Post on Wednesday, April 18th, 2018 in Accounting
McDonald’s, a food industry giant, is reluctant to share its Special Sauce recipe. However, the fast food leader gladly shares its recipe for a successful supply chain, which is considered to be one of world’s best supply chains. Previously, we had discussed Amazon’s supply chain and Apple’s supply chain, but today we are going to discuss the secrets of successful supply chain management at McDonalds.
Every successful business has a person behind its success. For McDonald’s, that person is Ray Kroc who joined the company in 1954. The McDonald’s supply chain got all of its power thanks to his efforts. He managed to develop ongoing relationships with suppliers, which have stayed with the company until now.
Kroc saw the company as a system consisting of three main building blocks: employees, owners, and suppliers. The company couldn’t exist without either of these building blocks. And all solutions should consider the question “What’s best for the system?”
As for McDonalds supply chain management, Kroc decided that a 100% outsourced supply chain would be the best solution for the system, and he did not fail. The first reason was that he did not have enough funds to build his own vertical supply chain. Secondly, Kroc didn’t copy the strategies of competitors who forced their franchised restaurants to buy food from them only.
Instead, he focused on the long term-outcome, not the short term one. Kroc’s McDonalds supply chain strategy was aimed at finding suppliers who would become the partners of McDonald’s and who would treat this partnership as seriously as he did. This strategy still remains the driving force of supply chain at McDonalds.
Researchers from the University of Tennessee studied the McDonald’s system and came up with the vested business model on which this system was based. The main principle of the vested model are win-win relationships in which both parties are equally committed to each other’s success. According to this model, supply chain management at McDonalds relies on the following five rules:
As for any food company, McDonald’s faces challenges when it comes to inventory management. These challenges consist in demand forecasting so the products are not thrown away as well as controlling the raw materials such as bread, potatoes, and beef. However, McDonald’s is capable of overcoming those challenges, and here’s how:
This is how the McDonald’s supply chain and McDonald’s inventory control processes are organized. Today McDonald’s serves around 68 million customers daily in 119 countries and stays ahead of the competition. This is the result of a successful supply chain strategy, which is more than 60 years old.
Adam is the Assistant Director of Operations at Dynamic Inventory. He has experience working with retailers in various industries including sporting goods, automotive parts, outdoor equipment, and more. His background is in e-commerce internet marketing and he has helped design the requirements for many features in Dynamic Inventory based on his expertise managing and marketing products online.
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Tuesday, December 11th, 2018