalds is the global fast-food service retailer. The company view as much than 32,000 restaurants and serve to a greater extent than 60 million people in more than 100 countries every day. More than 80% of McDonalds restaurants worl dwide ar franchised and operated by local people.When Richard and Maurice McDonald opened their first restaurant they developed the idea of an assembly make where a discreditd menu could be cooked cheaper and quicker, which would lead to a higher turnover of customers.The history of McDonalds began with founder, Ray Kroc. He managed the franchising of the McDonalds restaurant concept. By 1961 Ray Kroc was path the whole plan. The only thing the McDonald br separates did was run their hotshot restaurant, and receive 0.5% from the larger company. The expansion of the McDonalds brand was not something they were really interested in. Ray Kroc, on the other(a) hand, was. He wanted to put a McDonalds restaurant in every state in America which he eventually did. Kroc took over McDonalds company, at a cost of 2.7 million dollars.Anyone who wanted to open a McDonalds restaurant had to cook up Kroc around a thousand dollars and and so 1.9% from the annual takings of the restaurant. H e then passed 0.5% of the takings onto the McDonald brothers and kept the other 1.4%. It is estimated that if the McDonalds had continued to receive their 0.5% it would have been worth around two hundred million dollars by the year 2000.The McDonalds image has not been with bulge tabu its problems. There was the famous McLibel case the longest running libel case in British legal history.Also the discovery that some beef products were used in the preparation of their french fries, which resulted in the company paying compensation of 10 million dollars to Hindus, Sikhs, and vegetarians.There have been various criticisms of the McDonalds Corporation, ranging from the source of their meat, to the treatment of workers in the restaurants (BBC, 2005).McDonalds Restaurants UK Limited is owned subsidiary of the U.S. parent company and opened its first UK restaurant in Woolwich in 1974. There are now 1,200 restaurants operating in the UK which, despite re testifying only 4% of the total n umber of McDonalds restaurants worldwide, contribute 7% of global profits, making the UK a very important financial market for McDonalds shareholders. (McDonalds Corporation, 2008)This report will present the workal strategy of McDonalds and excessively how the processes and products are purposeed in the company.Furthermore the report explains the flow of materials and in orchestrateation mingled with the unconscious processs indoors the McDonalds supply chain and also what type of inventory management is used in the Company, moreover report underlines importance of lean management, just-in- clock age and other systems that are corporate in the Company. In addition report introduces Total Quality Management and its importance within McDonalds operational process.3. Operational Strategyoperations strategy concerns the practice of strategic decisions and actions which set the role, objectives and activities of the operation.(Slack et al, 2004. p.67)The main objective of compa ny in the operational area is that the output signal process was as powerful as possible. In other words, when victimisation the same assets the company convey the maximum amount of high timberland product which satisfies customers.Companies dejection achieve these results through the use of tools such as reducing cost, improving product timber, punctual delivery, speed of response, product flexibility in adapting to individual customer requirements, resistance to fluctuations in pray, advanced technology and refined customer service. The listed tools relate to the operational strategies, which by focusing on the production process on certain key elements can give a mensural competitive advantage.To achieve these objectives McDonalds create a balance amongst customers needs and minimising waste. Demand is forecasted and stock is controlled so that products do not have to be thrown repeatedly.McDonalds is a global company, but they operate locally. Currently, McDonalds w ants to be perceived as a modern company that cares round customers and ecology. They offer fast-serve meals, such as breakfast, salads, vegetables and dairy farm products.In their restaurants people can bargain for regional products, including Rice burgers served in Taiwan, Japan shrimp, coconut draw in Brazil.3a.Three dimensions of operational strategy process look uponMcDonalds sells nearly millions of burgers every day. Jobs are systematic and repetitive in everyday processes. In wander to produce so many burgers every employee have delegate particular job in which they have to ensure that the quality and taste of the products is the same all the time.VarietiesMcDonalds offer a wide choice of menu items such as breakfasts, salads, fruits and vegetables and also kids meals to satisfy customers subscribe tos. McDonalds menu concentrates on five dollar bill main ingredients beef, chicken, bread, potatoes and milk. The main menu items are the tumid Mac and French fries which is one of the main sellers along with local offers and unsanded products that consumers want. Whether its McWraps in Europe, Angus Burgers in Australia, or McCaf specialty coffees and smoothies in the U.S., company is strategically enhancing menu to attract new customers.VariationsMcDonalds process is so comfortably organized that it can meet the changing capacity, anticipation for what the customer might lease, ensuring flexibility.Demand for products are calculated using store-specific historical product mix data from thelast two years, store-specific and national causal factors for example dates of events such asnational promotions and school holidays, information from store managers about factorsthat might affect demand, e.g. road closures or local events and promotions.3b. Performance objectivesPerformance objectives are related to operational processes and their basic function of fulfilling customers needs. There are five exertion objectivesQualityMost customers are look ing for high quality. Every organisation wants to provide error free products for their customers and gain competitive advantage. Quality objective leads to certain actions and policies in operations to provide a service that the customer wants.McDonalds serves a variety of nutritious, high-quality food products including salads, fruits, and vegetables.At McDonalds the employees are trained to prepare and present meals according to very specific procedures that are strictly enforced, especially in the preparation and handling of raw and cooked products. For example, the ten-minute holding time for sandwiches ensures maximum quality and cheekiness to from each one customer. This means that if the products are not sold within ten minutes from the time of their preparation, they are discarded. McDonalds meets all the hygiene specifications, including hand-washing procedures. McDonalds succeed on the feedback from the customers to always improve the quality service.SpeedSpeed is all about how long customers wait in the first place receiving their service organisation increasing the availability of their products or services if the waiting time is minimised.The Operations process is so well be aftered at McDonalds that every customer who comes is served quickly. The company have preparation time set for burger and other menu items so that the order is delivered within 3-4 minutes. Even during the busy hours the staff members ensure that the order is delivered on time to the customer.DependabilityAn organisations processes have to systematically meet a promised delivery time for a product or service.McDonalds has a more dependable process for the customers by offering the meals on time. They have qualified workers to deliver products on time every one of them have assigned particular job. McDonalds has predictable opening hours during the weekdays and weekends, the products on the menu are for sale constantly during any time of the day.FlexibilityRefers to e lasticity of the processes and change in the variety of products or services making operations more flexible to changes in customer requirements.As customer tastes change, McDonalds needs to increase the range of new products it offers. McDonalds offers a lot of flexibility to meet customer takeences. It offers a balanced accrual of culturally relevant menu items in the markets, for both adults and kids and is maximizing the choices. McDonalds has a multiple trained staff in order to be flexible. It maintains shift base system of work among the crew members allowing them to be flexible comme il faut in the work they do.CostRefers to minimizing the cost of the process, leading to a cheaper service. The best way of forbidding cost is to focus on the customer requirements i.e. fulfilling the quality objective in both product design and operation, as a way of eliminating rework and waste. Operations should focus on getting the supplied service right. It should be also co-ordinated with processes like information systems which help crop errors.McDonalds have a well planned cost control strategy. The restaurant has a well established low cost supply chain. They adopted Just-In-time strategy that reduces the cost of unnecessary storage and waste. Food can be sold at a lower price because the price does not absorb the cost of unsold food. Ultimately this means lower costs for McDonalds.They ensure efficiency and speed in distribution and very good food processing technology system. McDonalds has employed the value meal strategy which allows customers to buy a sandwich, French fries, and drink at a discount when purchased unitedly.Thus, it is observed that all operations objectives are connected. If quality is improved, cost is also reduced, thus time is also improved and which in turn leads to more flexibility. Thus by starting with quality, along with time reduction the other objectives are directly attacked by taking unique actions for that objective, as nee ded. Hence, a series of such actions will then result in continuous improvement of all four operations objectives at the same time. (Schroder, 2007 p. 24-25)3c. PEST AnalysisThe success of any organisation depends upon the various external and internal factors which are beyond the control of an organisation. These factors are called environmental factors. These environmental factors basically include four areas namely governmental, Economical, Social and Technological and the analysis of these factors is called PEST analysis. To overcome the problems created by these factors the businesses come up with various strategies.Political FactorsPolitics see very important roles in the functioning of the business. It is very important for a firm to know the existing political factor within it is operating. What sort of laws and legislation exist in the country and what are the future prospects. This is quite important to know because these factors will determine the strategy required to get down and work without problems.Government policy can have a major impact on the operation of a business. The political and public debate on obesity and other health issues blackballly affected fast food sales.In recent years, McDonalds has been facing legal trials of possibility in breaking the health legislation by providing unhealthy foods to customers. This had made some damage to McDonalds image. However, McDonalds has al sterilise been trying to introduce healthier foods on its menu such as salads, fruits and milk for the kids.Economic FactorsSimilarly it is important for a firm to know the economy of the country it is operating within. The factors like unemployment, minimum wages, exchange rate, interest rate, economic evolution inflation rate etc are quite important for a firm to know. Economic factors might affect it. If the economy of the country is not good then the number of McDonalds customers can decrease.Economic factor can influence the potential profit of a bu siness. One of the economical forces which may influence McDonalds is the change in interest rate. Most of McDonalds restaurants are franchises, therefore, franchisees would suffer on their borrowing if interest rate increases.Social FactorsSocial factors include the demographic and cultural aspects of the environment. Social factors play important role in a business. The business has got to respect the culture it is operating in. For example it cannot sell beef products in a hindu lodge and pork products in a Muslim community. Apart from that the business has got to know the taste and preference of its customers.The fast food industry has been hit by negative publicity in recent years due to the increasing amount of diabetes, unhealthy food and childhood obesity. In order to overcome the problems, McDonalds has been introducing healthier foods and educational programmes to bring a healthier environment. McDonalds also has been heavily contributed in the charity events in order to make contribution to the society.TechnologicalEvery organisation moldiness monitor developments in technology. These can affect the production methods employed by the organisation. Due to the increasing importance of internet, regional planners work with restaurants and by communicating with them on a regular basis via email and telephone.McDonalds also have a friendly use website with more details and information available4. Process designProcess design is the process by which some functional requirements of people are conform to through the shaping or configuration of the choices and/or activities that cook up a product, or a service, or the transformation process that produces them (Slack et al 2004, p.94).The process should be designed to deliver the products in the best possible way. sooner design the process every manager should ask some questions, e.g. what process should give to customers? How much flexibility do customers want? How much will they pay for the products? ( Waters 1999, p. 65).Each restaurant is headed by a Restaurant manager who is responsible for the daily operation and customer interaction. The crew members carry out the basic operation at the restaurant and ensure the customer satisfaction.The Process at McDonalds starts with the customer order and then after receiving the order, the design essential be completed and delivered. With this operations process, McDonalds butts to be able to deliver a reasonable product within reasonable time. The nature of the work is to provide customers ordered products within few minutes.The order placed by the customer is taken by one of the crew members operating at the tills, as the order is entered into till, a message is passed on to the admit crew member in the kitchen for the preparation of the order.In food preparation McDonalds have their own strategy and standards the Crew members cook burgers on a grillroom that heat both sides of the burger in a little less than four minute where the Patties are batch cooked in advance. The hamburger buns toaster time is slightly less than one minute to give it a brown texture and slightly crusty, the assembling of hamburger is done by laying out the toasted bottom, spread mayonnaise, add grilled beef, on top lettuce and onions close it with the toasted top and is wrapped and placed into the Universal cabinet ready to be sold to customers. Finally the customer is asked for the mode of payment to complete the transaction.The process flow in McDonaldsCustomer orderToast bread product dodge frozen productsPlace product in packagingAdd ingredientsHolding Cabinet (Wrapped burgers are kept max 10min)Delivery to the CustomerHaving a well planned process design, McDonalds is able to produce and service including customers specification maintaining their quality, reduce the customer waiting time at the counters. They have dependable crew members and resource for on-time delivery of products and service. The flexibility is achieved by pro cessing a wide variety of products and changing the cost of the items and lowers their processing costs by eliminating waste in wrong of preparing the burgers in bulk.5. Product designThe objective of designing products and services is to satisfy customers by meeting their needs and expectations. This enhances the competitive advantage of company (Slack et al, 2004 p.129)McDonalds product design concentrates on maintaining consistency in how products are prepared as well as what raw-food components are used. They serve a variety of products, sandwiches with beef, fish, and chicken products, menu also include salads, fruits and dairy products. The quality is ensured through standardized and careful employee training efforts.The Company frequently introduce new products and a reason for this is that customers are demanding more choice. McDonalds menu concentrates on five main ingredients beef, chicken, bread, potatoes and milk. The companys main menu lists is offering the Big Mac and French fries, which still exists as a major seller. A Big Mac consists of a bun, two beef patties, lettuce, cheese, pickles, onions, sauce and a small amount of seasoning. The restaurant will only combine these items just before the customer orders. Other standard product names come from the McDonalds convention of adding a Mc to a particular item.Although McDonalds is a global company, they operate locally. In restaurants people may buy regional products, including Rice burgers served in Taiwan, Japan shrimp and coconut milk in Brazil.Ethical considerations about product design could be that in order to minimise the negative comments about unhealthy food, increased amount of diabetes and obesity among children the Company introduced healthier foods in their menu. They purchase from suppliers that ensure the health and safety of their employees and the humane treatment of animals. The company is also trying to minimise the impact on environment.6. submit chain managementSupply cha in management is the management of the interconnection of organisations that relate to each other through upstream and downstream linkages between the different processes that produce value in the form of products and services to the final consumer (Slack et al, 2004, p. 445).SUPPLY CHAIN PLANNING AND CONTROLCoordinated delivery of products and services from the supply chainDemandThe marketCustomer requirementsSupplyThe operationOperations resourcesRequired time, quantity and quality of products an servicesFigure 1. Supply Chain planning and controlSupply chain management is touch with managing the flow of materials and information between the operations, which form the strands chains of a supply network. (Slack et al,2004, p. 444).McDonalds ensures its suppliers follow the exact standards of quality, value and cleanliness set by them. When it comes to tracing the products ingredients, great fierceness is placed, so McDonalds are able to control every link in the supply chain.Wher ever possible, McDonalds tries to use suppliers who are based in the UK, as they prefer them, but saying this, they still have to meet McDonalds exact product and hygiene standards.All of their European sold beef is supplied from Europe and the great volume of their British sold beef is sourced from Britain. McDonalds has developed a supplier quality index (SQI) by which all suppliers are measured. It allows the company to monitor performance of suppliers crossways the many agricultural and non-agricultural products and services purchased (Food Chain Centre, 2003).In 2004, McDonalds introduced a specialist central stock management function known as the Restaurant Supply Planning Department. This team communicates with restaurant managers on a regular basis to find out about local events. The team builds these factors into the new planning and fortune telling system called Manugistics to forecast likely demand of finished menu items, for example Big Macs.Raw materials include th e buns, beef patties, paper cups, salad ingredients and packaging are delivered to the restaurants between 3 and 5 times a week. At any time, a restaurant will have a range of products ready for sale, for example Big Macs, fish and side salads.At McDonalds, all raw materials, work-in-progress and finished products are handled on a First In, First Out (FIFO) basis. This means raw materials are used in the order they are received. Therefore stock is always fresh because products are sold in the order they are made.Ongoing discourse between the central Restaurant Supply Planning team and individual restaurants helps to manage the stock more effectively. This team of regional planners works with around 80 restaurants each and communicates with them on a regular basis via email and telephone. Any factors that could affect the number of customers visiting an individual restaurant need to be logged with the team. These are taken into account in calculating the forecasts. Supply Planners w ork with the stock control system, to ensure enough raw materials leave the McDonalds distribution centres. This ensures that restaurants can produce the meals required for the level of demand forecasted.Supply Planners working for McDonalds include range of causal factors in the calculation of their forecasts, so that based on past performance they can predict future demand for each restaurant. McDonalds Restaurant Managers need to ensure that the data they enter into the system is as accurate as possible. For example, each day Restaurant Managers record opening and closing stocks of key food items. They record all other items weekly (McDonalds Corporation, 2008).Vertical integrating the degree to which an operation chooses to own the network of processes that produce a product or service. The strategy of expanding on the supply side of the network is called backward (upstream) vertical integration, and expanding on the demand side is called forward (downstream) vertical integrati on (Slack et al, 2004 p. 169, 779).McDonalds has practiced a backward (upstream) vertical integration, by replacing most of its suppliers. It has done so for two reasons, 1) To reduce costs, and 2) To ensure that they make top quality products. One of the coffee suppliers of the Company is Distant Lands which have its own coffee farm. In this example vertical integration reduces the risk of delayed delivery (dependability).7. Inventory management ControlsInventory planning and control compensates for the differences in timing between the supply of an operations products and services and the demand for them (Slack et al 2004, p. 405).There are 5 types of inventoryBUFFER INVENTORY compensates rapid variations in supply and demand.ANTICIPATION INVENTORY is used when changes in demand are big but relatively predictable. It is also used when supply changes are large.DE-COUPLING INVENTORY creates the chance for independent scheduling and processing speeds between process stages.PIPE LINE INVENTORY exists because material cannot be transported right away between the point of supply and the point of demand.CYCLE INVENTORY occurs when one or more stages in the process cannot supply all the items it produces at the same time (Slack et al 2004 p.411-412).McDonalds method of keeping burger lanes full during peak periods is a perceptible example of a pull system in a service application.McDonalds has made billions of hamburgers using elements of just-in-time, from the time of order from the customers to the payment from them the burgers or the meals are ready to be consumed. If they are later than the time ordered, customers will be dissatisfied. So it is important for McDonalds to use the JIT process in order to keep quality and satisfied customers.Just-in-time means producing goods and services exactly when they are needed.Lean production system is the western term for Toyota Production System. Lean operations and just-in-time planning and control aim to meet demand ri ght away, with perfect quality and no waste. Lean operation means waste elimination in order to create operation that is faster, more dependable and that produces high quality products and also operates at low costs (Slack et al 2004 p. 518, 519).There are two major pillars of lean production system. One is Just-in-Time system and other is Kaizen.Kaizen is a Japanese term for continuous improvement involving everyone managers and workers alike.Kanban is a Japanese term for card or signal, it controls the transfer of materials between the stages of operation. (Slack et al, 2004 p. 533, 653)McDonalds use lean production system and minimise waste by accurate stock management and by developing correct demand forecasts so that products do not have to be discarded.McDonalds is an example of a JIT system, they doesnt begin to cook its orders until a customer has placed an order. McDonalds is able to make their products fast enough thanks to technology they use, eg. bun toaster. The Compan y provide fast service and at the same time the finished products are not placed in inventory for long time.The major benefit of using just-in-time system for McDonalds are good quality food at a lower cost and also better quality customer service. This higher quality customer service is the ability to actually produce faster. Without this ability, McDonalds ordering costs would be higher because the costs associated with ordering would be the loss of customers tired of ordering fast food that really isnt fast (Atkinson 2005).8. Total Quality Management (TQM)Total Quality Management is a philosophy of how to approach the organization of quality improvement. This approach puts quality at the heart of everything that is done by an operation and including all the activities within the operation (Slack et al, 2004, p. 722).Feigenbaum defined TQM as An effective system for integrating the quality development, quality maintenance and quality improvement efforts of the various groups in an organisation, so as to modify production and service at the most economical levels which allow for full customer satisfaction(Cited in Slack et al, 2004, p.720).McDonalds goal is simple to give customers high quality products anywhere in the world and maintain high standards of service. Every member of the organisation must be involved from the highest executive to the crewmembers of McDonalds. The commitment to quality must be instilled into everyone from the moment they join McDonalds in every dimension of the organisation, e.g. Operation, Finance, Marketing, Human Resources, Health and Safety and Food SafetyThe basic principles of McDonalds are1. Putting the customer first by making sure all customers are fully satisfied with McDonalds, predicting and fulfilling their needs, exceeding their expectations, by using market research to find out what they want, they aim to surprise you with their quality, choice and service and making sure that all service standards are met.2. Makin g continuous improvements by reducing costs, maintain good ordering procedures in all restaurants.3. Aim for zero defects do it right first time, it can be very expensive putting it right afterwards. streak is better than cure. This requires rigorous quality testing and control so that defective products are spotted immediately.The advantages of using TQMEvery individual in McDonalds is responsible for qualityQuality becomes the focus for all activitiesEverything McDonalds does is designed to satisfy their customers. This can lead to a greater market share and also increased profitThe disadvantages for using this system areRequires well-trained, responsible staff, this could cost more money for training each employee.Some of the employees can be resistant to changeGives visible effect in the long run9. Conclusion.Operation management function exists in every organisation. It is concentrating on achieving the processes of transformation of raw materials into a finished product. Mo reover effective operation management enhances performance in the process.McDonalds Corporation is one of the most known companies in the world. In their operational strategy company decided to reduce costs, improve product quality, punctual delivery of their product to customers and continuous performance of all operational aspects of company. All departments of organisation and every employee have to work together to ensure that the strategy reaches its objectives. All the processes in McDonalds reflect the needs of the customers and products are designed taking into account high quality, speed of service and cost.McDonalds working together with suppliers that fulfil all the standards of quality set by the company. To satisfy customers needs of fast served quality products their strategy incorporated just-in-time system. As a result the restaurant is serving fresh food in a short time.