AGRIBUSINESS SUPPLY

CHAIN MANAGEMENT

GROUP – 6 Amey | Abhilasha | SudeepJuly 2012

MCDONALD’S SCM IN INDIA

Presented to : Professor Jabir Ali

Agenda

Introduction Products Suppliers E- Procurement Logistics and Distribution Channel Designs Food Quality and Safety management IT infrastructure Current efforts towards a sustainable supply chain McDonald’s Supply chain challenges Recommendations

Introduction

Largest food service retailer in the world Present in 120 plus countries globally

40 Indian cities with 217 restaurants and serves 650,000 customers daily

Joint venture in India with two companies: Connaught Plaza Restaurants Pvt Ltd (master

franchisee for North and East India) Hardcastle Restaurants Pvt Ltd (master

franchisee for West and South India) Breakfast and Meals

Products

Burgers: McMuffin, McAloo Tikki, McVeggie, McMaharaja, McChicken, Fillet-o-fish, etc.

Salsa wraps: Paneer & Chicken French Fries, Potato wedges Beverages:

Soft Drinks: Coca Cola as beverage partner Coffee, Tea, etc

Others: Pancakes, Icecreams, Pizza McPuff, etc.

Suppliers

Sesame SeedsFrom Ghaziabad, UP

BunsFrom Cremica, Ludhiana and Shah Bector and Sons, Maharashtra

Fresh Iceberg LettuceFrom Trikaya Agriculture, Maharashtra and Meena Agritech, Delhi

Cheddar CheeseFrom Dynamix Dairy, Maharashtra

Vegetable Patty(made from fresh peas, carrots, green beans, red capsicum, potatoes and rice) from Kitran Foods Maharashtra

Geographically diverse suppliers: Ensuring stringent quality standards!

Suppliers

• Dynamix is a supplier of Cheese for McDonald in India• Network of milk collection centers equipped with bulk coolers• Dedicated R&D centre and quality assurance program

• Trikaya is a supplier of Iceberg Lettuce• Specialised nursery with a team of agricultural experts• Drip and sprinkler irrigation with fertilizer mixing plant• Pack house , pre-cooling and cold room are located at

the farms itself to ensure no delay

• Supplier of chicken and vegetable products• World class infrastructure and support services• Separate processing lines for chicken and vegetable foods• High tech refrigeration plants for manufacture of

frozen foods at temperatures as low as -35 degree celsius

Supply Chain Integration

Operational Excellence

How McDonald uses E-Procurement System ?

Emac Digital is an internet procurement site designed for McDonald Corporation’s 27000 franchises

Emac Digital Company is an e-procurement website jointly owned by McDonalds and Accel KKR Co.

It is a procurement hub ; allows all of McDonald’s franchises across globe to buy everything needed to run their restaurants – from Uniforms to Hamburgers!

Procurement site allows business owners to buy supplies at a discounted price

E- Procurement allows 85% cut in costs according to McDonald’s supply chief Edwards

Major Suppliers

Small Suppliers

Emac Digita

l

E- Procurement

Global Franchises

Place Order

Suppliers

Emac Digital

Logistics

Supply Received

Logistics and Distribution

Matching supplier production with deliveries to meet schedules and restaurant needs

3 centralized distribution centers at Mumbai, Delhi and Kochi

Strong emphasis on economies of scale- high storage volumes!

QIP – Quality Inspection Program HACCP – Food safety standards emphasizing

prevention of faults rather than detection through inspection

Cold Chain

Procurement WarehousingTransportati

onRetailing

Vital Links of McDonald’s Cold Chain

The Cold Chain is necessary to maintain the integrity of food products and retain their freshness and nutritional value

McDonalds took 4 years and around Rs 450 crores to setup the food supply chain even before opening its 1st restaurant

Cold Chain Management System provides assistance in - Selection of high quality seeds - Drip irrigation technology - Refrigerated transportation system

Distribution Systems

McDonalds uses three types of distribution strategy

o Franchising - Contractual Vertical Marketing Systemo Licensingo Joint Ventures

Channels (1/3)

Physical function

Title function

Suppliers

Transporters Warehouse

Manufacturer

Transporters Warehouse

DealersTransporte

rsCustomers

Suppliers

Manufacturer Dealer Customer

Channels (2/3)

Payment function

Information function

Suppliers

BanksManufactu

rerBanks

DealersBanksCustomers

Suppliers

Transporter

Warehouse Banks

Manufacturer

DealersTransporters Banks

Customers

Transporter

Warehouse Banks

Channels (3/3)

Promotion function

Three dimensions of variation in the channel are : - Number of levels in the channel - Number of intermediaries at each level - Types of intermediaries used at each level

Suppliers

Advertising Agency

Manufacturer

Advertising Agency

DealersCustomers

Radhakrishna Foodland Ltd

Distribution centers and cold storages Completely dedicated distribution and supply chain

Multi-temperature transportation trucks (-25O to 22OC) Dry and cold storage facilities ERP systems in place Specialized in providing services including

Forecasting demand and Procurement (31Q system) Quality Inspection (Quality Assurance Teams) Storage and Inventory management

Max. 10 days inventory Data collection Reporting and analysis

Food Safety and Quality

Food Safety HACCP Supplier Quality Management Systems

(SQMS) Distributor Quality Management Program

(DQMP) Food Quality

Sensory Analysis Quality Assurance Teams ‘Product Cutting’ by management Evaluation by central laboratory in Hong

Kong

IT Infrastructure

Suppliers: Connected to suppliers through ERP systems

through which direct store orders are uploaded

Next stage is to connect DCs to suppliers through ERP systems

Customers: McDelivery

Online customer orders Delivery of meals to the customers’ doorstep Currently in 7 cities in India

McDonald’s current efforts towards sustainability of the supply chain

Focus on three main areas: Environment Ethics Economics

Supply chain focus areas: Sustainable Land Management

Committment Animal Welfare Supplier workplace accountability Sustainable fisheries

McDonald’s Supply Chain Challenges

Burgeoning demand in near future Only 4 distribution centers (DCs) in India Managing a very elaborate supply chain

structure and need of up gradation in future No flexibility in product portfolio:

Competition from other fast food restaurants

Heavy dependence on a very few suppliers No written contracts with supply chain

partners

Recommendations

Foreseeing a 35-40 % growth every year in near future, it should add more DCs to cater to the growing demand in future

To manage and optimize its elaborate supply chain network, it should adopt more sophisticated software systems

Source from more suppliers to diversify their risk and reduce dependency on few suppliers

Increase the product portfolio to counter competition in market

THANK YOU