EXPENDITURE CYCLE

The expenditure cycle is the set of activities related to the acquisition of and payment for
goods and services. These activities include the determination of what needs to be
purchased, purchasing activities, the receipt of goods, and payments to suppliers. Much of
the input to the expenditure cycle comes from the sales cycle, where purchasing
requirements are driven by the volume and type of customer orders.

The expenditure cycle is comprised of several distinct components, including the requisition
of goods and services, supplier selection, the ordering of goods and services, their receipt,
and subsequent payment for them.

On June 2000, McDonald’s formed a partnership with Accel-KKR, Inc.  to establish eMac

Digital, a new company designed to accelerate the development of global Internet related
businesses. This was to help focus on business-to-business opportunities that drive efficiencies,
maximize cost savings and create new markets and distribution channels. eMac Digital helped to
increase the strength of McDonald’s by the creation. development and investment on new
enabling patflorms that helped McDonald’s reduce its transaction costs, have a more effective
communication within the organization and to improve the quality of its operations by the use of
eMac Digital’s technology. To help provide better value in the supply chain management, eMac
Digital formed an e-procurement platform for McDonald’s and their suppliers to help manage
information, transactions, sales, orders and other functions. Because of the e-procurement
system, it allowed all of the McDonald’s franchises across the globe to buy everything they need
to run their restaurants and communicate what supplies they need from its suppliers through the
network.
 Figure 1: McDonald’s E-Procurement Model
The figure shows how McDonald’s e-procurement model looks and how it is connected
to each other representing its effective communication with each other that aids their needs from
the suppliers. This shows how effective McDonald’s in terms of its supply chain management.
McDonald’s supply chain management can be seen with two different ways, Cycle View
and Push/Pull View.
Cycle View
McDonald's supply chain process can be broken down into three different process cycles,
each performed at the interfaces between two consecutive stages of a supply chain. These three
process cycles are namely "Customer Order", the "Replenishment Cycle" and the "Procurement
Cycle".
The Customer Order cycle is created when the customer interacts with the employee in
the restaurant and places his order, prior to making payment for the meal. Right after his order
has been taken, orders from the counter will deliver to back into the kitchen located in the
restaurant itself, where the kitchen staff will gather different goods and components (e.g. buns,
lettuce, cheese, beef patty) to put together to form the end-product (e.g. cheeseburger). In the
Customer Order cycle, demand is external.
The Replenishment Cycle 1, will connect the retailer and the distributor and is usually
initiated due to the retailer's need to replenish lack of goods in the restaurant for future demand.
Such a cycle may be triggered at McDonald's when they are running out of stock of cheese. The
Replenishment cycle is similar to the Customer Order except that the retailer is now the
customer.
Finally, the Procurement cycle will connect the distributor and the supplier, for the
distributor will need to get supplies from the suppliers, to further distribute the goods to the
various retail restaurant outlets in the United States. In general, the scale of an order increases
whilst the frequency of an order decreases in the supply chain when moving further away from
the customer. This can be illustrated by the following example, of how a customer only orders a
set of meal daily from the retailer, the retailer orders heaps of lettuce weekly for its hamburgers,
the distributors get larger orders from more than one retailer monthly and the supplier gets an
even larger scale order to cater to the distributor's needs every three months.
Push/Pull View
Other than the cycle-based process view for supply chain operations, the push versus pull
view is also another way to view the processes performed in a supply chain. Processes can be
divided into two categories based on its timing relative to the timing of a customer's order. Pull
processes are triggered when a customer places his order whilst the push processes are initiated
just by the anticipation of a customer's order. In other words, a pull effect is reactive to a
customer's order whereas a push effect is speculating when a customer will order.
 McDonald's use both pull as well as push process; all processes except for those involved
in the Customer Order cycle are push processes. That is, products will be pushed from the
suppliers, to the distributors, to the restaurants where customers will then demand for that
product, creating a pull effect. This means that the Push/Pull boundary will be situated before the
Replenishment cycle takes place and after the Customer Order cycle occurs, just when the
customer order arrives.
The supply chain stages include customers, retailers, distributors and suppliers. Retailers
will attend to the customers, and put together the goods received from the distributors to prepare
the end-product to meet with the customers' needs. The distributors will transport the required
quantity of goods garnered from the suppliers to the retailers, as requested. The suppliers will
procure and ensure that certain quantities of raw goods are prepared for delivery once the
distributors place their orders for it.

References:

Expenditure cycle definition — AccountingTools

Mc Donald’s Supply Chain and E-Procurement Management – Social Media for

Business Performance (uwaterloo.ca)

Mc donald’s e procurement, Supply Chain and Logistics (slideshare.net)

Supply Chain Flows of Mcdonald's Free Essay Example (studymoose.com)