N.G.

Bedekar College Thane

(W)

T.Y.B.M.S

A Project study on
Logistics of McDonalds

Submitted by:-

Darius D’souza 121

Prathamesh Patil 131

Pratiksha Deshmukh 134

Submitted to:-
Prof.
Murlidharan
Contents

 Introduction
 History of McDonald
 Company overview
 Supply Chain
 Porter Value chain analysis
 Distribution Strategy
 Distribution Process
 Improving Logistics at
McDonalds
 Conclusion
 ACKNOWLEDGEMENT
On the completion of this project, we wish to great

fully acknowledge, by taking this opportunity to

express our sincere gratitude to Prof.

Murlidharan for his guidance and useful

suggestions that proved very useful in this project.

Once again we thank all the people who have

directly or indirectly helped us in this project.

Lastly, we sincerely thank all our friends who

have always given their encouraging support

and have been a great help all the time at

various stages of development of this project.

History of McDonald’s
McDonald's has come a long way ever since it’s beginning in 1955. Here
are
a few milestones of the McDonald's journey ...
1955 Ray Kroc opens his first
restaurant in Des Plaines,
Illinois and the McDonald's
Corporation is created.
1957 Quality, Service, Cleanliness
and Value (QSC& V) becomes
the company motto.
1959 The 100th McDonald's opens
in Chicago.
1961 Hamburger University opens
in Elk Grove, near Chicago.
1963 One billion hamburgers sold.
Ronald McDonald makes his
debut.
1964 Filet-O-Fish sandwich is
introduced.
1965 McDonald's Corporation goes
public.
1967 The first restaurants outside
of the USA open in Canada
and Puerto Rico.
1968 The Big Mac is introduced.
The 1,000th restaurant opens
in Des Plaines, Illinois.
1972 A new McDonald's restaurant
opens every day.
The Quarter Pounder is
introduced.
1983 Chicken McNuggets is introduce
New Hamburger University
campus opens in Oak Brook,
Illinois. Set in 80 wooded acres
Training is provided for every
level of McDonald's managemen
worldwide.
1984 50 billionth hamburger sold.
Ronald McDonald Children's
Charities is founded in Ray Kroc’
memory to raise funds in suppor
of child welfare.
1989 McDonald's is listed on the
Frankfurt, Munich, Paris and
Tokyo stock exchanges.
1990 McDonald's opens in Pushkin
Square and Gorky Street,
Moscow.
1993 The first McDonald's at sea open
aboard the Silja Europa, the
world's largest ferry sailing
between Stockholm and Helsink
1994 Restaurants open in Bahrain,
Bulgaria, Egypt, Kuwait, Latvia,
Oman, New Caledonia, Trinidad
and United Arab Emirates,
bringing the total to over 15,000
in 79 countries on 6 continents.
1973 Egg McMuffin is introduced.
1974 The first Ronald McDonald 1996 McDonald's opens in India – the
House opens in Philadelphia. 95th country.
The Happy Meal is launched.

Company Overview

McDonald's - A Global Phenomenon

McDonald's opened its doors in India in October 1996. Ever since
then, their family restaurants in Mumbai, Delhi, Pune, Ahmedabad,
Vadodara, Ludhiana, Jaipur, Noida Faridabad, Doraha, Manesar and
Gurgaon have proceeded to demonstrate, much to the delight of all
our customers, what the McDonald's experience is all about.
Their first restaurant opened on 15th April 1955 in Des Plaines,
Illinois, U.S.A. Almost 50 years down the line, we are the world's
largest food service system with more than 30,000 restaurants in
100 countries, serving more than 46 million customers every day.

Locally Owned
McDonald’s in India is a 50-50 joint venture partnership between
McDonald’s Corporation [USA] and two Indian businessmen. Amit
Jatia’s company Hardcastle Restaurants Pvt. Ltd. owns and
operates McDonald's restaurants in Western India. While
Connaught Plaza Restaurants Pvt. Ltd headed by Vikram Bakshi
owns and operates the Northern operations.
Amit Jatia and Vikram Bakshi are like-minded visionaries who share
McDonald's complete commitment to Quality, Service, Cleanliness
and Value (QSC&V). Having signed their joint-venture agreements
with McDonald's in April 1995, they trained extensively, along with
their Indian management team, in McDonald's restaurants in
Indonesia and the U.S.A. before opening the first McDonald’s
restaurant in India.

Respect for local culture

McDonald's India has developed a special menu with vegetarian
selections to suit Indian tastes and preferences. McDonald's does
not offer any beef or pork items in India. Only the freshest chicken,
fish and vegetable products find their way into their Indian
restaurants.In addition, they've re-formulated some of their
products using spices favoured by Indians. Among these are
McVeggie™ burger, McAloo Tikki™ burger, Veg. Pizza McPuff™ and
Chicken McGrill™ burger. They've also created eggless sandwich
sauces for their vegetarian customers. Even their soft serves and
McShakes™ are egg-less, offering a larger variety to their
vegetarian consumers.
International Standards
McDonald's India's local suppliers provide them with the highest
quality, freshest ingredients. Complete adherence to the Indian
Government regulations on food, health and hygiene is ensured,
while maintaining their own recognized international standards.
Fast, friendly service - the hallmark of McDonald's restaurants the
world over is the mantra they abide by.
Stringent cleaning standards ensure that all tables, chairs,
highchairs and trays are sanitized several times each hour. Such
meticulous attention to cleanliness extends beyond the lobby and
kitchen to even the pavement and immediate areas outside the
restaurant.

Their Philosophy
"They take the burger business more seriously than anyone else."
When McDonald's founder, Ray Kroc made that memorable
statement, he was letting the world in on the philosophy and secret
behind McDonald's phenomenal success.
Their vision to be India’s "best" quick service restaurant experience
is supported by a set of principles and core value.

The principles that guide them …

• Quality, Service, Cleanliness & Value - It is an unflinching
McDonald's ideology that our customers must always get
quality products, served quickly and with a smile, in a clean
and pleasant environment; and all at a fair price
• They are committed to exceeding our customers'
expectations in every restaurant every time.
• They have a passion and a responsibility for enhancing and
protecting the McDonald's brand.
• They believe in a collaborative management approach,
employing a mutually respectful business philosophy,
• They will seize every opportunity to innovate and lead the
industry on behalf of their customers.

Supply Chain
 Supply Chain

Overview Cold Chain LocalSourcing Suppliers

Overview
Did you know that every year, Rs. 50,000 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. McDonald's is committed to providing quality
products while supporting other Indian businesses. And so, they
spent a few years setting up a unique Supply Chain, even before
they opened their first restaurant in India.
A Supply Chain is a network of facilities including - material flow
from suppliers and their "upstream" suppliers at all levels,
transformation of materials into semi-finished and finished
products, and distribution of products to customers and their
"downstream" customers at all levels. So, raw material flows as
follows: supplier - manufacturer – distributor – retailer – consumer.
Information and money flows in the reverse direction. The balance
between these 3 flows is what a Supply Chain is all about.
When there is a balance in the finished product ordering, the
Supply Chain operates at its best. Any major fluctuation in the
product ordering pattern causes excess / fluctuating inventories,
shortages / stock outs, longer lead times, higher transportation and
manufacturing costs, and mistrust between supply chain partners.
This is called the Bullwhip Effect.

Depending on the situation, the Supply Chain may include major

product elements, various suppliers, geographically dispersed
activities, and both upstream and downstream activities. It is
critical to go beyond one’s immediate suppliers and customers to
encompass the entire chain, since hidden value often emerges
once the entire chain is visualized.
Cold Chain
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 finding the factor of cold room being vital ensured that
even before vegetables from farms entered the refrigerated zones,
they were locked in a pre-cooling room to remove field heat.
Vegetables were placed in the pre-cooling room within half an hour
of harvesting where rapid cooling decreased the field temperature
of vegetables to 2ºC within 90 minutes. Then a large cold room (a
refrigerated van) was used for transportation to the distribution
centers. In the van, the temperature and relative humidity of crop
was maintained at 1-4ºC and 95 per cent, respectively and the
flavors and freshness are locked at -35°C.
At the suppliers' level, care was taken to guard against any
possible contamination or interruption in the cold chain that can
break the link and have a detrimental effect on the quality of their
product.
The iceberg lettuce from Ooty, mutton patties from Hyderabad and
sesame seed buns from Punjab were all delivered to Radhakrishna
Foodland Private Limited (RFPL) distribution centre (cold storage) in
its refrigerated vans. RFPL stored the products in controlled
conditions in Mumbai and New Delhi and supplied them to
McDonald's outlets on a daily basis.
By transporting the semi-finished products at a particular
temperature, the cold chain ensured freshness and adequate
moisture content of the food. The specially designed trucks
maintained the temperature in the storage chamber throughout
the journey. Drivers were instructed specifically not to switch off
the chilling system to save electricity, even in the event of traffic
jam.
Below mentioned is the data about Refrigerated vans for
McDonald's distribution

Type Route Quantity

National inbound Suppliers to Distribution Center 20 vehicles
Outbound North Distribution Center to restaurant 13 vehicles
Outbound West Distribution Center to restaurant 11 vehicles
Outbound South Distribution Center to restaurant 1 Vehicle
Vital
Links in our Cold Chain
All suppliers adhere to Indian government regulations on food,
health and hygiene while continuously maintaining McDonald's
recognised standards. As the ingredients move from farms to
processing plants to the restaurant, 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. Based
on HACCP guidelines, control points and critical control points for
all McDonald's major food processing plants and restaurants in
India have been identified. The HACCP verification is done at least
twice in a year and certified.

Local Sourcing
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 their 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
practices and the ability to grow or to export.

There are many cases of local suppliers operating out of small

towns who have benefited from their association with McDonald's
India.

Suppliers

Trikaya Agriculture - Supplier of Iceberg

Lettuce.
Successfully grows speciality crops like iceberg lettuce,
special herbs and many oriental vegetables. Farm
infrastructure features:

♦ A specialized nursery with a team of agricultural experts.

♦ Drip and sprinkler irrigation in raised farm
beds with fertilizer mixing plant.
♦ Pre-cooling room and a large cold room for post harvest
handling.
♦ A large cold room and a refrigerated van for transportation
where the temperature and the relative humidity of this crop is
maintained between 1º C and 4º C and 95% respectively.
 Vista Processed Foods Pvt. Ltd. -
Supplier of Chicken and Vegetable
range of products.
A joint venture with OSI Industries Inc., USA, and
McDonald's India Pvt. Ltd. Vista Processed Foods Pvt.
Ltd. produces a range of frozen chicken and vegetable
foods. A world class infrastructure at its 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 Celsius to retain total freshness.
♦ International standards, 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 standard 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. Its plant has:

♦ State-of-the-art fully automatic machinery requiring no

human contact with product, for total hygiene.
♦ 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.

Radhakrishna Foodland - Distribution

Centre.
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
strengths are:

♦ A one-stop shop for all distribution management

services.
♦ Dry and cold storage facility to store and transport
perishable products at temperatures up to – 22 C.
♦ Effective process control for minimum distribution cost.

Porter Value Chain Analysis of

McDonald’s
The goal of these activities is to offer the customer a level of value
that exceeds the cost of the activities, thereby resulting in a profit
margin for McDonalds.
• The primary value chain activities are:

Inbound Logistics: the receiving and warehousing of raw

materials and their distribution to manufacturing as they are
required.
Operations: the processes of transforming inputs into finished
products and services.

Outbound Logistics: the warehousing and distribution of

finished goods.

Marketing & Sales: the identification of customer needs and

the generation of sales.

Service: the support of customers after the products and

services are soldto them.

• These primary activities are supported by:

Technology development: technologies to support value-

creating activities.The value chain model is a useful analysis tool
for defining a firm's corecompetencies and the activities in which it
can pursue a competitive advantage as follows:

Cost advantage: by better understanding costs and squeezing

them out of the value-adding activities.
• As Per the Porter's 5 Forces analysis McDonalds deals with
factors outside an industry that influence the nature of
competition within it, the forces inside the McDonalds
influences the way in which the firms compete, and so the
industry’s likely profitability is conducted in Porter’s five
forces model. A business has to understand the dynamics of
its industries and markets in order to compete effectively in
the marketplace. So McDonald’s rivalry in this competitive
market is blooming.
Distribution Process at McDonalds
Suppliers are proclaimed to be the backbone of any good business
as they are the individual units that build supply chain. On them
depends the health of the overall business cycle.
Benefit in McDonald’s favor was its expertise in the areas of
agriculture, which allowed it, along with its suppliers, to work with
farmers in Ooty, Pune, Dehradun and other regions to cultivate
high quality iceberg lettuce. There was substantial effort on sharing
advanced agricultural technology and expertise with
farmers/suppliers like utilization of drip irrigation systems (for less
water consumption), better seeds and agricultural management
practices for greater yields.
McDonald's incorporated state-of-the-art food processing
technology along with its international suppliers to pioneering
Indian entrepreneurs. They had imparted technical training to all
their suppliers on operation the imported machineries, educated
them on the McDonald's philosophy of Quality, Service, Cleanliness
and Value (QSCV) in order to provide standardized food to our
customers.
Distribution Strategy at McDonald’s India
McDonald's had been working critically on its supply chain part.
Considering, an international brand trying to make inroads into the
Indian consciousness, its Indian supplier partners were developed
in such a manner that made them stay with the company from the
beginning. For this purpose, it has developed local Indian
businesses, which can supply them the highest quality products
required for their Indian operations. In the supply chain
management, the distribution centers hold special place for
bringing food right to the outlet counters. For McDonald's India, the
distribution centres came in the following order: Noida and
Kalamboli (Mumbai) in 1996, Bangalore in 2004, and the latest one
in Kolkata (2007).
McDonald's entered its first distribution partnership agreement
with Radha Krishna Foodland, a part of the Radha Krishna Group
engaged in food-related service businesses. Better facilities and
infrastructures were created along with new systems by them to
satisfy McDonald's high demands, which finally culminated into an
agreement with McDonald's India, for Radha Krishna Foodland to
serve as distribution centres for their restaurants in Delhi and
Mumbai. As distribution centres, the company was responsible for
procurement, the quality inspection program, storage, inventory
management, deliveries to the restaurants and data collection,
recording and reporting. Value-added services like shredding of
lettuce, re-packing of promotional items continued since then at
the centres playing a vital role in maintaining the integrity of the
products throughout the entire 'cold chain'. The operations and
accounting is totally transparent and is subject to regular audits.
McDonald's worked aggressively to attain the right suppliers and
systems that ensured that 90 per cent of yield was indigenous
before the doors were opened to consumers. The only products
that they used to import were oil and fries, for which they had
made arrangements to manufacture the oil in India. They ensured
that the products developed locally abide by global McDonald's
standards.
Improving Logistics At Mcdonalds

Logistics is the integration of the activities that procure materials,

transform them into intermediate goods and final products through
manufacturing and assembly, and deliver them to customers.
Comprising all movement of materials from incoming shipments,
inventory, production and the final delivery to consumers, logistics
managers are responsible for the right goods being where they
need to be at the right time. For a firm as large as McDonald’s
logistics is an area where proper planning results in increased
efficiency. Because of its size, little improvements in the way it
handles materials adds up. Conversely, a few, seemingly simple
lapses can cost the company millions.
Purchasing is the most costly activity in most firms. For the fast
food industry, the cost of purchases as a percentage of sales is
often substantial. Because such a huge portion of revenue is
devoted to purchasing, an effective procurement strategy is vital.
Purchasing provides a major opportunity for management to
reduce costs and increase contribution margins. Because the cost
and quality of goods sold is directly related to the cost and quality
of goods purchased, McDonald's must examine a number of
strategies for effective purchasing. Because of the perishable
nature of food, a system of just-in-time ordering and delivery is
most effective for the company. For such a system to work, solid
ties must be forged with a lot of suppliers. Ordering huge
quantities of beef, chicken, and vegetables and expecting them to
arrive at the shortest possible time requires coordination with
capable suppliers.
The company stands to gain the most with improvements in
production – the actual preparation of food. Raw agricultural
materials arriving at its commissary must be turned into buns,
hamburger patties, french fries and McNuggets™ with minimal
waste. It must then carry over this practice of efficiency into its
outlets. Also, managers at McDonald's must decide...

Conclusion

All the suppliers shared McDonald's commitment and

dedication for satisfying customers by supplying them the
highest quality products. They worked cohesively to
ensure that the final product reached the customer
consistently each time and every time. At their level, every
care is taken to guard against any interruptions in the cold
chain which can break the link and have a detrimental
effect on the quality of the product. And more products
reaching the market fresher and quicker not only benefit
the economy but also help the farmer earn more.