Mac Donalds Supply Chain in India Essay Example

own factories or distribution centers. This is a horizontally integrated supply chain, as discussed in the lecture. McDonald's works with approximately 15 major suppliers in each western country, with the logistics supplier being the most significant. The logistics supplier is responsible for transportation, warehousing, and overall logistics management. They oversee the distribution centers, final processing facilities, and transportation services.

In the US, Perseco, a branch of HAVY Global Solutions, serves as McDonald's logistic supplier. McDonald’s values long-term relationships with its suppliers, which is why HAVY is the company’s logistic supplier in 32 countries (Supply chain movement, 2011). McDonald's has two types of suppliers: direct and indirect. The direct supplier is the logistic supplier mentioned earlier. It is considered direct because it is the sole supplier that McDonald's works with. McDonald's oversees the management of the logistic supplier, which then communicates the requirements to the food suppliers.

The primary processing plants, production plants, farms, and ranches are classified as indirect suppliers. While many suppliers in each country are local, there are also well-known international brands like McCain that serve as suppliers. McDonald's has established stringent production standards to govern the entire supply chain. To become an indirect supplier for McDonald's, one must meet multiple requirements; hence, numerous suppliers have adapted their production methods to align with McDonald's supply chain. Each category of goods is assigned only one supplier, and all suppliers adhere to a standardized routine for the supply chain.

1. According to Supply Chain Management in practise (2006), 70% of McDonald’s restaurants worldwide are franchisees. These franchisees rent the building from McDonald’s, while the interior belongs to them. McDonald’s emphasizes the

importance of long rental agreements, typically lasting at least twenty years. In addition, McDonald’s provides education and guidance to franchisees on restaurant operations. It is common for a franchisee to operate multiple restaurants.

4 The forecasting demand is crucial in McDonald's supply chain. The responsibility for this lies with the logistic supplier and franchisees, as McDonald's Corporation does not oversee it. According to Alex Bahr (2012), predicting demand in the market is a collaborative and trust-based process that requires real-life assessment.

Every distribution center knows the restaurants they work with and has a system to calculate and predict the right amount of food to deliver. Restaurant managers can make changes to these predictions. However, logistic suppliers use a sophisticated system that analyzes historical data to determine the number of transports needed for each restaurant. I appreciate a system where HAVI takes ownership and plans the products until they are sold in my restaurant.

In 2006, a franchisee stated that by using this method, they were able to focus on their restaurant and customers. Recently, Perseco in the US has developed a new strategy to enhance the transportation of supplies. They deliver and place the goods on the shelves, a concept known as "invisible supplies". This allows Perseco to deliver during off-peak traffic times, such as at night, resulting in lower transportation costs and faster delivery.

2.1 McDonald's had to assess the efficiency of India's logistics industry and the reliability of its transportation sector in order to enter the Indian market. They also had to search for new suppliers that would be appropriate for this market. Because McDonald's supply chain includes perishable

items, they needed to make adjustments in order to expand their operations in India. The extreme heat in the region made it impractical to use their existing supply chain, so McDonald's had to completely reconsider their supply chain strategy and introduce a new concept called a cold chain.

The reason is that 60% of Indians are vegetarian, while the remaining 40% do not consume pork and beef. As a result, McDonald’s had to revamp their menus to include vegetarian options. This process took 6 years to complete, including the establishment of a new supply chain.

The Suppliers are outsourced in the western supply chain. Radha Krishna Foodland Pvt, a part of the Radha Krishna Group, is the logistic supplier for the Indian market and the only distributor partner for the fast food chain. They provide a one-stop-shop for distribution management services and have four distribution centers strategically located in Noida (New Delhi), Mumbai, Bengaluru, and Kolkata. These centers ensure fast delivery to all parts of India. The distribution centers prioritize meeting McDonald's expectation of 'Cold, Clean, and On-Time Delivery' and play a critical role in maintaining product integrity throughout the entire cold chain. Local suppliers are chosen by McDonald's to process the raw materials. (Abhijit Upadhye, 2011)

Vista Processed Foods Pvt. Ltd procures chicken and vegetable products from Trikaya agriculture for lettuce, cheese from Dynamyx Diary Industries, and milk products from Amrit Food for frozen desserts used in McDonald's India supply chain (2009). The suppliers are chosen based on their ability to produce frozen foods at temperatures as low as -35°C to ensure maximum freshness. Additionally, all suppliers adhere to international standards

and procedures.

The Cold Chain has been updated (2.3).

The cold chain in India is a unique feature of McDonald's supply chain, as stated by Abhijit Upadhye (2011). McDonald's has the largest refrigerated movement of products in India. However, due to inadequate infrastructure for storage and transportation under controlled conditions, approximately 50,000 crore worth of food wastage occurs in India each year. This problem is common among many food chain companies that lack a well-established supply chain. The initial step to establish the cold chain is to contact suitable suppliers.

McDonald's has created a unique truck capable of transporting food at different temperatures. The truck can carry frozen products ranging from -18°C to -25°C, chilled products between 1°C and 4°C, and dry products at room temperature. This innovative design enables the transportation of all three temperature categories in a single vehicle, which is especially beneficial as store numbers and distances grow in their supply chain management.

Truck containers were designed with two side doors, in addition to the rear door, for the purpose of unloading products without disturbing items in other temperature zones. This feature enables fast delivery of supplies to distribution centers and subsequently to restaurants. All suppliers have specialized facilities to maintain the cold chain. Figures 4 and 5 depict the cold chain process for salads and cheese, respectively. These figures highlight the meticulous temperature control measures implemented at every stage of the process.

In conclusion...

To summarize, McDonald’s successful modifications to its supply chain have resulted in its ownership of over 270 restaurants in India, with plans to triple this number within the next three years. Additionally,

the company is considering the establishment of a fifth distribution center in central India.

The company has surpassed Pizza Hut and Dominos Pizzas in the Indian market thanks to its new supply chain. This case study emphasizes the importance of customizing the supply chain for each specific market. The lecture highlights that a single supply chain cannot meet the needs of every customer.