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Supply Chain Management of McDonalds India

Aditya Jain

Aditya Jain

Jan 13, 2019 · 4 min read

Introduction:

McDonalds opened its doors in India in October 1996. 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.

The company has a 100 percent outsourced supply chain, which is a rare case in industry giants. But
McDonald‟s has complete control over its functioning. The performances of outsourced companies are
monitored on Key Performance Indicators (KPIs).

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E-Procurement System:

McDonalds uses an e-procurement system under the name of Emac Digital Company which is owned by
McDonalds and Accel-KKR Internet Co. E-Procurement is a website that allows McDonald’s franchises to
buy everything needed to run their restaurants.

The complete supply chain of the McDonalds is operated over the Emac e-procurement model.

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McDonalds E-Procurement Model

Suppliers of Raw Materials:

McDonald’s India today purchases more than 96% of its products and supplies from Indian suppliers. It
imports only oil and fries. McDonald’s has a total of 40 suppliers in which 14 are the core suppliers,
known as Tier-1 suppliers, they supply directly to the fast food chain:

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Core Suppliers:

Amrit Foods: Amrit Foods, a division of Amrit Banaspati, has been associated with McDonald’s India as
a supplier of Dairy Mixes, Soft Serve Mix and Milk Shake Mix for over a decade now.

Cremica Industries: Cremica Industries was started in 1980 as small ice-cream unit run by Mrs Bector
out of her backyard in Ludhiana. However, after its initial success Cremica added buns and biscuits to its
product line and in 1996 McDonald’s selected Cremica to be its supplier for buns, liquid condiments,
batter and breading in collaboration with its international partners.

Dynamix Dairies: McDonald’s India has approved Dynamix Dairies, Baramati (Maharashtra) for the
supply of cheese to its restaurants. Dynamix has a modern automated plant that is fully computer
controlled.

Trikaya Agriculture: Trikaya Agriculture is McDonald’s supplier of fresh iceberg lettuce. The farms at
Talegaon, Maharashtra produce the crop throughout the year.

Vista Processed Foods: Supplier of Chicken and vegetable products from its Hi-tech refrigeration
plants for themanufacture of frozen foods at a temperature as low as -35C.

Logistics:

100 sales items in the restaurant

400 SKUs in the warehouse

200 restaurants per DC (~180 DCs globally)

Delivery frequency: ~3/wk, higher in urban areas

 2–3 stops per route

Exclusive distributors (3PL)

Strong quality focus (Cold Chain, HACCP, QIP).

Distribution:

Radha Krishna Foodland serves distribution centres to McDonalds across the country. It handles the
entire distribution in the country with four Distribution Centres (DCs). As distribution centres, the
company is responsible for:

procurement,

quality inspection programme,

storage,

inventory management,

deliveries to the restaurants and

data collection,

recording and reporting.

These distribution centres (DC) are dry and cold storage facility to store and transport perishable
products at temperatures up to — 22 Degrees Celsius.

Value-added services like shredding of lettuce, re-packing of promotional items continued since then at
the centers playing a vital role in maintaining the integrity of the products throughout the entire ‘cold
chain’.

There are only two products, buns and Cokes, which are sent directly to the restaurants. Buns have a
limited shelf life; hence they are sent directly to the outlets. Coca Cola has its own distribution system
which ensures quick dispatch of its products.
McDonald’s has no legally documented Service Level Agreements (SLAs) with RKFL. For distribution
partner also McDonald’s has set KPIs (Key Performance Indicators). The DCs are assessed on several
factors like:

⦁ administration efficiency

⦁ the total number of cases managed per man hour,

⦁ warehouse efficiency,

⦁ overtime as a percentage of the total number of hours worked and in the case of transportation,

⦁ the number of cases handled per trip,

⦁ truck utilization, etc.

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McDonalds Supply Chain in India

Transportation:

The items are stored in rooms with different temperature zones and are finally dispatched to the
McDonalds restaurants on the basis of their requirements.

The company has delivery trucks to transport products at temperatures ranging from room temperature
to frozen state. The specially designed trucks maintained the temperature in the storage chamber
throughout the journey.

Trucks:

National inbound — Supplier to DC: 20 vehicles + 2 for Kolkata.

Outbound north — DC to restaurant: 13 vehicles.

Outbound west — DC to restaurant: 11 vehicles.

Outbound south — DC to restaurant: 1 vehicle.

 Proposed Kolkata — DC to restaurant: 1 vehicle

CONCLUSION:

McDonald‟s Supply Chain is quite uniquely handled with the least number of employees on McDonald‟s
payroll. The control over outsourced entities is commendable. With an ever-growing business of fast
food McDonald‟s has laid down its systems efficiently and expanding at enormous speed. The model can
be replicated in other sectors as well.

REFERENCES:

KSHITIZ SHARMA. (January 2013). A CASE STUDY ON MCDONALD’S SUPPLY-CHAIN IN INDIA. Retrieved
from
https://www.researchgate.net/publication/276881546_A_CASE_STUDY_ON_MCDONALD'S_SUPPLY-
CHAIN_IN_INDIA

Essays, UK. (November 2013). Supply Chain Management of Mcdonalds in India. Retrieved from
https://www.ukessays.com/essays/marketing/supply-chain-management-of-mcdonald-in-india-
marketing-essay.php?vref=1

Sarvanan Rulez. (January 2012). Supply Chain Management of McDonalds. Retrieved from
https://www.slideshare.net/saravanansaravanan/supply-chain-management-of-mcdonalds-10883321