PRODUCTION PROCESS

In this context, the term “conversion” relates to the utilization and management of various
resources (inventory stock, labor, etc.) in the process of creating the goods and services to be
marketed by the organization. The key issues in this process include accountability for the movement
and usage of resources up to the point of supply which is then dealt with in the revenue cycle.
Conversion cycle activities include product accounting/costing, manufacturing control, and stock
management.

McDonald's is a JIT inventory process, which stands for "Just in Time," and Dell is another
company that uses this form. McDonald's does not start preparing or reheating food until a customer
places a particular order. This avoids wasting food and saves money by allowing inventory to be
stored rather than thrown away. JIT (just-in-time) inventory management one approach is to reduce
the ratio of ordering costs to keeping costs while also shortening lead times. As a result, the operation
has high holding costs, and the most profitable option is to order very small batches very often.
McDonald's ingredients are essentially the most important component of the production process.
There would be no development and no food without the right ingredients for the particular
restaurant, and without food, there would be no company. Meat, buns, vegetables, and burger
toppings, cheese, condiments, milk and cream for coffee, salt for fries, and salad dressing, among
other things, are needed.
McDonald's restaurants need the necessary materials and supplies. Your company would fail if you do
not have the necessary materials and supplies to manufacture and sell food. To seal the burgers, you'll
need paper or plates, cups for soda and hot drinks, fry boxes, cutlery, straws, napkins, and bags to
hold takeout in. materials are delivered to McDonalds in one lorry under 3 sections; chilled, ambient
and frozen; for being converted into finished products on the FIFO basis to remain the freshness.
When it comes to packaging, MCDONALD’S uses boxes of burgers, tumblers for drinks and various
bags for chips. This fast food restaurant uses cardboard because it is clean, recyclable and that what’s
make a responsible and ecological company as well as to insure the convenient freshness and safety of
its products.

McDonalds Inventory Management

McDonald's, like every other food corporation, faces inventory management problems. These
difficulties include demand forecasting in order to avoid wasting goods, as well as monitoring raw
materials such as bread, potatoes, and beef. McDonald's, on the other hand, is capable of overcoming
those obstacles, and here's how:

 Constant communication between the regional planner and restaurants. Every day, each
regional planner communicates with about 100 restaurants by making conference calls and
exchanging emails.

 Reliable inventory management system. McDonald’s inventory is managed by using

the stock control system to ensure constant availability of raw materials.

 Accurate demand forecasting. Regional planners analyse the past performance and work on
future sales campaigns, thus predicting the future demand. They use the stock control charts
of their inventory management system to display the product sales history and generate
forecasts for each restaurant.

 Storage and distribution. McDonald’s warehouses management runs with separate areas
for dry, refrigerated and frozen foods. In each area, a specific temperature is maintained so
the products are not spoiled because of weather and climate changes. The same goes for
distribution – McDonald’s has the same three distribution channels through which they
efficiently deliver food to restaurants while maintaining the correct product temperature.

The supply chain and inventory management processes at McDonald's are designed in this manner.

MANUFACTURING CONTROL
SUPPLY CHAIN, FOOD SAFETY, AND QUALITY ASSURANCE

The Company and its franchisees purchase food, packaging, equipment, and other goods from a
variety independent supplier. The Company has established and enforces high food safety and quality
standards. The organization has quality centers all over the world to ensure that its high standards are
upheld. The quality assurance process not only involves ongoing product reviews, but also on-site
supplier visits. A Food Safety Advisory Council, composed of the Company’s internal food safety
experts, as well as suppliers and outside academia, provides strategic global leadership for all aspects
of food safety. We have ongoing programs to educate employees about food safety practices, and our
suppliers and restaurant operators participate in food safety trainings where we share best practices on
food safety and quality. In addition, the Company works closely with suppliers to encourage
innovation and drive continuous improvement. Leveraging scale, supply chain infrastructure and risk
management strategies, the Company also collaborates with suppliers toward a goal of achieving
competitive, predictable food and paper costs over the long term. Independently owned and operated
distribution centers, approved by the Company, distribute products and supplies to McDonald’s
restaurants. In addition, restaurant personnel are trained in the proper storage, handling and
preparation of food for customers.

Product

The product is the physical good or service that the organization provides to its customers. It includes
both tangible and intangible elements including appearances, assurance, and packaging. McDonald's
sells the same goods in various countries, and the quality of these products brings in a significant
number of repeat customers (Singla, 2012). McDonald's has been able to consistently develop its
products in response to changing consumer tastes and expectations. New products with a reputable
name, high quality, and excellent customer-related features are launched by the company (Mcdonalds,
2017). It's worth mentioning that McDonald's has created a series of strict menus in order to preserve
the product's distinctive freshness and taste. Several quality tests are conducted on the product during
production to ensure that it follows the high-quality standard. Burgers, for example, must pass several
inspection catalogues, and the shelf life of such foods must not exceed 40 days (Singla, 2012).
Furthermore, when the goods are being made, strict specifications must be followed. Before being
shipped to consumers, goods that do not meet the required requirements are eliminated.

Labour

Labour is essential to success in fast food restaurants. Even though the role of the manager is very
important, without the employees there would be no production of making the food and preparing the
meals to go. McDonald's employs a method known as streamlining. It turns into a production line.
Every phase and movement of labour is carefully planned to avoid any errors. So, it's a well-
functioning streamlining mechanism from beginning to end. Customer service is very important.
Having customer satisfaction is key to success for a business. Service employees are responsible for
taking the order and serving the meal. For example, the cashier. Restaurants staff, restaurant
management, office staff and franchisee staff, these people is working in delivering a high quality of
services and products to the MCDONALD’S customers.

SERVICE PROCESS DESIGN

McDonalds' Face to Face engagement has a significant effect on their consumers. McDonalds has a
large customer base and serves billions of customers every day, whether they order from the drive-
thru or dine in. McDonalds needs to be very flexible when dealing with so many customers, and
because no two customers are the same, they have to make sure to satisfy all, which they do very
effectively and by using customer service.

PRODUCT COSTING

Despite the cost savings which is characteristic of standardisation, implementation of McDonald’s

price strategy is localised rather than globalised (Vignali 2001). McDonald’s has different pricing for
different countries. Each country undergoes a strict process to determine the price for a particular
market. The process (Vignali et al 1999) is:

 selecting the price objective

 determining demand
  estimating costs

 analysing competitors costs, prices and offers

 selecting pricing method

 selecting the final price

The process above is the basic framework that McDonald’s uses to set up localised pricing.

McDonald’s pricing strategy also involves price bundling combined with psychological pricing. In
price bundling, the company offers meals and other product bundles for a discount. In psychological
pricing, McDonald’s uses prices that appear to be significantly more affordable, such as
$__.99 instead of rounding it off to the nearest dollar. This element of McDonald’s marketing mix
highlights the importance of price bundling to encourage customers to buy more products (Meyer
2015).

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 McDonald's Production Process

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