BIT2019 Operations Management Journal of Internal Medicine

Introduction

According to Stevenson (2015), operations management refers to a range of activities that build value through goods and services that are converted from inputs into outputs. Nowadays, companies use operations management to remain competitive and to ensure their goals are achieved at the cheapest cost (Slack et al., 2016). In this report, we’ll discuss how the competition for McDonald, a fast food joint, has changed over the years and how these changes have transformed the company’s operation strategy. What’s more, we’ll talk about the company’s structural and infrastructural decisions in relation to its operational strategy and how they affect its performance objectives.

McDonald’s Competition and Operation

McDonald’s has over 36000 restaurants across approximately 117 countries, feeding over 60 million customers per day and providing employment to nearly 2 million personnel. Among the 36000 restaurants, 80% are franchised and run by local people (Smagghe, 2014). Ray Kroc is credited for overseeing the development of McDonald’s. Once he visited a small ‘Bar-B-Que’ restaurant owned by two brothers going by the names Dick and Mac McDonald, he was amazed by the operation that had been put in place. As such, the menu was only limited to fries, beverages and burgers which in turn allowed them to put more emphasis on the production process and customer service. After he took over, he not only expanded the restaurants but also stuck to the same operation principles implemented by his predecessors (Smagghe, 2014).

To have a competitive advantage, McDonald's came up with several innovations such as the ‘Speedee Service System,’ ‘A metred pump’ and ‘Hamburger University’ among others. For example, the ‘Speedee Service System’ was meant to bring out consistent high quality output across all McDonald’s restaurants (Ward, 2015). Consequently, customers were assured to get similar qualities of food, as well as service delivery irrespective of the location of the store they were ordering from (Ward, 2015).  

However, the completion became stiff especially during the 1990s and the early 2000s. Competitors were trying to emulate what McDonald’s was doing while others decided to focus on a particular aspect of quick service delivery such price, the speed of service, number of menu items or quality of food that was offered at that time. Among the joints that came up during this period include Burger King and Taco Bell. Burger King on its part was promoting itself by claiming to offer ‘flame-grilled’ quality (Ward, 2015). On the other hand, Taco Bell was offering value- pricing promotions which were way lower than McDonald's. The competition coupled with other factors such as demographic changes, changes in food tastes and preference, and nutritional concerns led to the closure of several stores particularly in the United States (Ward, 2015).

Operational Strategy

An operational strategy refers to the way a company intends to reach their goals and objectives (Slack et al., 2016). The main goal of an organization is to make the production process effective. This production process should give a high quality output that satisfies customers (Slack et al., 2016). McDonald’s strikes a balance between satisfying the needs of customers and reducing waste. The company controls stock and forecasts demand to minimize excessive waste. Currently, McDonald’s hopes to portray an image that cares about its consumers and ecology.

Dimensions of McDonald’s Operational Strategy 

McDonald’s mission centers on giving customers high quality products, service and value for money. The company produces and sells a huge number of burgers every day. To achieve this, the company has come up with a structural decision whereby each employee is assigned a specific job so that the quality of products gives customers value for their money (Thapa & Silvestrov, 2016).

Varieties 

Customers have a wide variety of foodstuffs to look forward to when their visit McDonald’s. As such, menu items include salads, fruits and vegetables. The menu concentrates on customers’ favourite ingredients such as milk, potatoes, beef and chicken among others. In a bid to look modern, the company introduced coffee and cappuccinos (Thapa & Silvestrov, 2016)

Variations 

McDonald’s has a well-organized process which enables it to achieve the changing capacity and subsequently anticipates what a customer might request. Demand for certain foodstuffs is determined through a historic mix data from possibly past events, promotions and so on (Christopher, 2016).

Performance Objectives 

Speed pertains to how long a customer waits before he or she can be served. By increasing availability of output, the waiting time is reduced. McDonald’s has designed an operation process that allows customers to request an order and immediately get served. Preparation of burgers takes 3 to 4 minutes (Christopher, 2016). Technology has played a key role in achieving consistency. Fool proof devices such as meter pumps or ‘clam shell’ grills have made the job easier and safer.

Quality

What makes a product appealing to a customer is its quality. Organizations that offer quality products to their customers have a higher competitive advantage (Stevenson, 2015). McDonald’s has become renowned due to its high-quality and nutritious products. All employees at the company as trained on how to prepare and present foods under certain procedures and guidelines which they must adhere to. For example, food items cannot be held for more than 10 minutes between being cooked and served which means customers will get fresh items (Christopher, 2016).

Cost

Cost minimization of a process leads to a cheaper service.  Lowering the cost of production can be achieved by fulfilling customer requirements. As such, this involves quality pertaining to product design and operations. McDonald’s has put in place a cost control strategy covering the supply chain. The joint has incorporated the Just-In-Time strategy which minimizes the cost of storage and waste (Vitasek, 2016).  Foodstuffs can be sold at a lower price without having to consider the cost of unwanted food. To achieve efficiency and seamless distribution, McDonald’s has adopted a value meal strategy that offers customers a discount when they buy a drink, French fries and a sandwich together.

Sarkar and Moon (2014) argue that if operation objectives are intertwined and quality is improved, the cost is reduced. Also, time of production is reduced which consequently leads to better flexibility. Hence, fulfilling customer requirements through high quality products results in improvement of connected factors.  

Supply Chain Strategy

Infrastructural decisions when incorporated in a company’s operations strategy supports the production process. An instance of infrastructural decisions is supply chain management (Crawford, 2015).  McDonald’s supply chain is based on a successful long-term strategy created by Ray Kroc. The strategy is based on a ‘system’ where everybody wins- employees, the owner that operates the joint and supplier partners. These three are referred to as the “three legs of the stool.” The stool is strong with all the three legs. Therefore, employees, owners and suppliers equally bear the weight of McDonald’s. Kroc claimed that if owners and suppliers were successful, then success would also come to him. In simple terms, owners and suppliers have a common interest in assisting each other to prosper (Crawford, 2015).

Many of McDonald’s supply partners today have been there since the start, with Ray Kroc choosing suppliers who shared the long-term strategy he had. Over the years, trust has been nurtured and enabled both parties to work in tandem with each other while minimizing costs. For example, Martin-Brower Company LLC, one of McDonald’s largest suppliers, has shared a relationship with the restaurant since 1956 (Bowersox et al., 2013). This distributor started out as a distributor of paper napkins to McDonald’s first joint in Illinois.  It now supplies to nearly 15000 McDonald’s regions in North America.  Furthermore, its distribution majors on transportation, logistics and warehouses to approximately a maximum of 700 joints, normally making a minimum of 2 supplies to each joint per week (Bowersox et al., 2013).

To foster a successful relationship with its partners, top of McDonald’s list is collaboration and communication. As such, the company keeps track of everything, communicating all data including point-of-sale, stock levels, inventories among other metrics to franchise owners and partners. In 2016, Gartner ranked McDonald’s are the second top supply chain. Gartner attributed this to the company’s corporate supply nature of managing the upstream supply network (Vitasek, 2016). McDonald's acts as a channel for franchise owners, suppliers, vendors and corporate stores. It regularly calls for council meeting so as to communicate to suppliers any information pertaining to product innovation, technology and safety (Goetsch & Davis, 2014). Base expectations agreed on with suppliers are monitored through a supplier performance index, however, the differentiator is aligned more cultural, as partners always put the restaurant’s system first. This occurs when the partners are communicating to the restaurant about product innovations, process innovations and incorporating top talent into the staff (Goetsch & Davis, 2014).

This close relationship that has been built over the years between the restaurant and its suppliers has been rocked by a number of issues which jeopardized its existence. For example, in 2015, the bird flu outbreak affected egg-laying hens estimated to be 40 million. However, McDonald’s was able to ride through the storm due to its close relationship with its egg suppliers. As such, the joint was able to secure enough supply of higher quality compared to the entire industry while also getting the eggs at constant pricing (Slack et al., 2016).  

Also, McDonald’s response to the infamous “horsemeat scandal” of 2013 which had swept over Europe’s food production drew wide acclamation. In particular, the Elliott Review which was tasked by the British government to undertake an official investigation into the scandal admired the transparency nature in which the restaurant handled the matter. McDonald’s worked in tandem its partners which saw them release a number of promotional films that were aimed at clarifying the origin of its beef while also addressing their customers’ concerns (Crawford, 2015).

Planning and Control Mechanisms

Control mechanisms regulate or control the processes in an organization (Rodrigues et al., 2015). Organizations use these control mechanisms for example to regulate their production, supply, finance and so on. Also, control mechanisms are employed to ensure that members of an organization aim towards one direction which enables them to achieve the goals of the organization (Rodrigues et al., 2015). In a nutshell, the aim of control mechanisms is to oversee the progress and performance of the organization.

McDonald’s has put in place several control mechanisms. First and foremost, the majority of its stock such as French fries is frozen. Finding fresh potatoes is increasingly difficult especially with the ever-expanding supply chain of the company (Bowersox et al., 2013). To improve the quality of the fries, McDonald’s uses a method which involves air-drying the uncooked fries, frying them and freezing them. McDonald’s also keeps extra amounts of foodstuffs for foreseen fluctuations in demand and supply so that customers can enjoy their desired menu whenever they wish.

Secondly, McDonald’s has made millions through its just-in-time process which means that goods and services are availed to customers when required (Rodrigues et al., 2015). The restaurant doesn’t begin to prepare let’s say a burger before a customer makes an order. The company has adopted technology such as bun toaster which makes it easy to make products Also, through lean production, waste is minimized which therefore leads to a dependable, low cost, high quality and faster operation (Thapa & Silvestrov, 2016).

Another way McDonald’s has put in place control mechanisms is through the introduction of less fatty foods in its menu such as salads. This comes against a backdrop of criticism from policymakers who claim the restaurant's foods lead to obesity (Smagghe, 2014). Criticisms create an unconducive working environment hence by diverting attention, McDonald’s can focus more on providing healthy and high quality food. Control mechanisms play a vital role in helping a business stand out in the market in which it operates. Similarly, control mechanisms affect organization functions such as organizing, planning and controlling (Rodrigues et al., 2015).

Conclusion   

Operation management is a practice found in every organization. It centers on processes that transform inputs into outputs. McDonald’s is a household name in many parts of the world. In its operation strategy, the restaurant focuses improving quality, reducing costs and process innovation in every operational aspect of the organization. Employees work together to achieve the objectives set by the joint. Every process adopted by McDonald’s takes into account customers’ needs of quick service delivery and high quality products. When it comes to suppliers, McDonald’s has forged a relationship full of trust and transparency as far as communication and decision making is concerned.  

References

Bowersox, D. J., Closs, D. J., Cooper, M. B. & Bowersox, J. C. (2013). Supply chain logistics management. New York, NY: McGraw-Hill.

Christopher, M. (2016). Logistics & supply chain management. Pearson UK.

Crawford, A. (2015). McDonald's: A case study in globalization. Journal of Global Business Issues, 9(1), 11.

Goetsch, D. L., & Davis, S. B. (2014). Quality management for organizational excellence. Upper Saddle River, NJ: Pearson. (Goetsch & Davis, 2014)

Rodrigues, L. C. A., Coelho, F. J., & Sousa, C. M. (2015). Control mechanisms and goal orientations: evidence from frontline service employees. European Journal of Marketing, 49(3/4), 350-371.

Sarkar, B., & Moon, I. (2014). Improved quality, setup cost reduction, and variable backorder costs in an imperfect production process. International journal of production economics, 155, 204-213.

Slack, N., Brandon-Jones, A., & Johnston, R. (2016). Operations management.  

Smagghe, D. (2014). Comment on letter to the editor from F. Lapostolle: ‘Worldwide relation between the number of McDonald's restaurants and the prevalence of obesity.’ Journal of internal medicine, 276(2), 199-200.

Thapa, G. B., & Silvestrov, S. (2016). Supply chain logistics in multi-level just-in-time production sequencing problems. Journal of the Institute of Engineering, 11(1), 91-100.

Vitasek, K. (2016, December 20). Supplychain247.com. Retrieved December 8, 2017

Ward, B. (2015). Emerging technology and ethical innovation: a case study approach to developing entrepreneurial decision making. Journal of Ethics & Entrepreneurship, 5(2), 103.