Do you ever wonder why certain McDonald’s have special items that aren’t offered across all branches? Hint: It has to do with its supply chain.
Beyond its Big Mac and McFlurry, Mcdonald’s is continuously offering new, limited items to its menu. It doesn’t sound too impressive to a customer, but supply chain managers like us can’t help but wonder how this huge corporation can do that with thousands of stores worldwide.
The answer? It’s in its supply chain management practices.
In short, Mcdonald’s employs a decentralised supply chain structure. Doing so helps them uphold high quality in its products while maintaining its operating costs. Additionally, the company sources its supplies from suppliers worldwide—even if it’s operating in more than 100 countries.
In a decentralised supply chain, decision-making isn’t in central headquarters. Instead, it’s distributed throughout the entire supply chain for flexibility and minimises business risks. In other words, companies can immediately shift and meet demands with new products that are popular locally, such as McDonald’s Teriyaki Burgers in Japan and Fruit & Maple oatmeal in the USA.
To have a clearer picture, let’s discuss how the iconic golden arches efficiently and effectively manage its products that lessen food spoilage and meet customer demands.
McDonald’s Supply Chain: Leveraging on Globalisation
McDonald’s began its franchise operations back in the 1950s. What started out as a small restaurant expanded to over a hundred countries—just 7 decades later. Now, their locations are serving 69 million customers every day worldwide.
With a restaurant that serves meals at an affordable price, how did it drive its business to become the corporate giant that they are today? What key ingredient allowed them to reach the heights of success that they have today?
You guessed it—it’s because of McDonald’s efficient supply chain and a reliable inventory management system. Let’s take a look at how their supply chain works.
1. Diverse and Sustainable Suppliers
McDonald’s Corporation outsources all of its supply needs, which means that it has suppliers for every ingredient on the menu. While outsourcing does come with business risks, McDonald’s avoids possible supplier disruptions by tapping the global market—carefully choosing the most reliable suppliers in each location to reduce its dependence on single sources.
Moreover, McDonald’s partners with suppliers and farmers that practises sustainable sourcing while providing quality ingredients. This includes everything, like beef, chicken, coffee beans, fish, and palm oil. Having a diverse supply chain allows them to continue serving millions of customers daily.
A reason for this is because it improves the connection between sustainable suppliers and farmers to continuously stock up for its required ingredients. For instance, McDonald’s serves 75 hamburgers a second, which means relying only on one supplier for their burger patties or sesame buns is not enough.
McDonald’s also focuses on local suppliers to deliver the key ingredients for its staple products, such as their Big Mac, fries, and Chicken McNuggets. This practice also allows them to release products that are exclusive items to specific countries. Examples of special menu items are the Bulgogi Burgers in South Korea and McIbérica in Spain.
2. Strong Supplier Relationship
McDonald’s views all of its suppliers as business partners and collaborators in growth, sharing its supply chain priorities that are valuable for its system. It does this so the suppliers have more freedom to meet the ever-changing customer demands, maintaining relevance and profitability across the world.
On top of all that, McDonald’s empowers its suppliers by not micromanaging them to meet the company’s goals. This means that the company sets the quality, service, cleanliness, and value standards and trusts the suppliers to meet their standards. As a result, McDonald’s built long-term business partnerships that evolved with the company’s system.
The trust and confidence between McDonald’s and its suppliers allow for better transparency throughout the whole supply chain process. The company can immediately pivot its sourcing to better suppliers if a partner continues failing to meet the standards, and is able to retain a good reputation worldwide.
In fact, McDonald’s strong supplier relationships got them on Gartner’s Master List of supply chains that recognised the company for sustained leadership in supply chains.
3. Reliable Inventory Management System
As a restaurant business, McDonald’s has many food products that do not have a long shelf-life. This means, inevitably their stores face challenges when it comes to inventory management. Controlling perishable items like bread, potatoes, and beef, is vital to reducing all the food waste and preventing profit loss.
So, how does McDonald’s overcome these challenges? Take a look below:
- Reliable Inventory Management. Each McDonald’s store has its own ordering system to review previous orders and select products it’ll need in its next delivery. The system quickens the ordering process, automatically generating a delivery note with the exact quantities and descriptions of the required products.
- Accurate Demand Forecasting. As a fast-food chain, customers expect to receive their meal within minutes. McDonald’s demand forecasting relies on daily point-of-sale (POS) data at the item level, product list, stock levels at restaurants, customer traffic flow, and product demand. Doing so ensures that each store has enough stock for their location and customers.
- Storage and Distribution. To ensure the quality of their food products, McDonald’s has a separate warehouse for dry, refrigerated, and frozen foods. By maintaining specific temperatures in each warehouse, products won’t spoil due to weather or climate issues.
Similarly, the company has three distribution channels that efficiently deliver food to restaurants while maintaining the correct product temperature.
McDonald’s, with its classic golden arches, is a successful and iconic worldwide brand because of how they manage its supply chain.
The company works with reliable suppliers in every region to serve the staple and local menu items that they offerーensuring that customers can order their favorite McDonald’s meal whenever they want.
As a business that mainly handles food and perishable items, it optimises its inventory by managing different stocks in specific warehouses to avoid spoilage and deliver products promptly.
Key Takeaway from McDonald’s Supply Chain
As a global fast-food chain, McDonald’s diversified its supply chain to continuously meet its customer’s demands. Moreover, by partnering with local suppliers, they release special menu items that are specific to each country’s cuisineーincreasing excitement among customers and profits for the restaurant.
As a supply chain manager, you want to have an efficient and resilient supply chain just like McDonald’s. One of the most important ways is to have solid relationships with your suppliers. Additionally, partnering with multiple suppliers encourages healthy competition, which results in better service for you.
Now, looking for global suppliers can be daunting, especially since there are so many out there. You’ll need to choose the most reliable suppliers. At Good for Life, we already have a list of companies that are committed to decentralised supply chains.
Good for Life works across 32 countries and has the capability to help you decentralise your supply chain. Our team empowers you with reliable and sustainable global suppliers to procure your materials faster.
Interested in diversifying your supply chain to maximise your profits like McDonald’s? Contact us today.