Anne Janelle M.

Jumadiao BOM02 BSBA OM 2-1

Inventory Management of McDonalds

In the surge of globalization, McDonalds became one of the most successful and popular
fast food chains in the world. One of the reasons behind their success is their Inventory
Management System. Since it operates in most countries, the need to control for their supply
management is very crucial. McDonalds lies in the food industry and most of their products are
perishable goods so it is important to handle its Inventory Management properly in able to avoid
or eliminate all forms of corporate waste.

McDonalds practices a Just in Time (JIT) system as a method of inventory control. As the
name proposes, JIT is a method of providing consumers with goods as soon as they have ordered
it. It simply means that McDonalds doesn’t begin to cook its orders until a customer has placed
an order. This enables them to have wastage reduction. But why is that so? Before, McDonalds
used to pre-cook a batch of hamburgers and is seated under heat lamps and wait until it is ordered
by the customer. But the problem to this kind of system is, if they cook their burgers in advance
and there’s a lot of leftovers that are not served, they would eventually discard whatever they
couldn’t sell and lead to a huge increase in their costs. But when McDonald’s adopted to the JIT
system they have improved the quality of their products since it is prepared freshly, making special
orders will not be an issue thus improving customer service, and there would be a reduction in
their costs due to significant reduction in wastage as uncooked material has higher shelf life.

McDonalds also has a regular contact between central restaurant supply manager and
individual restaurants which helps to manage their inventory more accurately. There is a central
team which includes employees who works in individual restaurants as well as regional planners.

Source: http://cmuscm.blogspot.com/2014/11/how-mcdonalds-manage-its-inventory.html
 Every regional planner deals with 100 restaurants and interacts with them through e-mails
and teleconferences on a regular basis. If there are any concerns or factors than can possibly
affect their inventory, they would address it within the team. Regional planners also works with
Manugistics, it is the new ICT stock control system to ensure the adequate amount of raw
materials. They also examine some necessary factors so that they can anticipate future demands
from past performances and potential promotional strategies as well. For example, when there’s
a “Buy one Get one Free” campaign for Big Macs, the sales of Big Mac will also increase so in
their forecast, they need to prepare enough stocks to supply all the needs of the promotion. In
this way, stock levels are always optimum, helping to ensure sales and the availability of the
freshest product.

A stock control chart is also crucial part in McDonalds’ inventory system. This displays the
balance of orders for new inventory against sales. The system is heavily based on projected sales
figures. For instance, is McFlurry’s sales ran out of the system, then ice cream stocks will need
to be entering the system.

Source: http://cmuscm.blogspot.com/2014/11/how-mcdonalds-manage-its-inventory.html

For each restaurant, the Manugistics program uses a few years of product sales history
to produce time series forecasts. And for the forecast, the regional planner team adds a specific
factor to the time series analysis. Then, the graph can produce a prediction or forecast for the
future inventory level after calculation.

For any company especially chain restaurants like Mcdonalds, effective and reliable
inventory management is essential. The effort that Mcdonalds is exerting in stock management
enables every restaurant managers spend more time focusing on ensuring high quality service
and the whole system is designed to control on reducing their waste. With their inventory
management, they can establish an efficient use of raw materials and fewer wastes are produced.
This gives a benefit for Mcdonalds and at the same time it benefits the environment.

References:

M8A Students. (2017). Just in Time (JIT) in McDonalds. Retrieved from

https://www.slideshare.net/AJ165/justintime-in-mcdonalds

Business Says. (2019). McDonald’s: Inventory Management Practice and its Advantages.
Retrieved from https://businessays.net/mcdonalds-inventory-management-practice-and-its-
advantages/

(n.a). (2014). How McDonald’s manage its inventory? Retrieved from

http://cmuscm.blogspot.com/2014/11/how-mcdonalds-manage-its-inventory.html