Assignment: 1

MCL 754

DEEPAK S YADAV

2021MEE2872
Objective: To understand the inventory management system and the practical application of
the concepts studied in the class, I search on internet about the inventory management of
McDonalds Fast Food outlet at Andheri west Mumbai. Through deep understanding of this
system I come on conclusion to answer these questions.

The Domino’s pizza outlet at Kandivali east Mumbai has also been chosen to understand and
compare the inventory management systems adopted. The following points were observed
about Domino’s inventory management –
Ques 1: How is a large variety offered to customers, based on limited level of inventory of
products.

Ans: Stock is the physical product a company buys, creates or sells. Every business has three
main types of stock:

 Raw Material
 Work in progress(WIP)
 Finished Products..

Mc Dolands follows a Assemble to Order system for a wide variety of products such as McAloo,
Mexican McAloo Tikki, Burgers etc which can be produced by the Buns and Tikkis.

On the contrary, they also follows a Make to Stock system to some dishes such as French fries,
coke and icecream, which are prepared everyday based on the predicted demand.

Domino’s also follows Assemble to order system for a wide variety of products such as Farm
house pizza, peppy paneer, fresh veggie etc which can be produced by pizza crust, butter,
cheese vegetables etc.

Ques 2 : Inventory management / fill / refill principles practiced ?

Ans: McDonalds: Inventory replenishment includes restocking of vegetables, buns, butter,

cooking oil, food paper container, chickens etc.

Domino’s : Inventory replenishment includes restocking of vegetables, cheese, butter, crust,

sauce etc.

The order sizes are estimated based on previous demand data collected. The replenishment
order size mostly depends on two factors: the inventory on hand for the day and the shelf life
of products.

Ques 3: How is delivery time / period reduced and kept to a minimum?

Ans: Both: The delivery time is kept to a minimum by maintaining precise information flow
between the vendors and restaurant. At the end of every day, information about the inventory
on hand and the inventory required for the next day is sent to vendors for planning.

Essential inventory items such as onion, buns, crust, butter, cheese etc. is assumed to be
needed by the restaurant everyday. This is therefore a periodic replenishment on a daily basis.
• Sourcing – Based on the location of every outlets, vendors are chosen strategically in order to
reduce lead time, distance and maintain freshness of food products

Ques 4: Is ABC classification used? What about FIFO principles? How is obsolescence/product
ageing managed?

Ans: Mc Donalds: Yes they are using ABC classification, their Burger, pizza and kebab are most
famous items, so they keep the raw material, work in progress inventory of these items.

Dominos: They are also using ABC classification, their The Philly steak pizza, ExtravagganZZa
Feast pizza, Cheeseburger pizza etc are the most famous items, so they keep the raw material
of these items.

All raw materials, work-in-progress and finished products are handled on a First In, First Out
(FIFO) basis. This means raw materials are used in the order they are received. Therefore stock
is always fresh because products are sold in the order they are made

They have also tie up with some trusts and NGOs for whatever foods left and unsold. Also they
have put discounts on items at the last minutes to clear up their inventory.

Ques 5: How do they deal with seasonality of demand? That is wide fluctuations during peak
season?

Ans: Both : Proper forecasting is done to estimate the seasonality of demand, based on
previous data they have built the model to estimate the demand during festive seasons,
valentine week, Christmas and new year time.

A forecast is an estimate of future sales of finished products. Forecasts are calculated using:

 Store-specific historic product mix data from the last two years
 Store-specific and national causal factors. These specify dates for events such as
national promotions & school holidays
 Information from store managers about factors that might affect demand, e.g. road
closures or local events & promotions.

Planning – Strategic planning of vendors to procure material is done during festivals such as
Diwali and Holi to reduce inventory lead time.
Ques 6 : Customer Service levels - defined ? Any guidelines

Ans: : Customer service level is defined by what extent we delight our customers because
“Today our delighted customer is our promoter tomorrow”.

They offer check sheets for knowing the customer satisfaction level and ask for any
recommendations. Also there is Google form for online reviewing the service level and
knowing the customers recommendations.

Followings are the parameters of major concern while reviewing.

Order fill Stockout

rate rate

Parameters

Probability Back-order
of on time Delivery
delivery

Order Fill Rate: It is the measure of orders that are met from the company stock at any given
point.

Stockout Rate: A company does lose out on a substantial number of orders during a stockout.

Back-order Level: It is the measure of orders waiting to be filled.

Probability of on-time delivery: This is a very important parameter, and has a directly
proportional relationship with the service level, of a company. Based upon the reviews and
recommendations of customers they are doing improvement in their system.

Ques 7: Any other special considerations for Boosting sale etc.

Ans: Both: Yes they are doing many efforts to boost their sell. During festive season they have given
special discounts offers to increase sales. Also they have more crowds from 6 to 10 pm, so during this
time they have hired some part time workers to fulfill the orders of all customers and increase customer
satisfaction. They have also connected to online food delivery portals like Zomato, Swiggy, etc. For
promotion and marketing they have a particular team for both online and offline marketing. Also
offering wide food variety to cater a wider range of customers.

Ques: What improvements would you suggest in their systems and why ?

Ans: : A few improvements that can be incorporated are :

 They should work on their responsiveness and pricing of products so that their will be easy
reach to each and every customer.
 As on weekends and evening time they be more crowd there be problems in serving each and
every customer, so they can provide some discounts in off times so that some customers shift
to that slot.
 Orders Serving Sequence – If customer orders include a variety of dishes, the restaurant must
understand the order and serve it in the most suitable way. This will lead to increased customer
satisfaction