Scribd Logo
Upload

Welcome to Scribd!

  • 9K views

    McDonalds Inventory Management Practice

    Uploaded by

    Piyush Dewan
    McDonalds uses a Just-in-Time inventory management system where products are supplied to customers with minimal delay between ordering and receiving. This allows McDonalds to make burgers fresh for each order instead of pre-cooking batches. The JIT system has improved food quality, customer service, and reduced costs by minimizing waste and inventory holding costs. It also allows McDonalds to procure raw materials in smaller quantities more frequently, improving quality and reducing expenses. While effective for McDonalds, the JIT system may not be viable for all organizations due to risks associated with handling large bulk orders.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd

    McDonalds Inventory Management Practice

    Uploaded by

    Piyush Dewan
    9K views4 pages
    McDonalds uses a Just-in-Time inventory management system where products are supplied to customers with minimal delay between ordering and receiving. This allows McDonalds to make burgers fresh for each order instead of pre-cooking batches. The JIT system has improved food quality, customer service, and reduced costs by minimizing waste and inventory holding costs. It also allows McDonalds to procure raw materials in smaller quantities more frequently, improving quality and reducing expenses. While effective for McDonalds, the JIT system may not be viable for all organizations due to risks associated with handling large bulk orders.

    Copyright

    © Attribution Non-Commercial (BY-NC)

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    McDonalds uses a Just-in-Time inventory management system where products are supplied to customers with minimal delay between ordering and receiving. This allows McDonalds to make burgers fresh for each order instead of pre-cooking batches. The JIT system has improved food quality, customer service, and reduced costs by minimizing waste and inventory holding costs. It also allows McDonalds to procure raw materials in smaller quantities more frequently, improving quality and reducing expenses. While effective for McDonalds, the JIT system may not be viable for all organizations due to risks associated with handling large bulk orders.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    9K views4 pages

    McDonalds Inventory Management Practice

    Uploaded by

    Piyush Dewan
    McDonalds uses a Just-in-Time inventory management system where products are supplied to customers with minimal delay between ordering and receiving. This allows McDonalds to make burgers fresh for each order instead of pre-cooking batches. The JIT system has improved food quality, customer service, and reduced costs by minimizing waste and inventory holding costs. It also allows McDonalds to procure raw materials in smaller quantities more frequently, improving quality and reducing expenses. While effective for McDonalds, the JIT system may not be viable for all organizations due to risks associated with handling large bulk orders.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 4
    At a glance
    Powered by AI
    The key takeaways are that McDonalds follows a Just-In-Time inventory management system where they make food items only after receiving customer orders to reduce waste and give customers fresh food. This approach helps improve quality, customer service, and reduce costs.

    McDonalds follows a Just-In-Time (JIT) system of inventory management where they supply products to customers with minimal delay between placing an order and receiving it.

    Some advantages of JIT for McDonalds include improved food quality by serving fresh food, better customer service by being able to handle orders better, and lower holding costs for raw materials with reduced inventory.

    McDonalds: Inventory Management Practice and Its Advantages

    By: Piyush Dewan (MBA Core-Div A: I Trimester)

    McDonalds is one of the most popular fast food chains with a worldwide presence. It can be

    found in 119 countries and has about 31,000 restaurants. It employs about 1.5 million people and

    is one of the largest fast food chains, serving 47 million customers daily (2). Most restaurants

    offer both counter service and drive through service with indoor seating (and sometimes outdoor

    seating too!). McDonalds has become a emblem of globalization. It’s main line of business is

    hamburgers. It primarily sells cheeseburgers, hamburgers, French fries, chicken products, ice-

    creams and soft drinks.

    Inventory management in McDonalds: McDonalds follows a Just in Time (JIT) system of

    inventory management.

    JIT, as the name suggests, is the system of supplying products to customers as soon as they have

    ordered for it, with minimal delay between placing the order and getting it in hand. McDonalds

    doesn’t begin to cook or assemble or preheat their stuff until they receive a customer order (1).

    This was not the case earlier. They had a different approach to inventory management wherein

    they used to pre-cook a batch of hamburgers and sit under heat lamps. It used to keep them under

    the lamps for as long as possible and eventually discard whatever they couldn’t sell. Hence

    customers couldn’t enjoy freshly made food. The only way it could happen was by the customer

    giving a special order.

    Hence McDonalds moved to the JIT system of inventory management. This shift was possible

    because of the new burger making technology that enabled them to make burgers faster and keep
    the time between placing an order and receiving it as miniscule as possible. This results in the

    finished product sitting in the inventory for as little as possible. This enables proper inventory

    management and reduces wastage while giving maximum satisfaction to the customer. The

    customer is made to wait for a very short period and this is a huge factor while going for such a

    system of inventory management. Thus, the customer is happy. But it has also lead to a huge

    decrease in costs for McDonalds and this is what has made JIT system such a success. The

    following have been the apparent advantages the JIT mechanism has brought to the McDonalds

    Operations:

    a) Improved quality of food: The burgers are made fresh for the customer and thus

    provide maximum satisfaction. There is no chance of offering stale food to the

    customer. Higher customer satisfaction leads to customer retention and increased

    sales. The customer resists the impulse to try out rival brands till he is deriving

    maximum satisfaction from the brand in question.

    b) Better customer service: McDonalds earlier used to make special orders for customers

    while dishing out precooked burgers from the inventory to most customers. Hence

    such special orders were dreaded by the staff and used to freak them out. The staff,

    now after introduction of the JIT system, is more calm and composed and offers

    better service to the customers. This higher customer service is subject to the ability

    to produce faster burgers. McDonalds are able to handle the demand a lot better. They

    don’t have to waste time in calculating the estimated sales hour by hour and maintain

    an inventory.

    c) Better costs: The holding costs for the raw material like bread, beef, cheese, chicken

    is fairly high because of their spoilage costs. Under the old system, McDonalds used
    to maintain a high inventory leading to faster orders but this resulted in a lot of unsold

    food because of the low shelf life of beef etc. after being cooked. The food was then

    forced to be sold at a higher price to cover up for the losses in scrapping unsold food.

    This resulted in lower costs to McDonalds.

    d) Better Raw Material handling: With the new system, McDonalds does not need to

    procure the raw materials in bulk advances. This reduces daily expenses considerably

    and ensures fresh and high quality raw material all the time.

    High holding costs and low ordering costs were the factors that drove the Just in Time system to

    the market. The ability to lower the operating costs makes JIT a highly feasible solution. It has

    also led them to reduce drastically the safety costs. Safety time exists due to variability in

    demand and variability in lead times from suppliers (3). JIT helps reducing the lead times and

    hence safety stock. JIT provides for an attractive and cost cutting mechanism but it is very

    important to weigh the risks and analyze the associated consequences that might happen. A very

    fast burger making technology makes JIT a viable option for McDonalds but this might not be

    the case in other organizations and they might face problems in handling bulk orders through JIT

    system.

    Sources:

    1. http://www.inventorymanagementreview.org/justintime/

    2. http://www.breitbart.com/article.php?

    id=CNG.aec4920fe8094fdd0baaeab2ed126bf1.741&show_article=1

    3. Inventory management explained, David J Piasecki

    You might also like