From Supply Chain to CUSTOMER

VALUE:
The McDonald's Way

1
You walk into a McDonald's fast-food outlet
with your six-year-old kid. As you reach the
counter, you place an order for two veg
burgers, pay for it, collect your burger-laden
tray and pull away to find a place to park
yourself while you munch your burgers. Your
kid is all vim and gusto, enjoying his burger
with lots of sauce. You are happy that the
stuff didn't cost all that much. Just Rs. 76 for
the two burgers. All served in the most
hygienic packaging, and fast. You wonder
how they do it.
How does McDonald's deliver consistent quality at
The old saying
about retailing affordable prices in India? Underlying its success
success mentions is a massive investment in the supply chain. From
three golden rule-
farm to processing centre to food-stall, it has built
Location, location,
location. In
one of the most cost-efficient chains.
McDonald's copybook you can add three
more ingredients; supply chain, supply chain
and supply chain. A super-efficient supply
chain is what lies behind its ability to deliver
high customer value at purse-friendly prices.
Let's start with the Rs. 38 veg-burger- which
your local restaurant can dish out just as
well, though maybe with a lower level of
quality consistency. He will buy ingredients
from different middlemen - the sauce, the
buns, the cheese and make the patty
himself. He will change the middlemen if they
charge too high. At McDonald's, they do it
differently. Each ingredient that goes-into the
burger will usually have one or two suppliers
at best and those suppliers are expected to
keep working at reducing costs through
improved efficiencies. You might think having
a monopoly supplier is the right recipe for
higher prices; but at McDonald's the idea is
to develop suppliers who grow big enough to
generate economies of scale and lower
prices while, of course, maintaining
consistent quality.
Coming back to the burger, the buns for the
western region come from Khopoli
(Maharashtra)-based Ras Foods, while
Cremica Agro Foods, a Punjab-based bis-
cuit-maker, supplies it to the north. The
sauces come from its affiliated company,
Mrs Sector's Specialty Foods of Ludhiana,
the cheese from Dynamix Dairy in Baramati,
the patty from Vista processed Foods at
Taloja, the iceberg lettuce from Trikaya
Agriculture (the last three in Maharashtra).
And tying the whole supply chain together is
the physical logistics company,
Radhakrishna Foods Ltd (RKFL), which
ships everything everywhere.
Some products (like lettuce) have more than
one supplier due to the fact that it can be
grown only in some seasons in some areas,
while the demand is all-year-round. But the
usual norm is to have as few suppliers as
possible. The logic: when you want the
burger in Delhi to taste and feel the same as
the one served in Chennai, having too many
suppliers is a luxury McDonald's cannot
afford.
The McDonald’s chain, invisible for the most
part, inf orms you of its existence only when
it moves. At 8 o'clock every night, a score-
and-odd white trucks carrying the
Radhakrishna Foodland banner move out of
delivery bays from two distribution centers
just outside Mumbai and Delhi (Thane and
Noida, to be specific). From patties to
cheese, ketchup to raw vegetables and ice-
cream mixes, a range of wet and dry
ingredients and pre-frozen products are
dispatched in hi-tech multi-temperature vans
to warehouses and then onwards to specific
retail golden arch outlets - some 48 in all
across 10 towns at last count.
The efficiency of the chain is apparent from
the thinking that went into these trucks.
When you have to transport around 500
tonnes per-month of varying quantities of
some 250 ingredients from 50-suppliers at
varying temperatures, you would have
needed a wider assortment of trucks than
McDonald's believes in having as few suppliers
as possible. Reason: by giving them volumes,
they can cut costs faster.
RKFL currently has. But look inside the
trucks, and you know how they contribute to
lower McDonald's supply chain costs. Each
truck has three levels of variable
refrigeration, and the size of each re-
frigerated compartment can be varied ac-
cording to need. Need more lettuce than ice-
cream one day? No problem. The com-
partment with the relevant temperature can
be expanded to take in more lettuce. This
flexibility is key to costs in a situation where
some perishables like tomatoes have to be
dispatched daily while products such as
cheese and buns need replenishing every
two to three days, depending on demand
and shelf-life.
From farm to
factory to fast-
food in your
tray, the
McDonald's
supply chain
appears well-
oiled today,
but it took several years to achieve this. "It
wasn't an easy job," says Amit Jatia, the
affable managing director of Hardcastle
Restaurants, one of he two franchisees of
McDonald's India. The other one is
Connaught Plaza Restaurants in the north,
run by Vikram Bakshi. The supply chain,
though, is common to both operations.
When one talks about retailing, the biggest
element of cost that comes to mind is the
real estate. McDonald's, which locates its
outlets only in the busiest places, no doubt
pays hefty premiums for its location. But
equally eye-popping is its investment in the
supply chain: Rs. 400 crore since it opened
the first outlet in 1996. Between now and
2005, it plans to invest another Rs. 400 crore
- all to deliver food items that cost, on
average, around Rs. 20-40 apiece. (Average
bills per customer: Rs 85).
But a Rs. 800-crore investment) in supply
chain and logistics does not look like overkill
if one juxtaposes it against the growth of
business projected in the near future.
According to retail consultant KSA
Technopak, the Rs 500 crore fast food
industry is likely to balloon 12-fold to Rs
6,000 crore by 2005. And in fast-food the
differentiator is always the efficiency of the
supply chain.
Consider this. McDonald's made its entry
around the same-time as fellow American
food giant Kentucky Fried Chicken. But eight
years later, Kentucky is still a non-starter.
McDonald has gone places -48 outlets so
Far, with more coming.
If reaching breakeven has taken all of seven
years, you have the real estate prices to
thank. Exclude real estate and overheads,
and the supply chain delivers such as cost
efficiencies that margins are said to ' be
upwards of 50 per cent.
Seven years, of course, is a bit off the mark.
For McDonald's foray in India goes back
further. Its supply chain work began almost
four years before it started its first outlet in
1996. This meant not only identifying farmers
for each of its ingredients, but also hand-
holding them-to churn out products as per
McDonald's specifications. The iceberg
lettuce, for example, has to be of a certain
weight; the peas have to be of a certain
dimension - else it might protrude through
the patty and get burnt.
It also meant putting in place a cold storage
chain, and cooking up a menu where mutton
stood in for the traditional beef patty - a strict
no-no in the land of the sacred cow. Besides,
the fast-food giant had to cobble up other
India-specific concoctions Like McAloo Tikki.
And then there was the question of getting its
pricing right. In India, typically one third of the
150- million-tonne production of fruits and
vegetables is lost at the post-harvest stage -
most of it attributed to wastage in storage
and transportation, mishandling and the cost
of intermediaries in the food chain. There
was no way McDonald's could have suc-
ceeded in India if it had to take this as given.
Says S.D. Saravanan, quality assurance
manager of McDonald's: "There is no way we
can pass on our costs to the consumer. So
what do we work out efficiencies in the
system to reduce costs," This meant helping
farmers improve yields on the crop; helping
poultry farmers use better feed so that birds
are heavier.
The logic is simple. The help provided by
McDonald's to its partners - its suppliers are
always "partners", never just suppliers - not
only ensures that it gets products as per
specifications, but also gives them
opportunities to upgrade their services and
enlarge their business portfolio. 'The single-
vendor concept has all the advantages of
increasing volumes for suppliers." says
Sundar Srinivasan, country purchasing
manager for McDonald's.
Thus Dynamix Dairy in Baramati, which
makes cheese for McDonald's with
dedicated assembly line, also churns out
cheese singles for biscuit-maker Britannia
that are marketed under the brand name
Milkman. Trikaya Agriculture is now one of
the largest providers of iceberg lettuce to
McDonald’s. And "Vista Processed Foods,
which processes a range of frozen chicken
and vegetable foods at its state-of-the-art
plant at Taloja, now supplies not only to local
McDonald's outlets, but additionally to some
in the Middle East and a host of hospitality
companies. Even Mrs. Beetor's Specialty
Foods, which supplies sauces to McDonald's
India, is considering enlarging its business to
encompass a range of condiments and
sauces.
The next key links in the supply chain are
warehousing, transportation and retailing of
products under controlled temperatures.
Thai's where the cold-chain distribution
network comes in. As the ingredients move
from farms to processing plants
restaurants. McDonald's Quality Inspection
Programme carries out quality checks at over
20 different points in the cold chain.
So intense is the planning of the supply
chain that if a new product hits the market
today, be sure its journey began a good two
years before that. For example, one new
entrain to McDonald's buffet was
vegetarian and non-veg curry pans intro-
duced in April this year, Work began on
these two products two years ago. They
were tested in two restaurants in Mumbai
and Delhi before going national, "it takes us
that long to gel the supply chain right. We
launch a product only alter everything is in
place." says Jada. "Our strategy is to achieve
best value by offering best quality while
keeping prices reasonable. We keep our cost
low by increasing efficiency and cutting
wastage at all levels," he adds.
The only way to contain costs is to guarantee
volumes from suppliers and force them to
upgrade their systems and processes to
minimize waste and speed up production.
For the farmer, a better yield means less
rejections and better price realization. And
with increasing volumes, a supplier can
extend his business beyond McDonald's, "it
is a two-way thing. Both McDonald's and its
suppliers benefit through improved
efficiencies says a consultant.
a Cremica Industries, a biscuit-maker from
Punjab, has tied up with one of McDonald's
British suppliers. It is now a major supplier of
buns and batter to the fast food chain and
other companies.
A look at McDonald's supply chain is an
amazing peep into how well the fast-food
giant has worked out the nitty-gritty’s of its
products right down to the basic ingredient.
While it would be impossible to look at all the
250 ingredients that go into making
McDonald's Indian offerings, we zeroed in on
five products which account for 80 percent of
McDonald's ingredient costs. These include
the patty, iceberg lettuce, buns, potatoes and
cheese. While patty tops the value chart, the
buns and ice-cream mixes account for the
volumes.
Just how do these products reach the
consumer? The daily logistics exercise for
each of the products is similar. From farm to
processing centre to distribution centre to
to retail outlet. Here's how McDonald's has
added value to key suppliers in its supply
chain.
TRIKAYA AGRICULTURE
It's the thick of summer. But the Trikaya farm
at Talegaon near Pune is lush with iceberg
lettuce, a crop which thrives in cooler climes.
the Today, the farm, set up by the late
advertising legend Ravi Gupta
eighties, is one of the major suppliers of
iceberg lettuce to McDonald's India. Until
1996, lettuce was nowhere on Trikaya crop
menu. Today, it can give established players
a tip or two on how to grow the best stuff. It
uses drip-irrigation and efficient
management techniques to supply iceberg
lettuce to McDonald's throughout the year at
a competitive price. From the earlier 35
tonnes per annum offtake, McDonald's now
buys a third of its 450-tonne
requirements from Trikaya. The rest comes
from farms in Ooty (20 percent), Meena
Agritech of Delhi (25 per
cent) and Ferracon Farms So intense is McDonald's planning
in Dehradun.
of its supply chain that if a new
McDonald's first began
trials of the crop way back
product hits the market today, be
in 1990 at Gangtok, sure its journey began two years
Sikkim. “For us, everything
starts from raw materials”,
says Saravanan. So the key for Trikaya was
to get the maximum yield. It began by
cultivating 1 acres of lettuce to check the
quality and yield. Once that was established,
the challenge was to expand horizontally – to
over 150 acres.
Not that the McDonald's association comes
without risk. Any damage to the crop is borne
by the supplier. "McDonald' accepts only
good quality material, so we have to
minimize our rejections." says Hari Gowda,
the Trikaya farm manager. The lettuce crop
is highly vulnerable to weather, conditions. It
can fail if there is excess rainfall, heat or
hailstorm. It has to be harvested at the right
time and handling has to be minimized to
maintain the freshness.
That's where McDonald's pitched in with
advice. To avoid calamities, McDonald's
suggested that the lettuce seeds (purchased
from McDonald's, which imports them) be
planted on raised beds or moved to two other
non-flood prone locations eight km and 40
in the km away during the monsoon. A lettuce crop
has a three month cycle. Once the seed is
planted, it lies in the nursery for 30 days. The
next 60 days are in the fields. Once
harvested its shelf life can be 15 days,
depending upon how quickly the temperature
farm is lowered to two degrees centigrade.
There is also the fear of pests. So once
again, integrated pest management has be-
come the key at Trikaya to minimize egg-
laying. Water accounts for 95 percent of
annual lettuce, making it an ideal fodder for pests.
Two years ago, Gowda discovered that the
entire produce is pest-infested. Today, with
before that.
McDonald's help, Trikaya uses the right
pesticides during different times of the pests'
lifecycle and inhibit their growth. Every
Monday, the pest-scouting data is passed on
to McDonald's office and together they work
out a solution. Result: pest-related rejections
are down to 10 per cent.
Trikaya has also invested in a cooling plant
and a refrigerated vehicle to transport the
produce. Then, to achieve improved efficien-
cies at the plant, it has devised ways to
minimize labor-handling of the produce. The
plant has
to he Mc Donald's still imports New Zealand
harvested
potatoes for French fries. Indian
at the
right time potatoes are 2-3 years away from
to retain catching up.
the leaf's
crispness and the weight of the lettuce head.
In winter, the head weight ranges from 400
gm to more than 900 gm. In summer, it is a
mere 200 gm. The rejection rate at harvest-
time is 20 per cent. To avoid excessive man-
handling, the head, which is cut at the base,
is placed directly onto a tray which goes to
the refrigerated room. It's stored there till the
morning, when it is sent, to the processing
plant. The lettuce is harvested everyday at
6am, packaged and maintained at a tem-
perature of two degrees centigrade in the
cooler. It is transported by a truck in a
compartment maintained at four degrees
centigrade. When it arrives at the processing
centre, it is processed at 8-12 degrees room
temperature while product and water
temperature is one to four degrees and kept
for upto a week before being dispatched to
the distribution centre in Thane, a north-
eastern Mumbai suburb.
In all, Tikaya produces about 45 tonnes of
lettuce a month and McDonald's up about 15
tonnes on an average. “It is always good to
have excess than short” says Gowda.
Sure, Trikaya has invested heavily to
upgrade its farm infrastructure. These
investments include a specialized nursery
and team of agricultural experts,
drip and sprinkler irrigation in
raised farm beds, a fertilizer-mixing
plant, a pre-cooling room and a
large cold room for post-harvest
handling, and a refrigerated truck.
How has this benefited Trikaya?
Apart from having McDonald's as a major
client for iceberg lettuce, its other specialty
products now include special herbs and an
array of oriental vegetables. It has also
started supplying broccoli to McDonald's for
its newly-introduced veg curry pan. Lettuce is
one area where McDonald's breaks iis own
rule of putting all its eggs in one supplier's
basket. It has three to four suppliers of
lettuce, but with good reason. Given the
fragility of the crop, it is always possible for
one of the suppliers to have a washed-out
crop. Trikaya, with its excess capacity, fills in
to maintain the steady flow of supply. There
are also plans to supply to McDonald's
Middle East operations and the Asia-Pacific.
All these steps, coupled with improved
sanitation measures, have also increased the
shelf-life of the shredded iceberg lettuce at
retail outlets. From the earlier three days, it is
six days now. But it isn't that McDonald's
picks up the same quantity. With the
constant launch of new products, projections
are made six months in advance. So Trikaya
monitors its iceberg lettuce accordingly. The
surplus is sold in the local market for which it
gets a better price - Rs 30 to Rs 100 a kg.
McDonald's, on the other hand, is able to
leverage the economies of scale to buy
cheap.
VISTA PROCESSED FOODS
Let's now enter the industrial hub of Taloja
on the outskirts of Mumbai, into the 2,000 sq
meter plot of Vista Processed Foods. Vista is
an equal partnership company between US-
based industries-(a food outfit with global
interests m meat, poultry and other value-
added, Food-processing activities) and
McDonald's. It sources the chicken and
vegetable range for western India
consumption from Vista. Processing food in
the north is Radhakrishna Foodland, which
also doubles up as a distribution centre.
McDonald's strategy for its suppliers has
been simple. Once it identifies suppliers, it
encourages them to work with its foreign
partners to gain technical know-how. Over
the years, having acquired the wherewithal to
supply raw materials or products to
McDonald's Indian specifications, the local
supplier has either gone it alone or has been
bought over by the foreign counterpart.
Vista began as a joint venture between OSI
and an Indian partner- Kitran Foods. The
latter opted out when it changed its business
focus. That's when McDonald's stepped in.
Today, Vista, with its state-of-the-art plant,
provides 20-30 per cent of McDonald's total
purchase of processed food. It also supplies
to oilier institutions like hotels, restaurants
and hospitals. As part of Vista's quality
control drill, no outside edible stuff-is
permitted on its premises. It does about Rs
400 crore of farm products, reveals CEO
Bhupinder Singh, an ex-Nestle manager. It
deals with 45 suppliers for the 12 products it
supplies to McDonald's, ranging from frozen
peas and assorted vegetables for the
vegetable patties to procuring the right
quality of birds for the chicken patty.
The loquacious Singh may be a food-
processor, but his knowledge of farming and
supply chain intricacies could have even the
most experienced farmer and restaurateur a
complex. Quite aware that the country is
weak on post-harvest measures, he ensures
that the farm harvest reaches his factory in
24 hours.
Take peas, for example. McDonald's accepts
only a certain size of pea. If it is too big, then
it is rejected. Why? There is every chance it
might pop out of the patty, which has a
specified diameter, and get burnt.
Vista constantly works with its farmers to
obtain the right crop. Over the years, the
suppliers who have been investing h cold
storage plants send frozen produce to Vista.
It maintains a pea stock of one month in its
cold storage. The supplies are replenished
by the farmer every month. "Any supplier
who works with us becomes an exporter. It is
backward integration for him," says Singh.
Now, take a look at how the patty is frozen. A
food expert mixes the vegetables as per
McDonald's recipe. It is then mixed with rice
as the binding agent. Once -this mix is fed
into the automated ma chine, it goes -
through the motions of being dipped in batter
and then rolled in bread crumbs and fried
and frozen - all this in exactly half an hour.
The final outcome is a frozen and packaged
patty which then has a shelf-life of one year.
It is maintained at -18 degrees centigrade.
Or take the chicken, which is widely used for
the Chicken McGrill. It has been developed
by Suguna Poultry of Coimbatore, which
provides the frozen deboned meat to Vista.
In fact, by the time the meal comes to Vista,
it has traveled quite a bit. The eggs are laid
in Bangalore. The hatching and contract
farming is done out of Pune. The bird is
processed in Pune before it is deboned and
sent to Vista. 'The egg hatching to bird killing
cycle takes 45 days and another five more
days for processing," says Singh. Vista picks
up 70,000 birds a month from Suguna, which
is 20 percent of its output.
By improving the quality of the feed, Vista is
able to improve the weight of the bird.
Earlier, a bird's weight would vary between
1.4 kg and 1.6 kg. Today, it ranges from 1.9
kg to 2.1 kg. Now what happens if pests
attack the feed crop and destroy the birds?
Are chicken patties discontinued at
McDonald's? Far from it. McDonald's has an
equally efficient backup plan in place for
assured supply. It has a host of suppliers on
standby if the assigned consignment fails to
deliver on different parameters. While the
vegetarian products are made every day, the
chicken range, which has a separate but
identical line, is made five to six times a
month. If Vista has to contain costs, then it
has to constantly strive to keep rejections to
a minimum. After every batch of patties, a
quality assurance expert fries a patty to test it
for color, appearance, internal texture and
flavor. If it passes muster on all the above
parameters, it is ready to be sent to the
distribution centre. If it falls short on even
one of the parameters, the entire batch is
rejected. By constant trial and error,
rejections are down from the earlier eight to
ten per cent to the current two per cent.
Singh claims that the major issues are
temperature related.
Or take cheese, which comes in both
shredded form and as singles. While the
singles go directly to McDonald's two dis-
tribution centers, the shredded cheese
comes to Vista to be used in a range of con-
coctions. While Modern Dairy and Amul
provide the paneer, the cheese is made by
Dynamix. Just how McDonald's nurtures its
suppliers is evident in the Fact that Dynamix
has set up a separate line for its fast-food
client. For Britannia, every cheese single
rolls out independently and is packaged at
the automated plant. For McDonald's,
Dynamix produces sheets of cheese which
are then cut into eight slices each. Says
Saravanan, "In an efficient supply chain, you
have to keep innovating. We will ensure that
our supplier makes money but not that much
that he puts all costs on us. It has to be
activity-based costs."
MCCAIN FOODS
Growing the right kind of potato for its French
fries has been a troublesome learning
experience for McDonald's. One of its
suppliers, Lamb Weston, invested heavily in
setting up production lines to process Indian
potatoes in the early nineties. But with the
quality of the potato crop not up to Mc-
Donald's specifications, the project had to be
abandoned. Now, McDonald is partnering
with its main global supplier, McCain Foods,
the world's largest French fries company.
Together, they help Indian farmers grow the
right kind of potatoes. According to
Saravanan, who is an agricultural expert, the
Indian potato wasn't as good as farmers
used seeds from the preceding crop. As a
result, not only did it have only one variety of
the crop, but the quality was poor.
The McDonald's specifications were clear
and unbending: a certain length, high solid
content and low moisture. "Indian potatoes
have 14-19 per cent solid matter compared
to the global standard of IS-26 per cent,"
says Saravanan. So McCain, a leader in
agronomy, zeroed in on Deesa and Kheda,
two Gujarat towns. It has been helping
farmers in these places with hotter agronomy
techniques, including irrigation, sowing seed
treatment, planting methods, fertilizer
application and storage.
Saravanan says the crop is improving.
McDonald's now sources the Indian potato
from Gujarat for its wedges, which now claim
21 percent solid content. He claims that it will
take a good three to four yean before the
right quality of potatoes (with 24 per cent
solid content) are grown for French fries.
"We are slowly getting better” he says.
Meanwhile, the potatoes for French fries
continue to be imported from New Zealand.
Industry sources say McDonald buys around
350 tonnes of potato for wedges every year
and imports around 1,200
tonnes for French fries.
The help provided by McDonald's to
From the processor, the
the processed food to its distribution centers,
where it is warehoused. From warehouses,
RKFL also takes the products to McDonald's
various outlets littered across the country, a
job which was earlier done by Cyrus
Guzder's logistics company AFL.
How did R KFL do all of this? Like the others,
RKFL too was in sync with McDonald's
strategy of helping its partners grow. It
introduced RKFL to Australia's F J Walker to
develop the distribution system. In fact,
Shete once admitted-that his group's growth
was closely linked to McDonald's. RKFL
created better facilities, infrastructure and
new systems to satisfy McDonald's
demands.
Consider the priorities of the distribution
centre (DC). It is responsible for
procurement, quality inspection, storage,
inventory management, deliveries to
restaurants and data collection, recording
In terms of sales, the chilled and frozen
supplies constitute 65 percent, says Sanjay
Ghone, general manager of RKFLs DC near
Mumbai. "With the increasing number of
restaurants, constant education and learning
has made a difference. The relationship
between McDonald's and us is that of a
carrying and forwarding agent," he adds.
A critical factor has also been truck
utilization. RKFL has invested in 24 multi-
temperature trucks which offer three different
temperatures - ambient, chilled and frozen.
This has no doubt saved on transportation
time and helped RKFL reschedule deliveries
based on orders from various outlets. Earlier,
transportation productivity was six 1(5 seven
cases per man-hour. This has gone up to 16-
17 cases. Moreover, every case was earlier
moved manually from the truck to the
restaurant. Today, trolleys transport four
cases at a time. Even the boxes, which used
to he placed haphazardly as in
any godown, are well aligned
now.

food is taken directly to

its suppliers ensures that it gets The entire facility is subjected to
Radhakrishna Foodland products as per norms, while giving inspection by McDonald's
Ltd's (RKFL) two them opportunities to upgrade experts every six months to
distribution centers-(DC) at ensure that none of the products
services.
Thane near Mumbai and are damaged in warehousing
Noida in Delhi. The centre in the north also and reporting. It also participates in certain and the right temperatures are maintained.
doubles up as a processing unit. RKFL s the value-added services like repacking of Says Saravanan, "There's a contingency
distribution and logistics arm of Rad- promotional items. All this done in a cost- plan for all ingredients and distribution. If the
hakrishna Hospitality Services, the Mumbai- effective way. power goes off, there are three gensets. If
based food caterer. So what are the major cost drivers? In 1996, that conks out, there's a mobile genset."

RKFL's association with McDonald's began
well before the fast-food chain made an India
entry. In 1993, having heard about their
plans-to enter India, Raju Shete, head of the
RKHS group, visited the US-headquarters of
McDonald's. This was largely for distribution
- picking up products from suppliers and
bringing ii to the processing centers. Today,
RKFL is the sole distributor of McDonald's. It
picks up raw materials from the suppliers and
sole distributor of McDonald's. It picks up raw
materials from the suppliers and brings it to
the processing centers. From there it takes
well" says Ghone. Adds Saravanan, "This is very important to our business."
the DC had inventories of 35-36 days. Now,
with more sales and efficiencies, ii is down to
around 1.1 days. So much so that the
division has focused all its resources to meet
McDonald's expectations of “cold, clean, on-
time delivery”. The DC maintains nine to
10'days1 worth of inventory - about 175
stock-keeping units. Dry goods account for
60 percent of inventory compared to 20
percent each of frozen and chilled stuff. This
includes both inbound (those picked up and
brought to the DC) and outbound (which are
taken from distribution centers to the outlets).
Once processed, all the products have a
minimum of 60 days’ shelf-life, except for the
buns, which have five days' and the lettuce
three days.
There are also systems in place for tracking
demand and supply. Every fortnight, RKFL
sends rolling projection to die suppliers for
the next three fortnights as every purchase
order is placed three weeks in advance. The
objective? 'To minimize the conversion of
raw materials into Finished products. This
helps suppliers to control their inventory as

A big hurdle here was the accurate forecast of product movement. Earlier it was tracked manually from each of the restaurants. Today, with
volume increasing, it is tracked through the product-mix. Outlets are able to gauge which are their best-sellers. "The distribution business works
on turnarounds of lock as fixed costs like storage are distributed over larger volumes," says Ghone. So RKFL has three turnarounds a month
compared to just one when it begun operations.
The use of multi-temperature trucks has reduced the number of daily deliveries to McDonald's outlets, which maintain an inventory of 2.5 to
three days' requirements. This is not all. McDonald's is constantly pushing its suppliers and DCs to bring costs down further. This means that the
suppliers have to continuously keep reinventing the way they do business to save time, speed up response and cut costs,

As a supplier says: "It is a win-win situation for both McDonald's and us. We cut costs and improve efficiencies, and the client stays with us
because we deliver. "Isn't that the best relationship possible?" Quite.

Suppliers
Trikaya Agriculture - Supplier of Iceberg Lettuce
Implementation of advanced agricultural practices has enabled Trikaya to successfully grow 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 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
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 Dairy - Supplier of Cheese

Dynamix has brought immense benefits to farmers in Baramati, Maharashtra by setting up a network of milk
collection centers 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 humanized baby food.
 Stringent quality control measures and continuous Research & Development

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
Degrees Celsius.
 Effective process control for minimum distribution cost

Source: http://www.mcdonaldsindia.com/aboutus/supplychain/suppliers.html