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A Project On
SUBMITTED TO: Dr.Jayant Sonwalkar
SUBMITTED BY: MUGDHA BIYANI PANKAJ SINGH
This Supply Chain Management project on McDonalds is the outcome of sincere and positive contribution of various individuals. We can not justifiably translate there help, cooperation and guidance extended to us in completing this project work in words. However we shall be failing in our duty if we don’t express our thanks to a few people in particular. We would like to thank Mr. Akhilesh Mishra(floor manager) at McDonalds for his cooperation and it has been high privilege to work under the able supervision of our respected teacher, Dr. Jayant Sonwalkar
Mugdha Biyani Pankaj Singh Parihar
Table of Contents
Introduction to McDonalds .
1.1 History. 1.2 Corporate overview. 1.3 Why the Project? 1.4 Types of Restaurants . 2. Methodology used.
3. 4. 5. 6. 7.
Business model. Advertising. Global operations and locations. McDonalds in India. Understanding Supply Chain Management.
8. Inventory Management. 9. How Purchasing cycle works? 10. Understanding Supply Chain
11. Suppliers and Distributors of McDonalds. 12. findings of study conducted.
More than 70% of McDonald's restaurants worldwide are owned and operated by independent local men and women.000 local restaurants serving 52 million people in more than 100 countries each day. .McDonald's Is the leading global foodservice retailer with more than 30.
Service.World Famous French Fries. Quarter Pounder. History 1955 1957 1959 1961 1963 1964 1965 1967 1968 1972 1973 1974 1983 1984 Ray Kroc opens his first restaurant in Des Plaines. Illinois and the McDonald's Corporation is created. Ronald McDonald makes his debut. Filet-O-Fish sandwich is introduced. McDonald's Corporation goes public. New Hamburger University campus opens in Oak Brook. The strong foundation that he built continues today with McDonald's vision and the commitment of our talented executives to keep the shine on McDonald's arches for years to come. Training is provided for every level of McDonald's management worldwide. . Set in 80 wooded acres. The Big Mac is introduced.000th restaurant opens in Des Plaines. 50 billionth hamburger sold. Big Mac. The Happy Meal is launched. near Chicago. Chicken McNuggets and Egg McMuffin. Chicken McNuggets is introduced. Ray Kroc. A new McDonald's restaurant opens every day. The Quarter Pounder is introduced. One billion hamburgers sold. Ronald McDonald Children's Charities is founded in Ray Kroc’s memory to raise funds in support of child welfare. The 100th McDonald's opens in Chicago. vision and executives. The 1. To read more about McDonald's history. Illinois. Hamburger University opens in Elk Grove. The first Ronald McDonald House opens in Philadelphia. The first restaurants outside of the USA open in Canada and Puerto Rico. Illinois. Cleanliness and Value (QSC& V) becomes the company motto. Our rich history began with our founder. click on their links in the left menu. Quality.Is one of the world's most well-known and valuable brands and holds a leading share in the globally branded quick service restaurant segment of the informal eating-out market in virtually every country in which we do business. Serves the world some of its favorite foods . Egg McMuffin is introduced.
corporate ethics and consumer responsibility. Kuwait. The first McDonald's at sea opens aboard the Silja Europa. the ninth McDonald's restaurant overall. Corporate overview . Bulgaria. Oman. Latvia.000 in 79 countries on 6 continents. The business began in 1940. Illinois on April 15. The present corporation dates its founding to the opening of a franchised restaurant by Ray Kroc. Trinidad and United Arab Emirates. Their introduction of the "Speedee Service System" in 1948 established the principles of the modern fast-food restaurant. Moscow. McDonald's opens in Pushkin Square and Gorky Street. Munich. Kroc later purchased the McDonald brothers' equity in the company and led its worldwide expansion. with a restaurant opened by siblings Dick and Mac McDonald in San Bernardino. bringing the total to over 15. Egypt. Its prominence has also made it a frequent topic of public debates about obesity. California. New Caledonia. in Des Plaines. Restaurants open in Bahrain. the company has become a symbol of globalization and the spread of the American way of life. McDonald's opens in India – the 95th country. Paris and Tokyo stock exchanges. the world's largest ferry sailing between Stockholm and Helsinki.1989 1990 1993 1994 1996 McDonald's is listed on the Frankfurt. 1955. With the successful expansion of McDonald's into many international markets.
2007. The company owned a majority stake in Chipotle Mexican Grill until completing its divestment in October 2006. McDonald's restaurants are found in 120 countries and territories around the world and serve nearly 54 million customers each day.Facts and figures A McDonald's restaurant in Times Square. Until December 2003. and has a minority stake in Pret a Manger. WHY THE PROJECT . On August 27. Redbox. but as of 2005. such as Piles Café. it also owned Donatos Pizza. It also has a subsidiary. which started in 2003 as 18-foot (5.5 m) wide automated convenience stores. McDonald's sold Boston Market to Sun Capital Partners. The company also operates other restaurant brands. has focused on DVD rental machines.
Norway. .• • • • To strengthen our knowledge To develop practical approach To understand real supply chain practices To know the cold chain system Methodology Used • • Through Questioners Personal interviews Types of restaurants A McDonald's restaurant in Kristiansand.
McDonald's introduced McCafés. There are also a few locations. After upgrading to the new McCafe look and feel. which was the ninth McDonald's restaurant opened. Drive-Thru. most McDonald's in Australia have McCafés located within the existing McDonald's restaurant. with the rest of the states quickly following suite. The site of the first McDonald's to be franchised by Ray Kroc is now a museum in Des Plaines. Pay and Drive. In Tasmania there are McCafés in every store. Today. Specially themed restaurants also exist. starting with Melbourne in 1993. such as the "Solid Gold McDonald's. located mostly in downtown districts. The building is a replica of the original. In Victoria. or McDrive as it is known in many countries. locations in high-density city neighborhoods often omit drive-through service. following the lead of other fastfood chains. and picking up orders. it was first introduced in Arizona in 1975. . As of the end of 2003 there were over 600 McCafés worldwide. Most standalone McDonald's restaurants offer both counter service and drive-through service. To accommodate the current trend for high quality coffee and the popularity of coffee shops in general. some Australian stores have noticed up to a 60% increase in sales. Illinois. In contrast. The McCafé concept is a café-style accompaniment to McDonald's restaurants.Inside a Dublin McCafé. McCafé is a concept of McDonald's Australia. Auto-Mac. that offer Walk-Thru service in place of Drive-Thru. with indoor and sometimes outdoor seating. paying for. there is also a McDonald's with a 24 carat (100%) gold chandelier and similar light fixtures. British Columbia." a 1950s rock-and-roll themed restaurant. In some countries "McDrive" locations near highways offer no counter service or seating. often has separate stations for placing. though the latter two steps are frequently combined.
dance pads. the Sports Zone which features a series of sport oriented activities to promote aerobic exercise for children aged 9-to-12. with many more being constructed soon after. the Parent Zone which features seating and provides a monitoring area for their children. Other McDonald's are located in Wal-Mart stores. called "McDonald's PlayPlace" (if indoors) or "Playland" (outdoors) . an obstacle course. The "R Gym" features the Toddler Zone. August 2006 . while others called McDonald's Express have limited seating and/or menu or may be located in a shopping mall. the Active Zone. McStop is a location targeted at truckers and travelers which may have services found at truck stops. basketball hoops. Equipped with stationary bicycles attached to video games. Redesign A UK McDonald's before the redesign. Some PlayPlace playgrounds have been renovated into "R Gym" areas. an active play environment with age appropriate games that develop physical coordination and social skills. monkey bars. and the Dining Area which allows families to eat. The first PlayPlace with the familiar crawl-tube design with ball pits and slides was introduced in 1987 in the USA. "R Gyms" are in-restaurant play area that features interactive game zones designed for children aged 4 to 12. and other games which emphasize physical activity.Some locations are connected to BP gas stations/convenience stores. designed for children aged four-to-eight that promotes physical fitness through fun play. Playgrounds Some McDonald's in suburban areas and certain cities feature large indoor or outdoor playgrounds.
Contemporary art or framed photographs will hang on the walls. with modern hanging lights to produce a softer glow. Plasma TVs will offer them news and weather reports. The new restaurants will feature areas: • • The "linger" zone will offer armchairs. and percentage of sales. The exterior will have golden awnings and a "swish brow" instead of the traditional double-slanted mansard roof. The "flexible" zone will be targeted toward families and will have booths featuring fabric cushions with colorful patterns and flexible seating. McDonald's introduced its "Forever Young" brand by redesigning all of their restaurants. Business model The McDonald's Corporation's business model is slightly different from that of most other fast-food chains. • Different music will be targeted to each zone. the yellow will turn golden for a more "sunny" look. supplies. but the red will be muted to terra cotta.The same McDonald's after the redesign. McDonald's also collects rent. the restaurants will have less plastic and more brick and wood. and olive and sage green will be added. As a condition of the . partially linked to sales. the first major redesign since the 1970s. The "grab and go" zone will feature tall counters with bar stools for customers who eat alone. sofas. In addition to ordinary franchise fees. The new design will include the traditional McDonald's yellow and red colors. To warm up their look. August 2007 In 2006. and Wi-Fi connections.
The UK business model is different. various types of chicken sandwiches and products. the Corporation owns the properties on which most McDonald's franchises are located. nearly one in eight workers in the U.franchise agreement. (According to a news piece on Fox News this figure is one in ten). and one which is employed either to abide by regional food taboos (such as the religious prohibition of beef consumption in India) or to make available foods with which the regional market is more familiar (such as the sale of McRice in Indonesia). french fries. This local deviation from the standard menu is a characteristic for which the chain is particularly known. and apples. The selection of meats McDonald's uses varies with the culture of the host country. Products McDonald's predominantly sells hamburgers.S. in that fewer than 30% of restaurants are franchised. have at some time been employed by McDonald's. According to Fast Food Nation by Eric Schlosser (2001).. breakfast items. In most markets. soft drinks. . potatoes. pork. The book also states that McDonald's is the largest private operator of playgrounds in the U.S. wraps and other localized fare. Illinois. with the majority under the ownership of the company. McDonald's offers salads and vegetarian items. McDonald's trains its franchisees and others at Hamburger University in Oak Brook. as well as the single largest purchaser of beef. and desserts.
as well as a few other slogans for select countries and regions. and makes coolers of orange drink with their logo available for local events of all kinds. sponsors sporting events from ranging from Little League to the Olympic Games. . and newspaper). In addition to the usual media (television. McDonald's has used 23 different slogans in United States advertising.Advertising Ronald McDonald McDonald's has for decades maintained an extensive advertising campaign. radio. At times. the company makes significant use of billboards and signage. television has always played a central role in the company's advertising strategy. it has run into trouble with its campaigns. Nonetheless. To date.
The EFTA countries are leading the Big Mac Index with the top 3 most expensive Big Mac's. The Economist magazine uses the "Big Mac Index": the comparison of a Big Mac's cost in various world currencies can be used to informally judge these currencies' purchasing power parity.Global operations Countries with McDonald's stores McDonald's has become emblematic of globalization. Iceland has the most expensive Big Mac. sometimes referred as the "McDonaldization" of society. followed by Norway and Switzerland. .
"McDo" (in France. in the People's Republic of China. Watson) looked at the impact McDonald's had on East Asia. When it opened in Hong Kong in 1975. McDonald's have recently taken to partnering up with Sinopec. In East Asia in particular. "Maccas" (in New Zealand and Australia). "Donken" (in Sweden). driving customers to demand the same of other restaurants and institutions. "de Mac" (in the Netherlands). "Maccer's" (in Ireland). 1998. edited by James L. the "Golden Arches Theory of Conflict Prevention" is not strictly true. "Mäkkäri" (in Finland). "McD's" (in New Zealand). or "Mac" (in Brazil). McDonald's have become a symbol for the desire to embrace Western cultural norms. China's second largest oil company. and the Kansai region of Japan). However. McDonald's was the first restaurant to consistently offer clean restrooms. "Macky D's" (in the UK). Quebec. as it begins to take advantage of China's growing use of personal vehicles by opening numerous drive-thru restaurants. A group of anthropologists in a study entitled Golden Arches East (Stanford University Press. . Thomas Friedman once said that no country with a McDonald's had gone to war with another. Some observers have suggested that the company should be given credit for increasing the standard of service in markets that it enters.The brand is known informally as "Mickey D's" (in the US and Canada). and the 2006 Lebanon War as exceptions. and Hong Kong in particular. Careful historians point to the 1989 United States invasion of Panama. "Macarrannis" (in Mexico). NATO's bombing of Serbia in 1999. the Philippines.
Global locations • • • • • • • • • • • • • • • • • • • • • • • • • Argentina Aruba Australia Austria Azerbaijan Bahamas Bahrain Bangladesh Barbados Belgium Bermuda Botswana Brazil Bulgaria Canada Cayman Islands Chile People's Republic of China o Hong Kong o Macau Colombia Costa Rica Croatia Cyprus Czech Republic Denmark Dominica • • • • • • • • • • • • • • • • • • • • • • • • • • Dominican Republic Ecuador Egypt El Salvador Estonia Fiji Finland France Georgia Germany Greece Grenada Guatemala Guyana Honduras Hungary Iceland Italy India Indonesia Ireland Israel Jamaica Japan Jordan Kuwait • • • • • • • • • • Latvia Lebanon Lithuania Malaysia Malta Mauritius Mexico Moldova Morocco Netherlan ds New Zealand Nicaragua Oman Pakistan Panama Peru Paraguay Philippine s Poland Portugal Qatar Romania Russia Saint Lucia Saudi Arabia Serbia • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • Singapore Slovakia Slovenia South Africa South Korea Spain Sri Lanka Sweden Switzerland Syria Taiwan Thailand Trinidad and Tobago Turkey Ukraine United Arab Emirates United Kingdom United States o Guam o Puerto Rico o United States Virgin Islands Uruguay Venezuela Yemen • .
U. serving more than 46 million customers every day. Doraha. Service. Manesar and Gurgaon have proceeded to demonstrate. Our first restaurant opened on 15th April 1955 in Des Plaines. our family restaurants in Mumbai. Ltd. Pune. Cleanliness and Value (QSC&V). Ahmedabad. Ludhiana.S. owns and operates McDonald's restaurants in Western India. Vadodara. we are the world's largest food service system with more than 30. Almost 50 years down the line. Amit Jatia and Vikram Bakshi are like-minded visionaries who share McDonald's complete commitment to Quality. While Connaught Plaza Restaurants Pvt. in McDonald's restaurants in Indonesia and the U. Locally Owned McDonald’s in India is a 50-50 joint venture partnership between McDonald’s Corporation [USA] and two Indian businessmen. Noida Faridabad. before opening the first McDonald’s restaurant in India. Jaipur.MCDONALDS IN INDIA McDonald's opened its doors in India in October 1996. Delhi. Click here for more information on the history of McDonald’s.A. Illinois. what the McDonald's experience is all about. Having signed their joint-venture agreements with McDonald's in April 1995. Respect for local culture McDonald's India has developed a special menu with vegetarian selections to suit Indian . Ltd headed by Vikram Bakshi owns and operates the Northern operations. much to the delight of all our customers. Amit Jatia’s company Hardcastle Restaurants Pvt.A. they trained extensively. along with their Indian management team. Ever since then.S.000 restaurants in 100 countries.
he was letting the world in on the philosophy and secret behind McDonald's phenomenal success. health and hygiene is ensured. In addition. Service. Only the freshest chicken. McDonald's does not offer any beef or pork items in India.tastes and preferences. We've also created eggless sandwich sauces for our vegetarian customers. Pizza McPuff™ and Chicken McGrill™ burger. Veg. and all at a fair price . highchairs and trays are sanitised several times each hour. offering a larger variety to our vegetarian consumers. Even our soft serves and McShakes™ are egg-less." When McDonald's founder. Our vision to be India’s "best" quick service restaurant experience is supported by a set of principles and core values [McDonald’s Way] The principles that guide us … • Quality. Ray Kroc made that memorable statement. Stringent cleaning standards ensure that all tables. McAloo Tikki™ burger. Our Philosophy "We take the burger business more seriously than anyone else.the hallmark of McDonald's restaurants the world over is the mantra we abide by.It is an unflinching McDonald's ideology that our customers must always get quality products. chairs. Complete adherence to the Indian Government regulations on food. Fast. International Standards McDonald's India's local suppliers provide us with the highest quality. freshest ingredients. while maintaining our own recognized international standards. served quickly and with a smile. we've re-formulated some of our products using spices favoured by Indians. Such meticulous attention to cleanliness extends beyond the lobby and kitchen to even the pavement and immediate areas outside the restaurant. Among these are McVeggie™ burger. Cleanliness & Value . in a clean and pleasant environment. friendly service . fish and vegetable products find their way into our Indian restaurants.
These efforts paid off in the form of joint ventures between McDonald's India (a 100% wholly-owned subsidiary of McDonald's . approximately 85% of McDonald's restaurants were owned and operated by independent franchisees. they would pop out of the patty and get burnt). Yet. But did anyone ever wonder as to how this US giant managed the show so perfectly? The answer seemed to lie in a brilliantly articulated food chain. drive-through and sit-down meals . fresh food. McDonald's success in India had been built on four pillars: limited menu. It trained the local farmers to produce lettuces or potatoes to specifications and worked with a vendor to get the perfect cold chain1 in place. We will seize every opportunity to innovate and lead the industry on behalf of our customers. which extended from these outlets right up to farms all across India. US-based fast food giant. We believe in a collaborative management approach. it worked frenetically to put the perfect supply chain in place. • • • It was early evening and one of the 25 McDonald's outlets in India was bustling with activity with hungry souls trooping in all the time. And explained to the suppliers precisely why only one particular size of peas was acceptable (if they were too large. McDonald's was able to run the show seamlessly by outsourcing nine different ingredients used in making a burger from over 35 suppliers spread all over India through a massive value chain. employing a mutually respectful business philosophy. Between 1992 and 1996.• We are committed to exceeding our customers' expectations in every restaurant every time. We have a passion and a responsibility for enhancing and protecting the McDonald's brand.encouraged the fast food giant to customize product variety without hampering the efficacy of its supply chain. Around the world (including India). when McDonald's opened its first outlet in India.a hot Maharaja Mac or an apple pie . fast service and affordable price. Intense competition and demands for a wider menu. No matter what one ordered .the very best was served every time.
With SCEM possible scenarios can be created and solutions can be planned. warehouses. Supply Chain Management spans all movement and storage of raw materials. DSD (direct store delivery). railroad. location and network missions of suppliers. closed loop shipping). production facilities. Supply Chain Management integrates supply and demand management within and across companies. Cross docking. Importantly. self-organizing network of businesses that cooperates to provide product and service offerings has been called the extended enterprise. and controlling the operations of the supply chain as efficiently as possible. LTL. implementing.g. Supply Chain Management Problems Supply chain management must address the following problems: • • Distribution Network Configuration: Number. delivery scheme (e. . Distribution Strategy: Including questions of operating control (centralized..g. Supply chain event management (abbreviated as SCEM) is a consideration of all possible occurring events and factors that can cause a disruption in a supply chain. while others consider the terms to be interchangeable. and customers. the loosely coupled. cross-docks and customers. which can be suppliers. direct shipment. and finished goods from point-of-origin to point-of-consumption. mode of transportation (e. pool point shipping. intermediaries. it also includes coordination and collaboration with channel partners. conversion. In essence. Some experts distinguish Supply Chain Management and logistics. procurement. third-party service providers. More recently.What is supply chain management Supply chain management (SCM) is the process of planning. distribution centers. work-in-process inventory.. decentralized or shared). motor carrier. including truckload. and logistics management activities. The definition one American professional association put forward is that Supply Chain Management encompasses the planning and management of all activities involved in sourcing. parcel. Supply Chain Management is also a category of software product.
push or hybrid). pull. SCOR is a supply chain management model promoted by the Supply Chain Management Council. and customers. inventory and transportation etc.. certain aspects of the internal processing of materials into finished goods. contract carrier. location. Supply chain execution is managing and coordinating the movement of materials. ocean freight. or 3PL. owneroperated. information and funds across the supply chain. Activities/functions Supply chain management is a cross-functional approach to managing the movement of raw materials into an organization. and third-party logistics. distribution centers and facilities. private carrier. including demand signals. Supply chain activities can be grouped into strategic. and operational levels of activities. while reducing management control of daily logistics operations. Strategic • • Strategic network optimization. and size of warehouses. airfreight). they have reduced their ownership of raw materials sources and distribution channels. tactical. forecasts. common carrier. creating communication channels for critical information and operational improvements such as cross docking.g. The effect is to increase the number of organizations involved in satisfying customer demand. The purpose of supply chain management is to improve trust and collaboration among supply chain partners. The flow is bi-directional. distributors. and then the movement of finished goods out of the organization toward the end-consumer. Strategic partnership with suppliers. Less control and more supply chain partners led to the creation of supply chain management concepts. Information: Integration of and processes through the supply chain to share valuable information. Another model is the SCM Model proposed by the Global Supply Chain Forum (GSCF). replenishment strategy (e. As organizations strive to focus on core competencies and becoming more flexible. direct shipping. These functions are increasingly being outsourced to other entities that can perform the activities better or more cost effectively. Cash-Flow: Arranging the payment terms and the methodologies for exchanging funds across entities within the supply chain. and transportation control (e. thus improving inventory visibility and improving inventory velocity. including the number. including TOFC and COFC. .. work-in-process and finished goods.g.• • • intermodal. Several models have been proposed for understanding the activities required to manage material movements across organizational and functional boundaries. Inventory Management: Quantity and location of inventory including raw materials.
including transportation from suppliers and receiving inventory. including all nodes in the supply chain. Supply chain management Organizations increasingly find that they must rely on effective supply chains. and planning process definition. Inventory decisions. load management Information Technology infrastructure. routes. locations. Tactical • • • • • • Sourcing contracts and other purchasing decisions. distribution centers. to support supply chain operations. Outbound operations. or networks. scheduling. Demand planning and forecasting. Benchmarking of all operations against competitors and implementation of best practices throughout the enterprise. including the consumption of materials and flow of finished goods. Production scheduling for each manufacturing facility in the supply chain (minute by minute). including frequency. including quantity. and contracting. Production operations. and other customers. location. coordinating the demand forecast of all customers and sharing the forecast with all suppliers. Production decisions. In . including current inventory and forecast demand. to successfully compete in the global market and networked economy. Sourcing planning. Milestone payments Operational • • • • • • • • Daily production and distribution planning.• • • • Product design coordination. Inbound operations. including contracting. in collaboration with all suppliers. so that new and existing products can be optimally integrated into the supply chain. accounting for all constraints in the supply chain. Where-to-make and what-to-make-or-buy decisions Aligning overall organizational strategy with supply strategy. and quality of inventory. manufacturing facilities. including all fulfillment activities and transportation to customers. including all suppliers. Transportation strategy. Order promising.
First. which are a paramount component of transaction costs. the network structure fits neither "market" nor "hierarchy" categories (Powell. Many researchers have recognized these kinds of supply network structures as a new organization form. Successful SCM requires a change from managing individual functions to integrating activities into key supply chain processes. technological changes. "Extended Enterprise". Therefore. "Virtual Corporation". It is not clear what kind of performance impacts that different supply network structures could have on firms. a complex network structure can be decomposed into individual component firms (Zhang and Dilts. 1979). strategic alliances and business partnerships. and "Next Generation Manufacturing System". 2001). 2004). joint product development. Traditionally. using terms such as "Keiretsu". However. joint ventures. In the 21st century. Second.Peter Drucker's (1998) management's new paradigms. particularly the dramatic fall in information communication costs. communicates with several distributors and retailers. to successfully operate solid collaborative supply networks in which each specialized business partner focuses on only a few key strategic activities (Scott. common systems and shared information. the choice of an internal management control structure is known to impact local firm performance (Mintzberg. as an outcome of globalization and the proliferation of multi-national companies. with little concern for the internal management working of other individual players. and attempts to satisfy this demand. following the earlier "Just-In-Time". Shared information between supply chain partners can only be fully leveraged through process integration. such a structure can be defined as "a group of semi-independent organizations. responding to customer demand. outsourcing and information technology have enabled many organizations. and little is known about the coordination conditions and trade-offs that may exist among the players. 1990). this concept of business relationships extends beyond traditional enterprise boundaries and seeks to organize entire business processes throughout a value chain of multiple companies. 1998). . with the complicated interactions among the players. An example scenario: the purchasing department places orders as requirements become appropriate. From a system's point of view. companies in a supply network concentrate on the inputs and outputs of the processes. such as Dell and Hewlett Packard. there were found to be significant success factors. each with their capabilities. This inter-organizational supply network can be acknowledged as a new form of organization. "Lean Management" and "Agile Manufacturing" practices. Supply chain business process integration involves collaborative work between buyers and suppliers. In general. which collaborate in ever-changing constellations to serve one or more markets in order to achieve some business goal specific to that collaboration" (Akkermans. During the past decades. Global Production Network". have led to changes in coordination among the members of the supply chain network (Coase. globalization. Marketing. 1993). there have been a few changes in business environment that have contributed to the development of supply chain networks.
d. c.According to Lambert and Cooper (2000) operating an integrated supply chain requires continuous information flows. The key supply chain processes stated by Lambert (2004) are: • • • • • • • • Customer relationship management Customer service management Demand management Order fulfillment Manufacturing flow management Supplier relationship management Product development and commercialization Returns management One could suggest other key critical supply business processes combining these processes stated by Lambert such as: a. sourcing should be managed on a global basis. where both parties benefit. g. Successful organizations use following steps to build customer relationships: • • • determine mutually satisfying goals between organization and customers establish and maintain customer rapport produce positive feelings in the organization and the customers b) Procurement process Strategic plans are developed with suppliers to support the manufacturing flow management process and development of new products. f. management has reached the conclusion that optimizing the product flows cannot be accomplished without implementing a process approach to the business.Customer service provides the source of customer information. b. Customer service management Procurement Product development and commercialization Manufacturing flow management/support Physical distribution Outsourcing/partnerships Performance measurement a) Customer service management process Customer Relationship Management concerns the relationship between the organization and its customers. The desired outcome is a winwin relationship. e. which in turn assist to achieve the best product flows. and reduction times in the design cycle and . It also provides the customer with real-time information on promising dates and product availability through interfaces with the company's production and distribution operations. In firms where operations extend globally. However. in many companies.
and research into new sources or programmes. links manufacturers. transportation. As product life cycles shorten.g. f) Outsourcing/partnerships . such as electronic data interchange (EDI) and Internet linkages to transfer possible requirements more rapidly. develop production technology in manufacturing flow to manufacture and integrate into the best supply chain flow for the product/market combination. coordinate with customer relationship management to identify customerarticulated needs. According to Lambert and Cooper (2000). the customer is the final destination of a marketing channel. meaning improved responsiveness and efficiency of demand to customers. and 3. inventory at manufacturing sites and maximum flexibility in the coordination of geographic and final assemblies postponement of physical distribution operations. Also. thus to reduce time to market. Manufacturing processes must be flexible to respond to market changes. supply continuity. supply sourcing. the appropriate products must be developed and successfully launched in ever shorter time-schedules to remain competitive. handling and quality assurance. hedging. handling. and must accommodate mass customization. e) Physical distribution This concerns movement of a finished product/service to customers. c) Product development and commercialization Here. Orders are processes operating on a just-in-time (JIT) basis in minimum lot sizes. scheduling and supporting manufacturing operations. wholesalers. Activities related to planning. the purchasing function develops rapid communication systems. select materials and suppliers in conjunction with procurement. In physical distribution. changes in the manufacturing flow process lead to shorter cycle times. managers of the product development and commercialization process must: 1. retailers). Also. negotiation. order placement.product development are achieved. Activities related to obtaining products and materials from outside suppliers requires performing resource planning. inbound transportation. thus it links a marketing channel with its customers (e. storage. d) Manufacturing flow management process The manufacturing process is produced and supplies products to the distribution channels based on past forecasts. many of which include the responsibility to coordinate with suppliers in scheduling. customers and suppliers must be united into the product development process. and the availability of the product/service is a vital part of each channel participant's marketing effort. 2. It is also through the physical distribution process that the time and space of customer service become an integral part of marketing. such as work-in-process storage. and time phasing of components.
By taking advantage of supplier capabilities and emphasizing a long-term supply chain perspective in customer relationships can be both correlated with firm performance. g) Performance measurement Experts found a strong relationship from the largest arcs of supplier and customer integration to market share and profitability. and includes 1) customer perception measurement. Also. Components of Supply Chain Management are 1.This is not just outsourcing the procurement of materials and components. A. Postponement 3.T. strategic decisions need to be taken centrally with the monitoring and control of supplier performance and day-to-day liaison with logistics partners being best managed at a local level. The logic of this trend is that the company will increasingly focus on those activities in the value chain where it has a distinctive advantage and everything else it will outsource. Standardization 2. Cost Customer Service Productivity measures Asset measurement. Customization Supply chain management components integration The management components of SCM . As logistics competency becomes a more critical factor in creating and maintaining competitive advantage. but also outsourcing of services that traditionally have been provided in-house. According to experts internal measures are generally collected and analyzed by the firm including 1. warehousing and inventory control is increasingly subcontracted to specialists or logistics partners. External performance measurement is examined through customer perception measures and "best practice" benchmarking. Hence. to manage and control this network of partners and suppliers requires a blend of both central and local involvement. and Quality. 2. 5. This movement has been particularly evident in logistics where the provision of transport. and 2) best practice benchmarking. 4. Kearney Consultants (1985) noted that firms engaging in comprehensive performance measurement realized improvements in overall productivity. logistics measurement becomes increasingly important because the difference between profitable and unprofitable operations becomes more narrow. 3.
1996.g. the "branches" of the previous identified supply chain business processes. Lambert and Cooper (2000) identified the following components which are: • • • • • • • • • Planning and control Work structure Organization structure Product flow facility structure Information flow facility structure Management methods Power and leadership structure Risk and reward structure Culture and attitude However.1 and 3. Consequently. ranging from low to high. Third level channel participants and components that will support the primary level channel participants. and SCM suggests various possible components that must receive managerial attention when managing supply relationships. Houlihan. 1990. of components added to the link (Ellram and Cooper. p. thus including secondary level components. a more careful examination of the existing literature will lead us to a more comprehensive structure of what should be the key critical supply chain components. may also be included. 1985).1). A primary level channel participant is a business that is willing to participate in the inventory ownership responsibility or assume other aspects of financial risk. thus including primary level components (Bowersox and Closs. which are in support of primary participants. Based on this study. Baziotopoulos (2004) suggests the following supply chain components: . 1996). that is. The literature on business process reengineering.The SCM components are the third element of the four-square circulation framework. and to examine the supply chain as an integrative one (See above sections 2. The level of integration and management of a business process link is a function of the number and level. what kind of relationship the components may have that are related with suppliers and customers accordingly. 1996). 93). A secondary level participant (specialized). how these components should be structured in order to have a more comprehensive supply chain structure. adding more management components or increasing the level of each component can increase the level of integration of the business process link. Baziotopoulos reviewed the literature to identify supply chain components. Consequently. buyer-supplier relationships. what supply chain components should be viewed as primary or secondary. is a business that participates in channel relationships by performing essential services for primary participants. That is. Lambert and Cooper's framework of supply chain components does not lead us to the conclusion about what are the primary or secondary (specialized) level supply chain components (see Bowersox and Closs. and which are the fundamental branches of the secondary level components. Bowersox and Closs states that the emphasis on cooperation represents the synergism leading to the highest level of joint achievement (Bowersox and Closs.
and postponement (order management). customer satisfaction. profit margins. 3. . direction. More specifically. 2. Secondary level components may include four types of measurement such as: variation. and the strategic objectives for particular initiatives in key areas of information technology. personnel management. For physical distribution. For outsourcing: Includes the primary level component of management methods. and asset management could be concerned as well. manufacturing planning. anytime money is taken from a company's Warranty Reserve or Service Logistics budget. and secondary level components such as market share. with secondary level components such as warehouse management. For product development and commercialization: Includes the primary level component of Product Data Management (PDM). manufacturing capabilities. total cost analysis (TCA). and returns to stakeholders.1. In other words. customer profitability analysis (CPA). material management. and logistics (secondary level components). decision and policy measurements. which is correlated with the information flow facility structure within the organization. manufacturing support and procurement: Includes the primary level component of enterprise resource planning (ERP). For performance measurement: Includes the primary level component of logistics performance measurement. 4. Reverse Supply Chain Reverse Logistics is the process of planning. For customer service management: Includes the primary level component of customer relationship management. 5. Reverse logistics is also referred to as "Aftermarket Customer Services". and secondary level components such as benchmarking and order fulfillment. effective inbound flow and storage of secondary goods and related information opposite to the traditional supply chain direction for the purpose of recovering value or proper disposal.implementing and controlling the efficient. operations. in accordance with these secondary level components. that is a Reverse Logistics operation.
JIT. “Warehouse” orientation “Distribution Center” information and inventory (storage. Localize to channel flows. . Quick Response pairs across the channel. safety stock) orientation (inventory flows: interrupted by barriers to velocity) interconnecting flows.Traditional and Supply Chain Management Approaches Compared ______________________________________________________________ Approach Element Traditional Supply Chain Inventory management Independent efforts Joint reduction in channel approach: inventories Total cost approach: Minimize firm costs Channel-wide cost efficiencies Time horizon: Short-term Long-term Amount of information Limited to needs of current As required for planning sharing and monitoring: transaction and monitoring processes Amount of coordination of Single contact for the Multiple contacts between multiple levels in the transaction between channel levels in firms and levels of channel: pairs channel Joint planning Transaction-based Ongoing Compatibility of corporate Not relevant Compatible at least for key philosophies: relationships Breadth of supplier base: Large to increase Small to increase competition and spread risk coordination Channel leadership: Not needed Needed for coordination focus Amount of sharing of risks Each on its own Risks and rewards shared and rewards: over the long-term Speed of operations.
and Manufacturing (CAM). Increasing use of automated decision aids like Decision Support Systems (DSS). 5. markets and production systems in industrially advanced nations and ♦ Transnational strategic alliances between firms. 7. These and related changes have led to certain ongoing trends that dominate the world industrial scene.INTRODUCTION Some of the important observable changes in today’s global context are : 1. organization network and inter organizational structures. 14. Knowledge intensive nature of production and service activities. ‘technology fusion’ for development of ‘hybrid’ technologies. Increasing importance of project management. . Total Quality Control (TQC) or company-wide Total Quality Management (TQM). 13. presently. Automation. Higher rate of new product development 4. Computer Aided Design (CAD). Shorter product change-over cycles 3. 11. Competitive strategy based on technology and training of employees in multiple work skills. Technological changes in information handling equipment and office automation. Combination of technologies i. Information technology based faster economic metabolism of organizations.e. Increasing role of technological forecasting. and Simulation Experiments. 10. 15. Quality and productivity-quality integration. in terms of zero-defect production. participation and responsibility. 2. Flexible Manufacturing Systems (FMS) 9. 12. These trends are: ♦ ♦ ♦ ♦ Globalization. Shorter product life cycles. Expert Systems (ES). Shorter production runs. 6. Equipment and process technology as a strategic resource 8.
and more exacting requirements of product cost. and performance of the users. ♦ Changing customer values. etc. Traditionally. Inventory managers have an unenviable task on their hands. for cost is like dust. ♦ Saturation and increasing segmentation of markets. erratic output.The following factors and their interactions further complicate the issue: ♦ Over capacity of production facilities in many industries. The foregoing picture of the state of global industrial competition brings out the exceedingly difficult and demanding nature of the requirements for coping with such a dynamic situation. inventory control systems have been reactive in nature. ♦ Emergence of unexpected competitors across the world. ♦ Need to lower breakeven point owing to increasing fractioning of markets. This becomes all the more important when cost is considered. The rule has been to provide for extra inventory as a means to tackle the wide range of variability that confronts any organization. However the nature of the problem is such that.it has a tendency to settle on . Inventories grow because of large lead times. Inventory management is but a part of the greater system that we may well call as the production materials management system. ♦ Unanticipated connections among industries owing to equipment and process technology changes in one branch of industry producing a cascading impact on other branches and sectors. They are blamed at the drop of a hat. INVENTORY MANAGEMENT INTRODUCTORY CONCEPT AND DEFINITION Inventory control cannot be treated in isolation. they on their own can do very little about the inventory on hand. quality. long setup times. Inventories must flow.
Manufacturing companies have broadly two categories of inventories. Insurance premiums 5. Storage and handling cost 3. can be a major competitive weapon. Conflicting Pressures on Inventory Levels Pressures for Small Inventories 1.anything sitting around. Manufacturing Inventory . affect virtually every aspect of daily operations. Cost of purchased items Four reasons for its importance are • • • • Inventories Inventories Inventories Inventories can be a major commitment of monetary resources. Inventories can be classified in various ways depending on the specific purpose. Firms hold inventories to buffer against uncertainties in supply. They are: 1. Labour and facility utilisation 4. Distribution inventory 1. Transportation cost 5. and in demand. Property taxes 4. Irrespective of whether a certain inventory is planned or not. Customer service 2. in the production process. obsolescence and deterioration. Interest or opportunity cost 2. Functions and types of inventories: Inventory serves various functions in a firm. it always serves the basic function of de-coupling supply from demand. are the major control problem in many companies. Rapid flow of materials allows little time for cost to accumulate. Shrinkage costs: Pilferage. Pressures for Large Inventories 1. Ordering or setup cost 3. Manufacturing inventory 2.
• Cost of paperwork. telex. To reduce material handling costs. Distribution Inventory (a) Finished products in warehouse (b)Finished products in transit FUNCTIONS OF INVENTORY CONTROL 1. To buffer to reduce uncertainty regarding raw material supply and prices. To take advantage of quantity discounts – bulk purchases. ELEMENTS OF INVENTORY COSTS The types of costs that usually affect the inventory decision are: 1. To disclose slow moving and non-moving items. tata toyo making radiators) (c) Finished components(eg tyres) (d)Sub-assemblies(eg. telegrams. • Costs involved in receiving the order. 2.gear box) (e) Work in progress (WIP)(eg steel body) (f) Finished goods(eg Tata indica V2) (g)Supplies/consumables(eg cotton. To de-link various successive stages in a production process. To facilitate manufacture of a range of products on the same facilities. 11. purchase follow up costs. 8. 5. typing and dispatching an order. telephone. 4. email and other correspondence costs. 13. To take care of variable. 7. damage. 10. immediate customer demands. . seasonal. postal. 12. • Costs incurred in following up timely deliveries. etc. To economize production level or smoother manufacturing. The cost to place replenishment order. if any.oil) (h)Spares(eg m/c spare parts) 2. These are also referred to as replenishment costs or procurement or indenting costs. To take care of physical impracticality of getting right amount of stock at exact time of requirement. • Any setup machine cost. 9.steel) (b)Semi-finished components (eg Tata junction control. To take advantage of lower bulk transportation cost. travelling costs. pilferage. checking.(a) Raw materials (eg. • Salaries and wages of the purchase department. To de-couple demand and supply (marketing and production). To stabilize direct labour requirements to improve labour relations. To prevent loss through loss. 14. 3. 6. physical handing over to stores. To earn favourable return on investment. incoming inspection. directly charged by the supplier to the batch size.
This may be a fixed sum per unit per time period. The cost to hold inventory: These costs include all expenses incurred because of the volume of inventory carried. . In more complex models it may consist of more than one element. Thus we see the basic conflict of inventory management: some objectives call for economizing on inventory levels. or and internal rate of return. These plus a related variable costs are discussed in the following paragraphs. and the value associated with funds tied up in inventory. Customer service objectives. reduced item life. two basic categories of costs are associated with inventories: (1) inventory carrying costs and (2) inventory acquisition costs. and 2. while other objectives call for increasing inventories. or it may be a fixed percent of value per time period. theft (burglars and employees). damage. for example. pilferage. promoting efficiency in production or purchasing The organization’s Inventory Management System must carry out objectives set by upper management. spoilage. security. Among the relevant costs are warehouse rental (implicit or explicit). while marketing wants larger amounts so that customer orders can be more promptly satisfied. These are also called as inventory carrying costs. This cost of capital may be the actual cost of funds borrowed to purchase inventory. The objectives set by management will frequently fall into either of two categories: 1. holding costs may consist of both physical storage and capital costs (foregone earnings). These objectives may create conflict along departmental lines: finance wants smaller sums tied up in inventory. COSTS ASSOCIATED WITH INVENTORIES From a managerial point of view. insurance for goods and warehouses. It must perform in such a way to enhance the organization’s profit or performance. representing gains made from using the same funds on. The Challenges of Inventory Management: • • Maximize the level of customer service.2. taxes on inventory. the interest that could have been earned by depositing the funds. clerical costs of counting inventory. The components of this cost are – cycle stock costs and buffer stock costs. That is. the interest that could be saved if that money were used to retire debt. obsolescence. and Minimizing the cost of providing an adequate level of customer service. Inventory investment objectives. a plant expansion.
000 worth of a production material and keeps it in inventory. And this cost conceptually can be charged against inventory occupying in the space. it is logical for the firm to charge all money invested in inventory an amount equal to that it could earn if invested elsewhere in the company. the greater the asset value. An extra Rs. When a firm purchases Rs.500. it simply has this much less cash to spend for other purposes. 1. then.000 worth of inventory represents an additional asset on which insurance premiums must be paid. The escalating and volatile cost of money in recent years. per cubic foot per year. Conceptually. Five major elements make up these costs in the following manner: ___________________________________________ 1 Opportunity cost of invested funds 12-20% 2 Insurance costs 2-4% 3 Property taxes 1-3% 4 Storage costs 1-3% 5 Obsolescence and deterioration 4-10% __________ Total carrying costs 20-40% _____________________________________________ Let us briefly examine these carrying costs. Opportunity cost of invested funds. 4. Property taxes. and consequently the higher the firm’s tax bill. 3. The warehouse in which a firm stores its inventory is depreciated a certain number of rupees per year over the length of its life. As with insurance. has increased the typical firm’s annual inventory carrying cost to figure between 25 and 35 percent of the value of the inventory. One may say. 2. Money invested in productive equipment or in external securities earns a return for the company. a number of studies determined that the annual cost of carrying a production inventory averaged approximately 25 percent of the value of the inventory. Prior to the relatively recent periods of higher rates. This is the “opportunity cost” associated with inventory investment. property taxes are levied on the assessed value of a firm’s assets. Storage costs.Carrying Costs Carrying material in inventory is expensive. however. the greater the inventory value. Most firms insure their assets against possible loss from fire and other forms of damage.500. then. the greater the asset value. . that the cost of warehouse space is a given number of Rs. Insurance costs.
the inventory level is directly related to the quantity in which the ordered material is delivered. carrying cost as % of inv. . No matter how diligently warehouse managers guard against these occurrences. production control. Examples of these costs are listed below and can be thought of as inventory acquisition costs. is pilfered. value) CC = Q/2 x C x I Where CC = carrying cost per year for the material in question Q = order or delivery quantity for the material. expressed as a percentage of inventory value Acquisition Costs Looking at inventory costs in another light. the annual inventory carrying costs that would be generated by delivery quantities of various sizes can be calculated as follows: (Carrying cost per year) = (average inventory value) x (inv. a certain percentage of the stock spoils. and handling an order. These factors all contribute to the cost of generating. Obsolescence and deterioration. 1. processing.5. as a percentage of inventory value. or eventually becomes obsolete. Relationship of inventory-related costs to inventory level ( AC = acquisition costs. the larger the inventory. In most inventory operation. the higher the average inventory level vary nearly directly with the size of the delivery quantity. along with its related paperwork. typically the greater the absolute loss from this source. a different set of indirect materials cost factors emerges. With new products being introduced at an increasing rate. carrying cost as a % of inv. in units C = delivered unit cost of the material I = inventory carrying cost for the material. Generally speaking. A certain portion of wages and operating expenses of such departments as purchasing and supply. a certain number always take place. CC= carrying costs. Further. When the complete order is shipped at one time. this group of carrying costs rises and falls nearly proportionately with the rise and fall of the inventory level. is damaged. the larger the order quantity.) If a firm has estimated its approximately inventory carrying cost. Consequently. value) (Carrying cost per year) = (average inventory in units) x (material unit cost) x (inv. the probability of obsolescence is increased accordingly.
envelops. observe that they behave quite differently from carrying costs. The total cost of the buyer’s time to the company will be the same whether the purchase order is written for 20 parts or 200 parts. telephone. Assume further that the part has been purchased before and that price quotations from three or four shops are on file. The cost of suppliers and services consumed in the placement and handling of an order typically varies directly with the number of order placed. This process may result in the development of a term contract with the supplier. Acquisition costs are not related to inventory size per se. The cost of supplies such as engineering drawings. 3. the buyer decides which supplier should receive the order and subsequently inquiries about the firm’s current shop loads and any other matters that have arisen during the investigation. they are a function of the number of orders placed or deliveries received during a given period of time. accounting . however. stores. production control. Next. Drawings and specifications of the part are then reviewed to refresh his or her memory regarding required tooling and other technical details of the purchase. It is entirely possible that a negotiation session may also be required. the buyer reviews the quotations to determine why the order was placed with supplier A last time. rather. and postage expended in procuring material When considering this group of acquisition costs. and so forth. The buyer first reviews the present inventory situation and probably checks with production control to see if any significant changes are anticipated in future production. If this is not the case. receiving. generating almost the same indirect cost for the company. the buyer’s investigation may require anywhere from an hour to several days.receiving. Suppose a buyer in the purchasing and supply department receives a requisition for a special fabricated part used in the manufacture of one of the firm’s products. Before deciding if supplier A should again receive the order. he or she will go through somewhat the same process. the buyer must also review supplier performance data.those departments whose personnel devote time to the generation and handling of the order. In largest segment of the acquisition cost element is made up of these types of indirect labor and overhead costs. they are considerably less so that the . fax machine. While these costs are significant. inspection. 2. and accounts payable . The cost of services such as computer time. In total. One simplified example will illustrate this point. and forms for purchasing. in which case the buyer’s effort is spread over all deliveries of the item during the life of the contract. Finally. generated in purchasing and in the other departments that subsequently become involved in handling some activity associated with the purchase. the next time the buyer receives another requisition for this part. stationary. telegraphs.
These factors often help a manager determine which items should or should not be carried in inventory. If a firm experiences a certain annual usage of an item. and what order quantities are appropriate for given items. thus generating lower annual acquisition costs. what inventory levels should be carried for specific items. If a firm’s cost accounting department can estimate its approximately acquisition cost per order. TC. As its name suggests. the annual acquisition costs that would be generated by order quantities of various sizes can be calculated as follows: ( Acquisition cost per year) = (number of orders placed per year) x (acquisition cost per orde r) AC = U/Q x A Where AC = acquisition cost per year for the material in question U = expected annual usage of the material. shows clearly that as the order or delivery quantity increases. carrying costs rise-and at the same time acquisition costs decrease. A = acquisition cost per order or per delivery for the material Economic Order Quantity Concept (EOQ) If one has to make decisions about managing an inventory. depending on the specific cost inclusions.human and related overhead cost figures just discussed. and the cost of the material itself. but that if follows the approximate contour of the AC curve shown in fig. is produced. fig. if carrying costs and acquisition costs are added together over the order quantity range shown on the graph. To see the total picture more clearly. today the range appears to run from approximately $50 to $125 per order. acquisition costs. Although the variable acquisition cost per order varies widely among firms. it is useful to understand the behavior of the inventory-related cost factors just discussed. Concentrating for the moment on the first two costs. This transformation is . The experience of numerous firms over the years reveals that this relationship is not linear. in units. the total indirect materials cost curve. in units Q = order or delivery quantity for the material. the number of orders placed during the year will decline as the individual order quantity increases. this concept holds that the appropriate quantity to order may be the one that tends to minimize all the costs associated with the order -carrying costs.
The economic order quantity concept simply says that the sum of all the indirect costs associated with inventory will be minimized on an annual basis if the material. These can be now be used to develop the EOQ formula. then. there is a little difference between lot sizes based on the JIT model and the EOQ model. Fig. who has researched various lot sizing concepts. including JIT. is ordered (or delivered) consistently in the quantity that corresponds with the low point on the TC curve. but in practice it probably finds its most effective application in this form. So. He writes: “When the EOQ model is properly employed.: Graphic representation of the EOQ concept ( AC = incremental acquisition costs. EOQ occurs when Annual carrying cost = annual acquisition cost CC = AC QCI/2 = UA/2 Solving for Q : Q2CI = 2UA Q = sq.” He points out that all relevant incremental costs must be included when using the EOQ model. This makes it easy to develop the basic formula that can always be used to calculate a materials basic EOQ. root of 2 UA/CI This formula. T Various types of inventory management techniques. • • • • ABC analysis VED analysis HML analysis GOLF analysis . Recall the two simple cost formulas developed for annual carrying costs and annual acquisition costs. Note that the low point on the total cost curve coincides with the point at which the carrying cost curve intersects the acquisition cost curve. This is the economic order quantity. It can be modified to accommodate numerous special conditions.shown in fig. This is perhaps an obvious observation. TC = total incremental costs). Professor Daniel Jones. says that the EOQ concept can be used in conjunction with a variety of inventory management systems. is the fundamental mathematical representation of the EOQ concept. but one that he finds frequently is violated in practice. the EOQ concept continues to be a versatile and useful too if it is properly applied. CC = incremental carrying costs. despite some criticisms. for which the graph is drawn.
These items should not be purchased in 'bulk’ but it must be purchased regularly in small quantities supplier of such items should be informed about the requirement of the product as per manufacturing plan.Essential items .Vital items E . Car.g. hence proper inventory management and regular check for such items are required. They do not require regular inventory control. 'C' category items are purchased in bulk. b) VED analysis VED analysis is based on criticality. According to this principle it is said that 80% of the inventory cost is due to 20% of the items (which are expensive) and hence their management is very much required to keep down the inventory cost. 'B' category items are not very expensive as compared to 'A' category. V . These items are 5% to 10% present and cost about 70% to 80% of total inventory. ABC analysis is based on "value analysis". (value of item based on its consumption) 'A' items are those whose cost is very high. Minimum inventory control should be done.20" principle or principle of "Vital few" & "trivial many". availability etc. e. They constitute 70% to 80% of total product and cost about 5% to 10%. 'A' category items should be managed by senior executive and monthly inspection for such products is required. These items are 15% to 20% present and cost 15% to 20% of total inventory. They are purchased in bulk to avail price discount benefit.• • • • • SOS analysis LIFO FIFO technique MNG analysis FSN analysis XYZ analysis a) ABC analysis ABC analysis is based on "80 .
Desirable items Vital items are those which when not present. ONGC etc.Medium cost (e.000) L .Low cost (e. e) SOS analysis S . Rs. c) HML analysis This is based on price analysis.First in First out g) FSN analysis F . Goods from local suppliers can be bought on credit purchase easily. Rs. f) LIFO FIFO technique LIFO .Foreign Golf analysis states that products which are bought from Government sources require more time and advance payment.10. Non government products require less time in purchasing.g.g.Non Government L .5000 to 10. less paper work & are given on credit.g. more paper work & legal documents like custom clearance etc.Seasonal OS .Fast moving items S .Local F . MMTC.g.Slow moving items N . . Essential items are those which when not present may not affect the production for short period but during long run or hire cost of production may go up. STC. below Rs.Government NG .000 & above price) M .5000) d) GOLF analysis G . Desirable products are those which do not matter of much important & production may go without it for long period of time. H . the production may come to halt. These are scientific inventory management techniques which are in current use and helps in effective inventory control and management easy to adopt and easy to be understood.Off Seasonal Seasonal goods should be purchased in bulk during season and stored for off season.D . e.Last in First out FIFO .Non moving items Non moving items should not be kept. Foreign goods require more terms and conditions.High cost (e.
Purchase indents/Bill-of-material(Production items) 2.PURCHASING CYCLE A. Purchase indents(Other items) B.SCRUTINY OF PURCHASE INDENT Completeness of description Appropriateness of request Routing of indent through stores.MARKET RESEARCH Telephonic quotations Written quotations Scheduled buying Source selection & source development .ESTABLISHING THE NEED FOR PROCUREMENT Recognising the need for procurement Determining the requirements Spelling out specifications Communicating requirements to purchase: 1. Logging indents into indent registrar C.
ORDER PREPEARTION Scrutiny of quotations Negotiations placing orders on suppliers Obtaining suppliers’ acceptance of purchase order E.D.FOLLOW UP Pre-delivery follow up Shortage chasing Reminders Personal visits Telephones/Telegrams Faxes/Telexes Posting of personnel at suppliers’ works F.RECEIVING & INSPECTION Receiving dispatch details (RR/LR/CAN) & logging them into the consignment register Collection of material from transporter godown Inspection for physical damages to the packages & number of packages Entering consignment details in GRN register Uncrating of goods Quantity certification Raising of GRN Intimating receipt of materials to the indentor Inspection of goods .
G.INVOICING & PAYMENT Receiving GRN s in accounts department Receiving suppliers’ bills Posting of purchase register Passing of bills Effecting payments A) Supplier and Vendor/Ancillary Supplier • Caters to a number of manufacturers • • • • May or may not be on contract Relationship is that of buyer and seller and superficial Breach may not affect both intensely Relationship does not involve joint decision making Vendor/Ancillary • Caters to upto 50% for the manufacturer (single) • Supply based on a longer period of time contract • Partner's in progress and relationship is deep-rooted • Any one backing out can cause intense harm to other or breach of relationship can harm both • Involved in decision making with the manufacturer B) Centralized v/s Decentralized Purchase .STORAGE & RECORD KEEPING Movement of materials to concerned store/rejection store Quality certification Application of protective coating/marking Storage of materials into appropriate racks Posting of receipt into stock card H.
Make v/s Buy Decisions Make • Manufacturers produce in house • Cost of acquisition > cost of manufacture • Company has the capacity to invest • • • • Company has no plans to divest or focus to core competencies L & T forges ahead into LTITL Requires 5 M's Men Material Machinery Method Money When secrecy in involved Buy • Manufacturers outsource • Cost of manufacture > cost of acquisition • Company cannot afford to block huge capital • Company plans to divest and focus on core competencies • SBI out sources its 17 functions • Not Required • No secrecy involved . national player • CSD canteen purchases centrally • TAJ GROUP has stationary material supplied by a central re-cycle paper manufacturer in Delhi Decentralized • Each manufacturing unit buys locally • • • • • • Discounts are less as compared to centralized Standardization is not the key factor.Jamshedpur & Lucknow purchases welding materials from different suppliers Mc Donald’s in Pune is supplied chicken by Venky's and in Delhi by Sunrise hatcheries C.Centralized • Purchase carried out for various units at the head office / purchase office at a central location • Heavy discounts offered due to economics of scale • Standardization is the key reason • Logistics cost is high • Supplier is big. Logistics cost is low Supplier is local TELCO Pune.
it is necessary to analyze the costs. For reducing the costs of various levels. 5. Any proposed system will have to include the following costs in the total distribution costs. Finding out the Effects of Handling. 1. Using Quantitative Techniques. The Freight Costs 2. . some information may be required externally. 1. the company must have such a system which will minimize the costs. 4. 3. Analyzing the Information. Variable Warehouse (inventory) costs There is another cost which is difficult to measure. That is the cost of lost sales due to delivery delay or the product not being available to the customer. Fixed Warehouse Costs 3. Setting the Priority Areas. Getting the Details of Cost Data.The Distribution Cost Analysis For achieving the objectives of physical distribution. the distribution manager can identify the areas where costs can be reduced. After examining the analysis. 2. 6. Calculating the Cost per unit. Getting the Details of Cost Data : These can be obtained mostly internally. The steps for distribution costs analysis are : 1.
Calculating the Cost per unit : After knowing the fixed costs and the variable costs. . Setting the Priority Areas : The distribution manager can think of the strengths and weaknesses of the Company and then set the priorities for cost reduction. Finding out the Effects of Handling : In some products like cement or fertilizers or glassware. its analysis will indicate the areas where action is required.2. Distribution Administration Costs 9. Packaging Costs The details of the above can now be discussed. Costs at the Production Point : These would include raw material. 6. Using Quantitative Techniques : It will be meaningful to know whether some quantitative techniques could be used to advantage. 2. The cost components can be categorized as under : 1. 3. The interdepartmental nature of the work creates many mental barriers also. machine time. Shortage of goods. 4. power & fuel cost. a) Costs of Storage and Handling : These would consist cost of labour as well as space. It is not an easy task due to various reasons. 6. it will be imperative to have minimum handling. direct labour. damaged goods costs 8. 5. Costs at the Production Point Costs related to Materials Movement Costs of Warehousing Costs of holding the Inventories Costs incurred by the Dealers Costs incurred by the Consumer Further. Each handling will increase the probability of damage. 1. breakage. the costs could be of : 7. pilferage. 3. 5. The entire exercise of collection of cost data and its analysis will be of tremendous help is arriving at a decision as to how to reduce the costs. unit costs can be worked out for different numbers of units distributed. Analysing the Information : After getting all the information. 4.
the costs are called 'Improper Location Costs. b) The servicing cost of inventory would include. Costs of deteriorating of goods can also be there at the production point. A minimum level of inventories (Safety Stock) will have to be maintained. Costs of Handling Inventories a) The inventories are most likely to be at three places : (i) at the Production Point. b) Financial costs and administrative costs are incurred. (ii) at the Warehouse.' 4. it may be contracting the transport carriers with hiring charges. Alternatively. (iv) deterioration. 5. (ii) insurance. location of the warehouse is not ideal. (i) handling costs. At all the above places. If it is company's own warehouse. In addition to this. c) There is one more aspect to carrying the inventories. c) Packaging costs would include the costs of material for packaging as well as the cost of labour needed for that. (vi) Taxes. More costs are incurred due to a wrong location. Costs incurred by the Dealers . Costs related to Movement of Materials a) Freight costs would be incurred for the goods to be carried from the plant/factory to warehouse and then to the distributor/dealer. That cost is to be calculated. (iii) pilferage. 3. then rentals are to be provided for.b) Financial costs which would involve costs of working capital for finished goods inventory. c) Sometimes. If it is a hired warehouse. capital costs and also operating costs are incurred. Costs of Warehousing a) Here also cost of storage is incurred. b) The company may possess its own transportation equipment in which case it will have capital costs as well as operating costs. (iii) at stock points. In such a case. the stock levels would have to be increased during a particular time-specially when the demand of that product is likely to increase. 2. capital would be employed and interest will be paid. c) Insurance charges will be paid for transport insurance. (v) obsolescence.
For export markets again. All these packaging costs would form the costs of distribution. b) The dealer will be incurring costs for storing of inventories and handling as well as the financial costs involved in these. the goods would be uninsured. Costs incurred by the Consumer It can be debated whether some of the costs incurred by the consumer-specially for transportation should form part of the distribution costs analysis. There may be damages due to handling or shortages due to theft. Damages. The distribution cost analysis is very important for the distribution manager. . Consumers would expect some discounts/rebate towards these costs. there would be costs incurred for office maintenance as well as administrative and managerial staff. These also need to be analyzed. In rural markets in India. Packaging Costs : Apart from the normal costs related to the immediate wrapping of the product. Provision has to be made for taking care of these costs. when fertilizers are purchased in bulk quantities by the cultivators. Distribution Administration Costs : At the distribution manager's office. the material will be going to the distributor/dealer. It would help him in identifying the weaker areas in the system and apply corrective measures. As per the terms of the contractual arrangements.there is an insurance during transit and storage. There may be a difference between the value of insurance and the claims settlement. Cost of Storage’s.a) From the warehouse. But at some point. the containers are returnable. Pilferage’s : For bulk quantities . costs would be necessary for special packaging for transportation and warehousing. 8. like in soft drinks glass bottles. the material may be delivered at the warehouse and thereafter. 9. specific packaging would be mandatory. In competitive markets. c) Sometimes. 7. they have to think of the delivery point and the costs incurred by them thereafter. The costs of returning would also be an element of costs at this level. all the charges like transportation will be borne by the dealer. 6.
This is called the Bullwhip Effect. since hidden value often emerges once the entire chain is visualized. even before we opened our first restaurant in India. It is critical to go beyond one’s immediate suppliers and customers to encompass the entire chain. 50. shortages / stock outs. a diesel engine manufacturer may be able to integrate a GPS . And so. Depending on the situation. the Supply Chain may include major product elements. raw material flows as follows: supplier . the Supply Chain operates at its best. higher transportation and manufacturing costs. and both upstream and downstream activities.material flow from suppliers and their "upstream" suppliers at all levels. Rs.Supply chain management at McDonalds (India) Did you know that every year. A Supply Chain is a network of facilities including . When there is a balance in the finished product ordering. geographically dispersed activities. For example. So. longer lead times. Information and money flows in the reverse direction.000 crore worth of food produce is wasted in India? This is mainly because of the lack of proper infrastructure for storage and transportation under controlled conditions. transformation of materials into semi-finished and finished products. we spent a few years setting up a unique Supply Chain. The balance between these 3 flows is what a Supply Chain is all about. various suppliers. and mistrust between supply chain partners.manufacturer – distributor – retailer – consumer. Any major fluctuation in the product ordering pattern causes excess / fluctuating inventories. and distribution of products to customers and their "downstream" customers at all levels. McDonald's is committed to providing quality products while supporting other Indian businesses.
the downstream customer. However. may see no need for this functionality. may be very interested in a locator system. Its immediate customer.locator system into its engine control system. . a heavy truck manufacturer. Understanding the value to the downstream customer is part of the supply chain management process. a trucking company with a large fleet.
changed the Indian fast food scenario to match international standards. its Indian supplier partners were developed in such a manner that made them stay with the company from the beginning." As per today's standings. has much to do with this. The transition towards the latest technology. For this purpose. Bangalore in 2004. About two decades ago.six years before it started its actual operations. Bakshi explains. "The success of McDonald's India is a result of its commitment to sourcing almost all its products from within the country. which can supply them the highest quality products required for their Indian operations. an international brand trying to make inroads into the Indian consciousness. and the latest one in Kolkata (2007). the distribution centres came in the following order: Noida and Kalamboli (Mumbai) in 1996. the company invested about Rs 400 crore even before its first restaurant commenced operations in October 1996. for various requirements. For McDonald's India. And its success is credited to its well-established supply management chain. McDonald's entered its first distribution partnership agreement with Radha Krishna Foodland. besides several others standalone restaurants working with it. a part of the Radha Krishna Group engaged in food-related service . it has developed local Indian businesses. Sanjeev Bhar traces its supply chain management that played a vital role in its growth. one of the first brands that left a strong imprint on the Indian QSR history.Big Mac's supply chain success The seed of McDonald's success was sown in 1990 . "We had to ensure that we had the back-end linked up to the farm level for delivery commitment. the distribution centres hold special place for bringing food right to the outlet counters. Today. Tracing its success path McDonald's had been working critically on its supply chain part. which has been subsequently noticed in other QSRs as well. In the supply chain management for a QSR. arguably. Considering." The company also deployed the latest state-of-the-art food processing technology for having a sound supply chain. According to Vikram Bakshi. the acronym has been seamlessly absorbed in the industry lingo. McDonald's. McDonald's India works with as many as 38 Indian suppliers on a long-term basis. managing director and joint venture partner of McDonald's India (North & East). the QSR wouldn't have meant much to the Indian F&B segment.
recording and correcting any deviations. Setting up of the Cold Chain has also enabled us to cut down on operational wastage Hazard Analysis Critical Control Point (HACCP) is a systematic approach to food safety that emphasizes prevention within our suppliers' facility and restaurants rather than detection through inspection of illness or presence of microbiological data. the supplier gets the opportunity to expand his business. control points and critical control points for all McDonald's major food processing plands and restaurants in India have ben identified. Trikaya Agriculture Suppier of Iceberg Lettuce Implementation of advancved agricultural practices has enabled Trikaya to successfully grow speciality crops like iceberg lettuce. As McDonald's expands in India. The relationship between McDonald's and its Indian suppliers is mutually beneficial. There are many cases of local suppliers operating out of small towns who have benefited from their association with McDonald's India. have access to the latest in food technology. exposure to advanced agricultural practices and the ability to grow or to export. health and hygiene while continuously maintaining McDonald's recognised standards. Farm infrastructure features: • A specialised nursery with a team of agricultural experts. The HACCP verification is done at least twice in a year and certified. . McDonald's Quality Inspection Programme (QIP) carries out quality checks at over 20 different points in the Cold Chain system. The limits have been established for those followed by monitoring. As the ingredients move from farms to processing plants to the restaurant. special herbs and many oriental vegetables. Based on HACCP guidelines.Vital Links in McDonald’s Cold Chain All suppliers adhere to Indian government regulations on food.
• • •
Drip and sprinkler irrigation in raised farm beds with fertiliser mixing plant. Pre-cooling room and a large cold room for post harvest handling. Refrigerated truck for transportation.
Vista Processed Foods Pvt. Ltd. Supplier of Chicken and Vegetable range of products (including Fruit Pies) A joint venture with OSI Industries Inc., USA, McDonald's India Pvt. Ltd. and Vista Processed Foods Pvt. Ltd., produces a range of frozen chicken and vegetable foods. A world class infrastructure at their plant at Taloja, Maharashtra, has :
• • •
Separate processing lines for chicken and vegetable foods. Capability to produce frozen foods at temperature as low as -35 Degree Cel. to retain total freshness. International stardards, procedures and support services.
Dynamix Diary Supplier of Cheese Dynamix has brought immense benefits to farmers in Baramati, Maharashtra by setting up a network of milk collection centres equipped with bulk coolers. Easy accessibility has enabled farmers augment their income by finding a new market for surplus milk. The factory has:
• • •
Fully automatic international stardard processing facility. Capability to convert milk into cheese, butter/ghee, skimmed milk powder, lactose, casein & whey protein and humanised baby food. Stringent quality control measures and continuous Research & Development
Amrit Food Supplier of long life UHT Milk and Milk Products for Frozen Desserts Amrit Food, an ISO 9000 company, manufactures widely popular brands - Gagan Milk and Nandan Ghee at its factory at Ghaziabad, Uttar Pradesh. The factory has:
State-of-the-art fully automatic machinery requiring no human contact with product, for total hygiene. Installed capacity of 6000 ltrs/hr for producing homegenised UHT (Ultra High Temperature) processed milk and milk products. • Strict quality control supported by a fully equipped quality control laboratory.
Radhakrishna Foodland Distribution Centres for Delhi and Mumbai An integral part of the Radhakrishna Group, Foodland specialises in handling large volumes, providing the entire range of services including procurement, quality inspection, storage, inventory management, deliveries, data collection, recording and reporting. Salient strenghts are :
• • •
A one-stop shop for all distribution management services. Dry and cold storage facility to store and transport perishable products at temperatures upto -22 Degree Cel. Effective process control for minimum distribution cost.
The Cold Chain is necessary to maintain the integrity of food products and retain their freshness and nutritional value. The Cold Chain is an integral part of the Supply Chain Setting up the Cold Chain has involved the transfer of state-of-the-art food processing technology by McDonald's and its international suppliers to pioneering Indian entrepreneurs, who have now become an integral part of the Cold Chain. The term Cold Chain describes the network for the procurement, warehousing, transportation and retailing of food products under controlled temperatures. McDonald’s restaurants store products to be used on a daily basis, within a temperature range of –18ºC to 4ºC. About 52% of our food products need to be stored under these conditions before they are used.
McDonald's has always been committed to sourcing its requirements from local suppliers and farmers. This assurance is rooted in the philosophy of our company's founder, Ray Kroc. He firmly believed in mutual benefits arising from a partnership between McDonald's and the local businesses, thus ensuring that McDonald's commitment to growth was mirrored by that of its partners. In keeping with this belief, we have carefully identified local Indian businesses that take pride in satisfying customers by presenting them with the highest quality products. Adherence to Indian Government regulations on food, health and hygiene were a top priority. McDonald's India today purchases more than 96% of its products and supplies from Indian suppliers. Even our restaurants are constructed using local architects, contractors, labour and maximum local content in materials. The relationship between McDonald's and its Indian suppliers is mutually beneficial. As McDonald's expands in India, the supplier gets the opportunity to expand his business, have access to the latest in food technology, get exposure to advanced agricultural
Suppliers . The HACCP verification is done at least twice in a year and certified. McDonald's Quality Inspection Programme (QIP) carries out quality checks at over 20 different points in the Cold Chain system. Setting up of the Cold Chain has also enabled us to cut down on operational wastage Hazard Analysis Critical Control Point (HACCP) is a systematic approach to food safety that emphasizes prevention of illness or presence of microbiological data within our suppliers' facilities and our restaurants rather than its detection through inspection. health and hygiene while continuously maintaining McDonald's recognised standards. All suppliers adhere to Indian government regulations on food. control points and critical control points for all McDonald's major food processing plants and restaurants in India have been identified. There are many cases of local suppliers operating out of small towns who have benefited from their association with McDonald's India. As the ingredients move from farms to processing plants to the restaurant.practices and the ability to grow or to export. Based on HACCP guidelines.
has : • Separate processing lines for chicken and vegetable foods.. Ltd. Farm infrastructure features: • A specialised nursery with a team of agricultural experts. • • • Vista Processed Foods Pvt. Vista Processed Foods Pvt. A world class infrastructure at its plant at Taloja. procedures and support services. Ltd. special herbs and many oriental vegetables.Supplier of Iceberg Lettuce Implementation of advanced agricultural practices has enabled Trikaya to successfully grow speciality crops like iceberg lettuce.Trikaya Agriculture .Supplier of Chicken and Vegetable range of products A joint venture with OSI Industries Inc. USA. International standards. Ltd. Drip and sprinkler irrigation in raised farm beds with fertiliser mixing plant. and McDonald's India Pvt. • • . Maharashtra. produces a range of frozen chicken and vegetable foods. Refrigerated truck for transportation. Pre-cooling room and a large cold room for post harvest handling. . Capability to produce frozen foods at temperature as low as -35 Degree Celsius to retain total freshness.
casein & whey protein and humanised baby food.Supplier of long life UHT Milk and Milk Products for Frozen Desserts Amrit Food. for total hygiene. manufactures widely popular brands . Its plant has: • State-of-the-art fully automatic machinery requiring no human contact with product. Capability to convert milk into cheese. Maharashtra by setting up a network of milk collection centres equipped with bulk coolers. skimmed milk powder. lactose. Uttar Pradesh. The factory has: • Fully automatic international standard processing facility.Gagan Milk and Nandan Ghee at its factory at Ghaziabad. Easy accessibility has enabled farmers augment their income by finding a new market for surplus milk. butter/ghee. Installed capacity of 6000 litres / hour for producing homogenised UHT (Ultra High Temperature) processed milk and milk products. Strict quality control supported by a fully equipped quality control laboratory.Dynamix Diary . Stringent quality control measures and continuous Research & Development • • Amrit Food .Supplier of Cheese Dynamix has brought immense benefits to farmers in Baramati. an ISO 9000 company. • • .
Foodland has regularly won the Best Supplier Award from McDonald's. • • • • Effective process control for minimum distribution cost.Over 65 % temperature controlled Stores as far as 500 – 1000 kms Drops per month . McDonald's . Products . Foodland specialises in handling large volumes. subsequent to the commencement of our relationship. data collection. Dry and cold storage facility to store and transport perishable products at temperatures up to . recording and reporting. quality inspection. inventory management. inventory management. storage. McDonald's opened its first store in India in October. deliveries. quality inspection. We handle their entire range of services including procurement. West & South of the country. We have the sole responsibility of McDonald's entire supply chain all across India. spread across the North. providing the entire range of services including procurement. data collection.Distribution Centre An integral part of the Radhakrishna Group.Challenges • • • • • • • • • • • • Full Supply Chain responsibility Multi Temp.22 Degrees Celsius.Radhakrishna Foodland . recording and reporting. 1996 and currently has 113 stores. storage. • Over the years. deliveries. Salient strengths are : • A one-stop shop for all distribution management services.Over 1000 Movement mainly by road Regular movement of perishables by air Routing Challenges No margin for error – Operations critical client No Stock Outs at store On time delivery record – above 97 % Clean delivery record – above 99 % Unfailing inbound supply chain Foodland : how it helps in supply chain of McDonalds? .
handling and distribution solutions to various clients. The services are tailor made to suit each client’s requirements. which include organisations such as McDonald's and Radhakrishna Hospitality Services Pvt. (RKHS) Objective To provide a cost effective solution to our customers ensuring product integrity throughout the supply chain. such as storage.Foodland provides Customized Distribution & Logistics services encompassing the entire supply chain. Platter Of Services • • • • • Supply Chain Structuring Inventory Planning & Replenishment Management Warehouse Management Customer Order Fulfillment Logistics – Temperature Controlled . Ltd.
Key Features: 1. 4. 8. 5.000 km Perishable tonnage handled per month – 7.00. 7. 2. . Dedicated to ‘cold chain’ movement The only logistics solution provider with expertise in handling agri – produce Total kilometer run per month is – 7.000 tons Robust quality systems & processes First in the country to use multi temperature vehicles Use of innovative methods to ensure temperature integrity during transit Experienced staff – The BEST in the industry. 6.It handles bulk transportation of temperature sensitive products. Its experience of over a decade in the logistics & distribution industry has led us to believe that there is still one area which remains poorly serviced – that of movement of small volumes of perishable items across the country. 3.
Fresh Rush – Features • • • • • • • Multi temperature products. end up deciding not to market their products which are of a perishable nature in certain markets. companies have to move goods either by air.Fresh Rush. combined with our domain expertise in the logistics & distribution area.Our experience also tells us that many companies. And because currently.A minimum of 500 kgs to maximum of 5000 kgs can be transported In transit temperature tracking Fixed schedule of pickup and delivery Well trained and experienced manpower Adherence to strict hygiene standards Consignment can be tracked through GPS system . for want of a cost-effective and reliable logistics solution. thus losing out on potential revenue opportunities. or through bulk carriers with very little control on the delivery schedule. Given the current scenario. there is no reliable service provider to cater to this need. such as Frozen (below –18ºC) and Chilled (1ºC to 4ºC) can be transported Flexibility of load movement . which is expensive. Fresh Rush is a temperature controlled transportation service addressing the needs of small volume cargo. we have launched a new service .
Kalamboli • • • First of its kind in India Designed as per global standards The centre procures. Food Park. value adds.000 sq meters Multi Temperature Zones Integrated Facility – Storage and Value Addition capabilities under one roof Ensured / Guaranteed Food Safety Paradigm shift in the way food is handled in the supply chain in India First of its kind in the region . stores and distributes various kinds of perishable and non-perishable food products Food Park – Features • • • • • • Spread over 33.1.
• • • • • • • • • • Benchmarked against global standards Codex / USDA / PFA compliant Scalable Dedicated storage for specific categories Sanitation / Hygiene standards – Trash handling Air / Water Quality – Treatment Plant / ETP Ripening Rooms.4 tonnes per day o o o o • • 2. Crate Wash Facilities. Sea Food and Poultry Controls – Building Management System (BMS) 100 % Power Back Up Food Park – Capacity • • • Capacity to manage over 6000 SKUs Can store 70.000 cases with 1400 pallet position and 3. Blast Freezer. Kanjur Marg DC • • • • Spread over 3.500 sq meters Dry Provisions DC Capacity to manage over 9000 SKUs Can store 80.000 cases with 1.700 pallet positions and over 4.600 pick faces . Flake Ice Machine Value Added Services – Processing of Vegetables & Fruits. Meat.000 pick faces Processing Vegetable & Fruits – 21 tonnes per day Meat – 3 tonnes per day Fish – 3 tonnes per day Blast Freezing – 6 tonnes – per day Ice Machine – 2.
3. Delhi DC (Noida) • • • • Dedicated to operations in the North Highly functional DC Chiller / Freezer / Dry Storage Capacity to manage 576 pallet positions Findings of study conducted .
helping the staff in assessing the stock quantity at the end of each day. like the french fries are obtained from new Zealand via shipments. we conducted this study in the month of March and the demand during this time is affected by the school and college examinations.as per the suitability and requirements of the stock.The sources at Mc Donalds told u sthat the trucks from Mumbai reach Indore on Monday. only after which it is used. after which they are dumped as waste. Hyderabad on wednesday and so on at Bangalore and Gujarat too.Radhakrishna Foodland had been working with Mc Donalds for the past ten yearsand the trems abd conditions for choosing the network design was decided by the headquarters of Mc Donalds itself. Mc Donalds forecast its requirements on a daily basis. that due to the ephimeral shelf-life of tomatoes. They keep the buffer stock for a period of three days. no matter how big or small in size.and their stock is stored at the outlets itself. The items which are to be procured from foreign territories comes to India via ships. it i sthe only commodity that they make purchase from local markets. revealed that their forecasting depends on a few factors like the upcoming movie release in that week and its response. In India too.Mc Donalds has its outlets in different parts of the globe. There are daily product safety checklist which is maintained manually as well as with the help of computer softwares too. The study that we did in Indore. the orders cant be fulfilled. Likewise.The demand for different departments also vary from one outlet to another. The Radhakrishna Foodland not only process the fooditems but also handle the logistics partially. but they do not have any local vendor. They have a fixed vendor.Every organisation has its inventory cycle.Pune on tuesday. Every product used in preparing the menu items come with an expiry date. 2.The food items are transported via air conditioned trucks having different chambers.The Mc Donalds outlets do keep a safety inventory. . Every organisation. Similarly.All the raw material comes in a frozen form. that is The Radhakrishna Foodland. 4. specifically of four to five inches diameter which undergoes a thorough sanitization process. like the French-fries served in Mc Donalds has a life of two hundred and seventy days. But once the menu items are cooked.The delivery center is at Mumbaiwhere from the required stock is transported to different locations. each one in a multiplex.The trucks have pre-defined destinations to reach each day. Mc Donalds has numerous outletsin different cities. for order processing. The concerned person told us.Each chamber is designed for the different kind of stock at different temperature levels.has its own forecasting techniques.they are not kept for more than ten minutes. 3. which caters the range of 230 products that Mc Donalds require. where there are three outlets of Mc Donalds.This is because without forecasting the demand and supply requirements.1.
The rounding and scheduling of ouput and input is done manually and through computer based softwares too. the conventional methods of maintaining suplly chain records are now a passe`. 6. 7.They do assess their daily requirements via safety checklists. Mc Donalds too use a standardized visual Foxpro based program via which the outlets are linked with the head office and the Radhakrishna Foodland too. from the customers end are duly heard and resolved as per the need of the situation. 8.With the evolvement of the new technologies and convenient softwares.Mc Donalds does not have any third party logistics. if any.5. .Mc Donalds believe in the saying "Customer is the King" and thus the the complaints .
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