OP5305

Operations Management
McDonald’s And Burger King

Group–5

Aditya Makhija 401803002

Devansh Pahuja 401803008
Riya Aggarwal 401756003
Anutaj Veer Singh Nagpal 401803024
 Table of Contents

1. Inventory Management

2. Supply Chain Management

3. MRP Sheets

4. LPP Formulation

5. Transportation Problems

6. Quality Management
McDonald's is an American fast-food company,
founded in 1940 as a restaurant operated by
Richard and Maurice McDonald, in San
Bernardino, California, United States. They
rechristened their business as a hamburger
stand, and later turned the company into a
franchise, with the Golden Arches logo being
introduced in 1953 at a location in Phoenix,
Arizona. In 1955, Ray Kroc, a businessman, joined
the company as a franchise agent and proceeded
to purchase the chain from the McDonald
brothers.

Burger King is an American multinational

chain of hamburger fast food restaurants.
Headquartered in Miami-Dade County,
Florida, the company was founded in 1953
as Insta-Burger King, a Jacksonville,
Florida–based restaurant chain. After Insta-
Burger King ran into financial difficulties in
1954, its two Miami-based franchisees
David Edgerton and James McLamore
purchased the company and renamed it
"Burger King"
Inventory
Management
ABC Analysis
 Product -Process Matrix
The Product Process Matrix as the name suggests, is an illustration of the
type of product and the production process used to manufacture the
product. The matrix comprises of two dimensions, the product life cycle
and the process life cycle. Introduced in 1979 by Robert H. Hayes and
Steven C., the matrix still holds its ground and is relevant in many
companies as it helps them develop business strategies to compete better in
the market by having a greater sense of knowledge about the product-
process relationship.

We will use various products of both the Burger King and

McDonalds and compare their product process matrix. Also,
we will use components of products as factor in equation for
matrix.
 Volume-Variety Matrix

To better understand the competitive

position of an enterprise, the relationship
between the volumes produced by the
company is compared relative to the variety
produced. An interesting diagonal has
evolved where most companies are clustered
in order to compete effectively. The position
on the diagonal is the optimal position in
terms of production cost and responsiveness.
Movements from that competitive diagonal
can either be a competitive advantage for the
company or a disaster.
McDonalds

Burgers

Fries
Burger King

Patties

Fries
Supply Chain
Management
 Bullwhip Effect

The bullwhip effect is a supply chain phenomenon describing how

small fluctuations in demand at the retail level can cause gradually
larger fluctuations in demand at the wholesale, distributor,
manufacturer and raw material supplier levels. The effect is named
after the physics involved in cracking a whip.
Four key causes of bullwhip effect are:
Demand Forecast Updating
Order batching
Price Fluctuation
Rationing and shortage gaming
McDonald’s
Challenge
Bullwhip is the Key challenge in McDonalds’ supply chain. The Bullwhip Effect is a main reason for higher
costs and problems in supply chains. In McDonald, the upstream activities react to forecasts, while somewhere
on the downstream part the chain waits for orders to be made. Seasonal promotions and special offers are
creating great difference in demands at retail and consumer level which creates Bullwhip effect.

Solution
Upper and Lower Inventory Control Method The automatic monitoring technology of McDonald's stores
is very advanced, from order to achieve transparent management of the stock has a set of automation
equipment.
Investing in the right technology, including a robust inventory tracking system, helps reduce the number of
mistakes that occur and helps maintain more accurate stocking levels over time.
The McDonald’s supply chain is both critical and multi-layered. There are two categories in food ingredients supply;
In Tier-I there are 14 core suppliers-provide processed products e.g., Vegetable and chicken patties come from Vista
Processed foods Pvt Ltd., French fries, potato wedges and hashbrowns by McCain Foods India Pvt. Ltd. And so on.
In Tier-2 suppliers there are growers and processors who provide lettuce and potato, poultry items and coating
systems that are used for coating the chicken and vegetable patties. The flow of ingredients is from Tier-2 to Tier-I
suppliers who process them.
 In 2019, Burger King launched a new product, “The Impossible Whooper”
The company said the product was a strong contributor to Burger King’s U.S.
same-store sales growth of 5% after launching nationally in August. Executives
said then that the item was bringing back customers who had not returned in a
while, as well as younger consumers.
•

Burger King • Amid declining traffic trends across the fast-food industry, restaurant chains
have turned to realistic meat alternatives from Beyond Meat and Impossible
Foods to attract customers trying to cut back on their meat consumption due
to health or environmental concerns.
•
•
• Due to this Burger King stored huge inventories for “Meatless
Meat” and the Impossible Whooper, but ultimately the sales
went down, the craze died and in January the average daily
orders of the Impossible Whopper at one of its locations had
dropped by 32 to 28. In comparison, one of its restaurants
typically sells about 234 beef Whoppers a day.

• Ultimately, the product was not embraced by our guests as we

thought it would be. We may offer plant-based alternatives
again in the future, but we have removed it from the menu for
now,”- said by a Burger King representative.
The measures taken by Burger king to avoid these type of incidents:

l A well defined market study to avoid miscalculations leading to these type of failures

l Burger King has one of the most diverse and well-integrated supply chains that includes quality
management and periodic audits of delivery schedule and profitability performance . Burger
King uses cloud platform to strengthen global supply chain.

l Avoiding setting the premium prices to products which does not let the customer segment
targeted to buy the product.

l The commodity analysis and risk management strategies enables to employ a more
sophisticated approach to commodity hedging, purchasing, contract provisions and pricing
methodologies, which help to reduce the impact of commodity volatility.

l Through technological capabilities, they employ advanced planning systems, demand

management and forecasting, timely sales data, resource planning, warehouse management,
transportation management and electronic commerce. Our partners in the supply chain, including
our members, suppliers and distributors, also leverage our tools to communicate and plan more
effectively; to make better informed management decisions and, ultimately, to reduce expenses at
every level.
LPP
Formulation
McDonald’s

Problem
Due to COVID restrictions restaurants had to shut out their dine in option, leaving them with takeaways and
deliveries only. The outlet takes 120 orders maximum at daily.15 minutes are taken for a takeaway order and 30
minutes for a home delivery. Considering the staff is same, there is a total of 20 hours of staff labor available. The
ratio of deliveries to takeaways is 3:2 but 30% of customers will go for a home delivery. Takeaways will bring a
$12 Profit on average per order and Deliveries will bring $16 per order. Formulate the LPP for maximization of
Profit.

Solution:

The decision variables in this problem are how many orders in takeaways and
deliveries will take. The quantities of orders taken are represented as:
X1= Takeaway
X2 = delivery
The LP model formulation used to maximize is Z=$12x1 + $16x2.

This formula will be used as an objective function that will maximize the numbers of orders.
Z = total profit per day

$12x1= profit from takeaway

$16x2= profit from deliveries

There are numerous model constraints Resource Constraints

● x1 + x2 ≤ 120(maximum orders in days)

● 15x1 + 30x2 ≤ 1200 (labor in minutes to prepare and deliver meals) OR o .25x1 + .50x2 ≤ 20

● 2x1 - 3x2 ≥ 0 (will sell at least 3 takeaways and 2 deliveries) OR o x1 /x2≥ 3/2

● .70x2 - .30x1 ≥ 0 (at least 30% will go for deliveries) OR o x2 /(x1+x2) ≤ .10

Non-Negativity:● x1 ≥ 0 ● x2 ≥ 0
 Extreme Point Lines through Extreme Point Objective function
Coordinates (x1, valueZ=12x1+16x2
x2)
O (0,0) 3→2x1-3x2≥04→-0.3x1+0.7x2≥0 12(0) +16(0) =0

A (43.08,18.46) 2→15x1+30x2≤12004→- 12(43.08) +16(18.46) =812.31

0.3x1+0.7x2≥0
B (34.29,22.86) 2→15x1+30x2≤12003→2x1-3x2≥0 12(34.29) +16(22.86) =777.14

The maximum value of the objective function Z=812.31 occurs at the extreme
point (43.08,18.46).
Hence, the optimal solution to the given LP problem is:
x1=43.08, x2=18.46 and max Z=812.31.
x1+x2≤120; 15x1+30x2≤1200
2x1-3x2≥0; -0.3x1+0.7x2≥0
Burger King

Problem
As the manager of a Burger king restaurant, Seth is trying to decide the best way to allocate the
available raw materials to the four Wednesday night specials. The table below contains the
information on the food and the amounts required for each item.
Food Cheese Burger Hamburger Tacos Chili Available

Ground beef 0.3 0.25 0.25 0.4 100 lbs

Cheese 0.1 0 0.3 0.2 50 lbs
Beans 0 0 0.2 0.3 50 lbs
Lettuce 0.1 0 0.2 0 15 lbs
Tomato 0.1 0.3 0.2 0.2 50 lbs
Buns 1 1 0 0 80
Taco Shells 0 0 1 0 80

One other fact relevant to his decision is the market demand and selling price.

Cheese Burger Hamburger Tacos Chili

Demand 75 60 100 55
Selling Price ($) 2.25 2 1.75 2.50
Solution:

Let

a=No.of cheese burgers

b=No.of hamburger
c=No.of tacos
d=No.of chili

Objective Function:

Revenue Maximize, Z = 2.25a+2b+1.75c+2.50d

Ground beef: 0.3a+0.25b+0.25c+0.4d ≤ 100
Cheese: 0.1a+0.3c+0.2d ≤ 50
Beans: 0.2c+0.3d ≤ 50
Lettuce: 0.1a+0.2c ≤ 15
Tomato: 0.1a+0.3b+0.2c+0.2d ≤ 50
Buns: a+b ≤ 80
Tacos Shells: c ≤ 80
Demand:
a ≤ 75; b ≤ 60
c ≤ 100; d ≤ 55
 Cheese Burger Sloppy Joes Taco Chili
Selling Price $2.25 $2.00 $1.75 $2.50

Amount Used per Unit Produced Total Used Available

Ground beef 0.3 0.25 0.25 0.4 59.25 <= 100 lbs
Cheese 0.1 0 0.3 0.2 32.5 <= 50 lbs
Beans 0 0 0.2 0.3 29.5 <= 50 lbs
Lettuce 0.1 0 0.2 0 15 <= 15 lbs
Tomato 0.1 0.3 0.2 0.2 44 <= 50 lbs
Buns 1 1 0 0 80 <= 80
Taco Shells 0 0 1 0 65 <= 80

Cheese Burger Sloppy Joes Taco Chili Total Revenue

Solution 20 60 65 55 416.25
<= <= <= <=
Demand 75 60 100 55
Transportation
Problem
Mrs Bectors food specialities ltd produces Breads and Buns at its plants in Jalandhar, Ludhiana and Greater Noida. These
plants supply the demand for orders at Burger King and Mc Donald’s restaurants in Noida and Gurugram and Patiala.
The tables below present the information of:
Production Plant Daily Supply (Units)
Jalandhar 100
Ludhiana 200
Greater Noida 300

Location Demand
Noida 200
Gurugram 200
Patiala 200

Transportation costs per unit from each plant to each Store are summarized in the following table:
To. Noida Gurugram Patiala
From
Jalandhar 40 47 80
Ludhiana 72 36 58
Greater Noida 24 61 71

Solve the above problem to help Mrs Bectors food specialities ltd to satisfy the demand at the stores at the
lowest transportation costs.
Quality
Management
• Performance – Performance is the measure of how efficient a product is to perform its intended
purpose. In case of fast – food, the objective is to relieve a customer of hunger and provide the
necessary nutrition to the body. The better the performance of a food item in this respect, the more is
the demand for that particular item.

• Conformance – This is one of the major concerns of a product developed by any organization that it
should conform to some pre – defined standards that are expected for that particular range of
product. The fast – food joints are expected to conform to the food quality norms and nutritious
value.

• Features – These are the additions to the product that can enhance its performance. The addition of
accessories in electronic equipment can enhance its performance. Similarly, fast – food joints
provide a wide range of additional products like soft drinks, sweets, coffee etc. along with the
burgers which fetch more revenue as well as result in the increased service quality and performance.
Some of the food packages include additional items like toys etc. that further result in rich features.
• Aesthetics – It is the biggest concern for any organization dealing with food and drink market.
It’s the subjective sensory characteristic. There are a lot of competitors in a fast – food business.
The customers along with the nutrition and value for money also care for the aesthetic value of
the delivered products. These may be the taste, look and feel etc. This may also be the ambience
in the fast – food joint. The customer prefers a place where he finds a good combination of all the
above concerns. A very nutritious burger in a shabby wrapping won’t be popular among the
customers on the contrary vice versa can be a market leader.

• Serviceability- A fast food joint is known for its servicing and delivery services, since last 2
years, people have shifted to take outs and deliveries more than dine ins, the servicing has
become more important than many other factors.

• Safety- The safety of consumer is a new factor that is considered in terms of fast food joints, the
consumer while consuming the product should feel safe and better. The fast food joints need to
set their locations in such a way to maintain safety, have guards to maintain security and also
setting fire extinguishers and open kitchens(to let customer view the cooking process) helps them
getting the feeling of being safe.
• Reliability – Reliability is the property of achieving customer trust. A customer should be
able to rely on a product for its consistency across various geographic locations. This is
crucial for fast – food joints as a person travelling to an unknown place around the globe
would be more tempted to walk in to a familiar food joint and hence would expect the same
taste and quality that he is used to in his own country or region. This leads to an increase in
global business by catering to regular customers.

• Durability- The franchise and its restaurants should be able to withstands the sudden fall and
rise in demands, running out of stocks is a major problems of restaurants, If a restaurants
wants to stay in business, it must be durable and have a perfect read on market.

• Perception- The perception plays an important role in quality management, the fast-food
joints have to closely monitor their customer segments and produce their menus accordingly.
If the product has right quality in perception of the customer segment they are targeting. If
the product’s perceived quality is not as good as object’s quality then the product might fail,
the perception can be made better with the help of ambience of restaurants and other factors
that surround the product.
Case Studies
CASE II
We saw how choosing Bumble bee was a better option as it was
dependable and was helping us reduce a fixed cost. We can see
this in
our companies as well as they source the important factors like
labor
and resources locally (as much as they can) as it helps reduce
fixed costs drastically.