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Management Information System "Manugistics" at Mcdonalds:: "Mcdonald'S Restaurant Case Study"
Management Information System "Manugistics" at Mcdonalds:: "Mcdonald'S Restaurant Case Study"
“It is one of the most accessible web-based architecture that was implemented by
the company’s management after due diligence and proper testing (2)”.
It is a new planning and forecasting software system that predicts following aspects:
This system has proved quite beneficial for the company. Its major advantages
include (1):
“In France and Germany, participating restaurants used the system to reduce raw-
item waste by 30%, and cut inventories by 30%. In addition, the number of times a manager
had to bring store product from one restaurant to another due to shortages was reduced
from eight to four (3)”.
There is never shortage of stock. This results in customer’s satisfaction in
getting everything that they ordered.
The orders are made accurate based on current stocks.
The time required in preparing an order is calculated accurately and
efficiently.
The amount of stock ordered for promotions is more accurate, based on past
performance.
There is a reduction in the need for emergency deliveries. This ultimately
saves money.
Stock levels are always at optimum level. It thus helps to ensure sales and the
freshest product.
Stock can be reduced automatically at the end of a promotion, thus avoiding
too much stock.
In order to enhance the efficiency and accuracy of present stock control system,
the company needs to implement some new information processing tools and methods
to enhance the stock management activities. The methods are as follows:
1. Just-In-Time (JIT):
This approach is best applicable for providing “fresh” food i.e. the
raw materials are received just in time; they are processed and produces
meals that are served to consumers just in time too. It means that fresh
meals are completed and served on the spot to the guests (4).
1. Just-In-Time (JIT):
This approach, as explained above, provides fresh product in lesser time i.e.
as soon as the order is placed, the food is prepared by employing freshly received
raw materials and hence served just in time without any delay (5).
EOQ is defined as the “order size that minimizes both total stock
holding and ordering costs”. Its general formula mainly comprises of stock
holding cost, ordering cost per item and demand (7).
Given data:
Manual Calculations:
2∗D∗S 2∗545∗2000
EOQ =
√ H
=
√ 1500
= 38
The reorder point = R = d́ * L = 150 * 2 = 300 happy meal boxes for week 1.
Below is the spreadsheet of calculations for EOQ and its respective graph:
EOQ model chart
£160,000.00
£140,000.00
£120,000.00
£100,000.00 total Costs
£80,000.00 ordering Costs
cost
(The complete excel calculations in spreadsheet are attached also in a separate excel file.)
Step 1:
First of all, the demand for happy meals boxes per week of an eight
week period is given below:
The demand in each of the eight weeks is shown above. The company
initially has 260 happy meals boxes available so if these are used to meet the
demand of 150 in week 1, we get:
260-150 = 110 left on-hand (i.e. in stock) at the end of the week.
would each ensure that sufficient happy meal boxes are available to
meet forecast demand in week 5.
If 135 happy meal boxes are ordered earlier than week 3, then the
company will be carrying extra inventory (stock) for a number of periods,
thus carrying stock costs money. It would seem appropriate therefore to
order 135 chairs in week 3. This will give:
(The complete excel calculations in spreadsheet are attached also in a separate excel file.)
1. Network Diagram:
For given data of the new project, the network diagram is drawn here under:
In above network diagram, each activity is represented by a vertex. The
vertexes are joined with each other in the manner each task is to be completed
before or after one another. The number marked on each arrow head i.e. arc is
shows the duration (in days) of each respective task.
2. Critical path:
Now, by moving backward, the latest possible start times are calculated as:
E = 10 – 1 = 9
C=9–4=5
D=9–3=6
A=5–4=1
B = minimum of 5 – 5 = 0 and 6 – 5 = 1
These values are shown in the denominators of the nodes values. The
vertices with equal earliest and latest starting times make up the critical path and they are:
Critical path = B C E
Calculation of financial viability for the launch of increased burger
production:
The financial viability of this new project can be calculated by estimating the
values for Internal Rate of Return (IRR) and Net Present Value (NPV). Both values are
calculated separately for 10% and 20% and then compared and correct one will be
selected.
For 10%
For 20%
Conclusions:
In order to decide the values of IRR and NPV among the two from 10% and
20% annum calculations, following results are deduced:
Work cited
1- http://businesscasestudies.co.uk/mcdonalds-restaurants/managing-stock-to-meet-
customer-needs/types-of-stock.html#axzz2GceyjHtq
2- http://www.computerweekly.com/news/2240058399/McDonalds-gets-a-taste-of-
future-demand-with-Manugistics-roll-out
3- http://supermarketnews.com/archive/mcdonalds-controls-inventory-worldwide-
system
4- http://www.suic.org/wp-
content/uploads/research3/mba_research/25Thanchanok_Prasarnsuklab.pdf
5- http://www.inventorymanagementreview.org/2005/11/mcdonalds_a_gui.html
6- http://www.slideshare.net/simplyshreya99/demand-forecasting-inventory-
management#btnNext
7- http://www.scribd.com/doc/22765513/Strategic-Operations-
Management#outer_page_6
8- http://www.cargalmathbooks.com/The%20EOQ%20Formula.pdf
9- http://www.cimt.plymouth.ac.uk/projects/mepres/alevel/discrete_ch12.pdf
10- http://www.businessdictionary.com/definition/critical-path.html