THE ³INDIAN´ MCDONALD¶S

In India, though McDonald¶s has been a runaway success by being very mindful of local sensibilities and tastes. Localization of ingredients, communication, visible company faces and consciously not cultivating an international image have been the strategies adopted by McDonald¶s in India. Where else in the world will you get McAloo Tikki or a Maharaja Mac? McDonald¶s is a renowned fat food American chain started by Ray Kroc in 1955. He established a franchising company with brothers Dick and Mac McDonald, who owned the famous McDonald¶s hamburger stand in California since 1937. Later in 1961, Ray became the sole owner of McDonald¶s by buying out the stakes of the McDonalds brothers. In India, McDonald¶s was started in 1996 in a unique way. The company got into a 50:50 joint venture with Delhi-based entrepreneur Vikram Bakshi¶s Connaught Plaza Restaurants to own and operate McDonalds Restaurants in the northern part of the country. On similar lines, Mumbai based Amit Jatia and his Hard castle Restaurant were chosen for to own and operate McDonald¶s Restaurants in the western parts of India. Interestingly, Bakshi is considering the franchisee model for McDonalds North India operations by 2008 for deeper penetration into the country¶s growing food and beverages market. By February 2007, McDonald¶s has 61 outlets in north India and plans to open another 25 joints in the course of the year and invest Rs 4 billion over the next 3 years. It is also planning to introduce McCafe concept in India by the end of 2007. McDonald¶s India is planning to increase the number of its restaurants from 105 to 155 all over the country by the end of 2007. 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 is attributed to wastage in storage and transportation, mishandling and the cost of intermediaries in the supply chain. McDonald¶s spend a few years setting up a unique cold chain. The cold chain is necessary to maintain the quality of food products and retain their freshness and nutritional value. A cold chain refers to the procurement, warehousing, transporation, and retailing of food products under controlled temperatures. Setting up the cold chain has involved the transfer of state-of -the-art food processing technology by McDonald and its international suppliers to pioneering Indian entrepreneur, who have now become an integral part of the cold chain. McDonald¶s has invested staggering Rs 8 billion in setting up its extensive supply chain in India. Efforts to initiate work on its supply chain started way back in 1992, about 4 years ahead of opening its first outlet in 1996. Not only was it difficult to identify the right vendors capable of adhering to McDonald¶s international standards, but also to train them to product as per its stringent specifications. For example, the peas have to of a particular dimension; otherwise they protrude from the patty (if bigger than standard size) and get burnt. Similarly, the iceberg lettuces (Band Gobi in Hindi) have been of specific weight. All suppliers adhere to Indian Government¶s regulations for food, health, and hygiene, while continuously maintaining McDonald¶s recognized standards. As the ingredients move from farms to processing plants to the restaurants, McDonald¶s quality inspection programme (QIP) carries out quality checks at over 20 different points in the cold chain system. Setting up of cold chain also enabled it to cut down on operational wastage. The company¶s hazard analysis critical control point(HACCP) is a systematic approach to food safety that emphasizes prevention within McDonald¶s suppliers facility and restaurants rather than detection through inspection of illness or presence of below quality food. Based on HACCP guidelines, control points and critical control points for the company¶s major food processing plants and restaurants in India has been identified. The limits have been established for those followed by monitoring, recording, collecting any deviations. The HACCP verification is done at least twice in a year and certified. The relationship between McDonald¶s and its Indian suppliers is mutually beneficial. As McDonald¶s expands in India, suppliers get the opportunity to expand their businesses; have access to the latest in food technology and advanced agricultural practices; and the ability to grow or to export. There are many cases of local suppliers operating out of small towns who have benefited from their association with McDonald India.

for a burger in Delhi to taste the same as in Chennai. McDonald¶s. Capability to produce frozen foods at temperature as low as ± 35 degree Celsius to retain total freshness. on the other hand. ranging from frozen peas and assorted vegetables for vegetable patties to procuring the right quality of birds for the chicken patty. The process of freezing a patty after preparation is quite interesting. The association with McDonald¶s has a share of risks because any damage to the crop is borne by the suppliers. It is stored there till next morning when it is sent to the processing plant. Due to this collaboration. leverages the economies of scale to buy the vegetables at cheaper prices. Today. To avoid calamities McDonald¶s suggested that lettuce seeds be purchased from McDonald¶s (which imports them) and planted on raised beds or moved to two other non-flood prone locations 8 km and 40 km away during the monsoon. When it arrives at the processing center. and many oriental vegetables. McDonald¶s vast experience comes into play here. with McDonald¶s help Trikaya uses the right pesticides during different times of the pest¶s lifecycle and inhibits their growth. and International standards. the head of lettuces. Refrigerated truck for transportation. given the fragility of the crop. Drip and sprinkle irrigation in raised farm beds with fertilizer mixing plants. it is always possible for one of the suppliers to have a washed out crop. which is cut at the base. a northeastern Mumbai suburb. The lettuce crop is highly vulnerable to weather conditions. it goes . It accepts only good quality material. provides 20-30% of McDonald¶s total purchase of processed food. Few years back. According to the company. it is processed at 8 to 12 degrees room temperature. In the case of lettuce. The remains amount is sourced from farms in Ooty (20%). A food expert mixes the vegetable as per the recipe. It can fail if there is excess rainfall. A world class infrastructure at their plant at Taloja. Trikaya with its excess capacity fills in to maintain the steady flow of supply. Trikaya also invested in a cooling plant and a refrigerated vehicle to transport the produce. The product and water temperature is 1 to 4 degrees and kept for 4 weeks before being dispatched at the distribution center in Thane. Maharashtra has: Separate processing lines for chicken and vegetable foods. Trikaya sells the surplus produce in the local market for which it gets a better price of Rs 40 to Rs 100 a kg. pests used to devastate the lettuce crops at Trikaya. and Ferracon Farms in Dehradun. Pre-cooling room and a large cold room for post harvest handling. the pest scouting data is passed on to McDonald¶s office and together they work out a solution. Meena agritech of Delhi (25%). To avoid excess man handling. procedures and support services. Once this is fed into the automated machine. The lettuce is harvested everyday at 6 am. so suppliers have to minimize rejections. packaged and maintained at the temperature of 2 degree celcius in the cooler. Vista processed food Pvt. It is then mixed with the rice as the binding agent. with its state of art plant. It is transported by a truck in a compartment maintained at 4 degree celcius.TRIKAYA AGRICULTURE Implementation of advanced agricultural practices has enabled trikaya to successfully grow speciality crops such as iceberg lettuce. Every Monday. Lettuce is one of the few products sourced by McDonald¶s from more than one supplier despite the usual norm of having as few suppliers as possible. is placed directly on the tray which goes into the refrigerated room. McDonald¶s buys third of its 450 tonne annual requirement from Trikaya. The farms infrastructure features: A specialized nursery with a team of agricultural experts. special herbs. It deals with 45 suppliers for the products it supplies to McDonald¶s . Vista. pest related rejections are down to 10 percent. Ltd: Vista processed food produces a range of frozen chicken and vegetable foods. the number of suppliers should be less. heat or hailstorm.

zeroed in one Deesa and Kheda. McCain Foods. However. and flavor. the cheese is made by Dynamix. a leader in Agronomy. Dynamix Dairy Dynamix has brought immense benefits to farmers in Baramati. Vista picks up 70. One of its suppliers. While Modern dairy and Amul provide the paneer. The final outcome is a frozen and packaged patty which then has a shelf life of one year. It also churns out cheese singles for biscuit-maker Britannia that are marketed under the brand name Milkman. invested heavily in setting up production lines to process Indian potatoes in the early 90¶s. Together. Hence. which is 20 per cent of its output. it is ready to be sent to the distribution centre. by the time the meat comes to Vista. In fact. Indian potatoes typically have 15-19 % solid matter compared to the global standard of 18-26%. sowing seed treatment. which has set up a separate line for McDonald¶s. Vista strives to minimize rejections. the rejections are down from the early 8-10% to current 2%. high content. As a result. The major concerns of vista in this process are related to temperature controls. Now. . including irrigation. skimmed milk powder. and Stringent quality control measures and continuous R &D Cheese comes in both shredded form and as singles. The crop is improving in 21% solid content and McDonald¶s is now sourcing 350 tonnes of potato from Gujarat for its wedges. lactose. It has been helping farmers in these places with better agronomy techniques. Dynamix produces sheets of cheese that are then cut into 8 slices each. It will take a good 3 or 4 years before the right quality of potatoes (with 24% solid content) are grown for French fries. The bird is processed at Pune before it is deboned and sent to Vista. but the quality was poor. it has partnered with its main global supplier. the project had to be abandoned. It has continued to import 1200 tonnes of potatoes every year for French fries from New Zealand. It provides the frozen deboned meat to Vista. By constant trial and error. they are helping Indian farmers grow the right kind of potatoes. and storage. For McDonald¶s. a quality assurance expert fries a patty to test it for colour. butter/ghee. The chicken used in chicken McGrill is supplied by Coimbatore-based Suguna poultry.000 birds a month from Suguna. internal texture. appearance. McCain Foods: McDonald¶s had a troublesome learning experience in sourcing the right kind of potatoes for its French fries in India. The eggs are laid in Bangalore.through the motions of being dipped in the batter and then rolled in bread crumbs and fried and frozen. the entire batch is rejected. McCain. the world¶s largest French fries Company. McDonald¶s specifications are clear and unbending. and baby food. It is maintained at -18 degree centigrade. fertilizer application. with the quality of potatoes crop not up to the McDonald¶s specifications. all this in exactly half an hour. If it falls short on even a single parameter. While the singles go directly to McDonald¶s two distribution centers. casein and whey protein. Capability to convert milk into cheese. In order to contain costs. Lamb Weston.a certain length. After every batch of patties. planting methods. and low moisture. two Gujarat towns. Easy accessibility has enabled farmers to augment their income by finding a new market for surplus milk. The hatching and contract farming is done out of Pune. The factory has: Fully automatic international standard processing facility. The Indian potato crop was not as good because farmers used seeds from the preceding crop. it has travelled quite a bit. Maharashtra by setting up a network of milk collection centers equipped with bulk coolers. not only did they have only one variety of the crop. the shredded cheese comes to Vista to be used in a range of concoctions. McDonald¶s did not want to take any chances. The egg hatching and bird killing cycle takes 45 days and another 5 days are used for processing. Having burnt its fingers. If it passes the test on all the parameters.

Earlier product movement was tacked manually from each of the restaurants. Each truck has three level of variable refrigeration. This includes both inbound (those picked up and brought to the distribution centre) and outbound (which are taken from distribution centers to the outlets). J. A big hurdle was the accurate forecast of product movement. it introduced the supplier to Australia¶s F. The salient strengths of this company are A one stop shop for all distribution management services. lettuce is needed more than ice cream. Today. Every fortnight. Even the boxes. Only time will tell. The objective is to minimize the conversion of the raw materials into finished products. quality inspection. deliveries. and the size of each refrigerated compartment can be varied according to need. The truly Indian fast food chain Nirula¶s of Delhi is trying hard to make its presence felt in Delhi¶s adjoining state with a snail¶s pace. it is down to around 10 days about 175 stock keeping units. Walker to develop the distribution system. In 1996. trolleys transport four cases at a time. every case was earlier moved manually from the truck to the restaurant.ambient. RKFL¶s distribution centre had inventories of 35-36 days. This has no doubt saved on transportation time and helped RKFL reschedule deliveries based on orders from various outlets.Radhakrishna Foodland: An integral part of Radhakrishna group. Once processed. To transport around 800 tonnes of varying quantities of some 250 ingredients from 50 suppliers at varying temperatures. depending on demand and shelf life. and Effective process control for minimum distribution cost. recording and reporting. which used to be placed haphazardly as in any go down. Therefore. Its fellow American food giant Kentuchy Fried Chicken (KFC) entered the Indian market around the same time. providing the entire range of services including procurement. their design contributes to lower McDonald¶s supply chain cost. chilled and frozen. if they would ever be able to give competition to the likes of McDonald¶s. The competition is way behind for McDonald¶s in India. The Noida centre also doubles up a s a processing unit. Earlier. but is yet to catch up with it. a wider assortment of trucks than Radhakrishna Foodlands Ltd (RFKL) currently has is needed. transportation productivity was 6 to 7 cases per man-hour. RKFL has invested 24 multi-temperature trucks which offer three different temperatures. Dry goods account for 60% of inventories compared to 20% each of frozen and chilled stuff. RKFL sends rolling projections to the suppliers for the next three fortnights as every purchase order is placed 3 weeks in advance. all the products have a minimum of 60 days shelf life. The distribution business works on stocks turnarounds as fixed cost such as storage are distributed over larger volumes. The gusto to take on the international giants such as McDonald¶s is missing among Indian fast food pioneers. its journey is sure to have begun a good two years before that. which maintain an inventory of 2. data collection. Foodland specializes in handling large volumes.5-3 days requirement. This flexibility is the key to cost control in a situation where some perishables such as tomatoes. Dry and cold storage facility to store and transport perishables products at temperature up to -22 degree Celsius. Now with more sales and efficiencies. During its early association with RKFL. This has gone up to 16 to 17 cases. If on a particular day. The processed food is taken to RKFL¶s two distribution centers¶ at Thane near Mumbai and Noida near Delhi. RKFL has three turnarounds a month compared to just one when it began operations. it is track through the product ± mix. The supply chain is common for both North and West India managed by Vikram Bakshi and Amit Jatia respectively. the compartment with the relevant temperature can be expanded to take in more lettuce. Today with volume increasing. which remains fresh for 5 days and lettuce. Outlets are able to gauge their best ± sellers. Moreover. The use of multi temperature trucks has reduced the number of daily deliveries to McDonald¶s outlets. This helps suppliers to control their inventory as well. . However. have to be dispatched daily. The planning behind McDonald¶s supply chain is so intense that if a new product hits the market today. McDonald¶s always treats its suppliers as partners and strives to help them in every possible way. inventory management. are well-aligned now. storage. There are also systems in place for tracking demand and supply. which remains fresh for 3 days. except for buns. while products such as cheese and buns replenishment every 2 or 3 days.

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