Pom Assignment

Operations Management in McDonalds
From our research we came up with the following operation management strategies
being implemented by McDonalds:
•Goods & Service Design
•Quality
•Location Selection
•Layout Design
•Human Resource
•Supply Chain Management
•Maintenance
The McDonald has the above stated strategies out of the 10 OM strategies. These
are explained as under:
Goods & Service Design
The tangible goods and intangible services are provided by McDonalds and theho
mogeneity is maintained globally. The goods and services are provided on in a
package that’s why the company lies in 50% in goods production side and 50% in
service providers. In Pakistan the same level of services is offered by McDonalds,
compared to international level.
Quality
The company really maintains its product quality. A lot of expenditure is made in the
quality maintenance and improvement researches. McDonalds maintains the following
quality rules:
• Maintaining strict standards of quality and safety, so that the customers can feel
comfortable fitting any of the food products into their personal eating styles.
• Serving a variety of nutritious, high-quality food products and portion sizes, including new salad, fruit,
and vegetable offerings and Happy Meal choices.
• Providing nutrition information to help customers make smart choices that address their
individual lifestyle needs.
•Informing the customers about energy balance and fun, practical ways to incorporate
physical activity into their everyday lives.
• Motivating kids to be active by engaging Ronald McDonald as ambassador for play and activity.
• Sponsoring major sports competitions, including the Olympics and the FIFA World Cup soccer matches.
Location Selection
Generally it has been observed that McDonald follows the different locations and outlets according to
the specific area.
Strategies
McDonalds makes and implement its location strategy in following way: -
a) Business Areas:
They open their branches in business areas where they target the corporate people and the working
class to dine in and have their timeout for breakfast and lunch.
b) Play Lands and Shopping Areas:
They try to introduce their services according to target customers, i.e. capture the customers in
the amusement parks and in markets such as the branch in Fortress Stadium, Model Town link road
etc.
Convenience:
Customers feel comfort ability when a branch is in near vicinity to their work place.
Customer Gaining:
Due to the good environment the company has an ability to gain their customers to their
locations
Layout Design
This strategy refers to the overall working and general environment offered byMcDonalds. It includes
the personnel level, service and product layout, interiors and exteriors etc.
Strategies
Trainings:
McDonalds provide training opportunities for its employees who need training in a particular area. So it
enables the organization to achieve its goals efficiently.
Separate Departments for Different Functions:
McDonalds has different departments for different
functions. Marketing department consists of marketing experts who perform marketing analysis
and finance department consists of finance experts who arrange and manage finance etc.
Human Resource
Being partially in pure services and goods production sector, McDonalds exercises agood strategy for its
human resources e.g.
Right Person on Right Job:
McDonalds allocates its human resource in differentareas according to the abilities, qualifications and
experiences of employees. The yappoint a marketing expert for marketing, accountant for accounts etc.
McDonalds has differentdepartments for different

functions. Marketing department consists of marketingexperts who perform marketing analysis
and finance department consists of financeexperts who arrange and manage finance etc.
Proper Utilization of Resources:
As there are many experts in different areas, so theyuse all available resources and opportunities
properly. They provide services to
their customers efficiently, which satisfies customers and they achieve their goalssuccessfully.
Employee’s Job Satisfaction:
McDonalds provides training opportunities to itsemployees to improve their skills. So it results in

enhanced employee performanceand they become more interested to work in good manner, which
gives a goodreputation to the organization.
Competency:
McDonalds trains it’s employees of all departments to enhance their capabilities and to
improve their skills and therefore employees provide right product.
To right customers on right time. So it enables the organization to compete in the market.
Supply Chain Management
These strategies determine what is to be made and what is to be purchased. So McDonalds follow these
strategies and have a just-in-time inventory system. Which means that the orders are placed as the raw
material comes to near finish. McDonalds maintain no inventory levels for perishable goods.
Suppliers
The major suppliers of McDonald’s in Pakistan are as follows:
• Dawn Breads for Buns
• Choudhry Dairy Limited for dairy products
• Walls Ice Cream
• Coca-Cola Ltd. for drinks
• Pakages for packing
Maintenance
Theoverallmaintenance process of McDonalds is that they emphasize on themaintenance of the product
quality, the human resources used within the organization, its location and layout designs. They train
their employees of all department6s regarding their job, so they can handle their customer and work as
well which helps to maintain their status quotas. McDonalds is among the companies which are partially
involved in the production of goods and services, so a proper maintenance system
within the organization strengthens the good will and reputation.
QUALITY MANAGEMENT
Management of an entire organization so that it excels in all aspects of products
and services that is important to the customer.
In simple words we can narrate total quality management as a continuous quality
improvement process. So McDonalds also practice the strategy of total quality
management and tries to enhance its efficiency & affectivity level by working in
different areas such as continuous improvement, quality of goods and services,
training, and customer satisfaction.
Product Quality
The ability of a product or service to meet customer’s needs is termed as quality.

Therefore McDonalds works a lot in the quality improvement of its goods by
improving ingredients and nutrients of the food stuff. Some recent nutrient’s
quality improvement information is as under:
For people concerned about food allergies, we have consolidated all allergen
information into the ingredient statement for each menu item so that you have one
current source of information. Please check these listings regularly as ingredients
in menu itemsmay change.
TQM we have concluded our report as under:
• McDonalds is maintaining its product quality according to the international
standards
• The customization of the product and services according to the culture
of Pakistan has resulted in customer satisfaction
• McDonalds has properly covered the business areas with in cities e.g. Lahore
• McDonalds maintains a good environment in every premise.
•McDonalds has a learning environment for employee development and
customer satisfaction.
SUPPLY CHAIN ACTIVITIES:

Supply chain management encompasses the planning and management of all
activities involved in sourcing and procurement, conversion and all logistics
management activities. Companies adopt supply chain management to ensure that
supply chain is operating efficiently and providing high level of customer
satisfaction with low cost. SCM integrates the demand and supply management
within and across companies.
The objective is to meet customers demand while keeping prices low and
McDonalds works on lean strategy to serve its customers as McDonald’s doesn’t
begin to cook its orders until a customer has placed a specific order. They stay on
JIT (just in time) strategy which helps them to reduce or sometimes eliminate waste
and efficiency within purpose of minimum cost. Benefit associated with this is the
higher quality customer service; even placing special order does not bring
McDonalds into panic situation that can cause delays. Also holding cost of burgers
is fairly high so JIT strategy helps them to reduce the spoilage cost. JIT helps
McDonalds to keep eye on Economic Order Quantity which determines how much
to be ordered and there are two factors that drive economic order quantities down:
low ordering costs and high holding costs.
Variability in demand and variability in lead times from suppliers put pressure on
organization to maintain certain safety stock in case of McDonalds; the supplier is
internal production process but problem associated with JIT is it reduces your
safety stock which can actually be a big problem, also with lean strategy
organization lack in capacity to respond to fluctuation in consumer demand.
Structuring the supply chain requires an understanding of the demand patterns,

service level requirements, distance considerations, cost elements and other
related factors. Moving of material inward is upstream and outward is downward.
The upward activities are divided into tiers of suppliers. A supplier that sends
materials directly to the operations is first tier supplier; one that send materials to
a first tier supplier is a second tier supplier; one that sends material to a second
tier supplier is a third tier supplier and so on to the original source. Customers are
also divided into tier. One that gets product directly from the operations is first tier
customer and so on to final customers.
With 37,000 locations across 120 countries, McDonald's is easily the biggest restaurant
chain in the world. The fast food titan is also among the most profitable companies on
the market. Despite a weak operating year in 2016, its 20% profit margin places it 9th
from the top among the 30 members of the Dow.
It might surprise you to learn that most of those earnings weren't produced directly
through the sales of trademark menu products like Quarter Pounders, Chicken
McNuggets, or Big Macs. Instead, Mickey D's market-thumping profitability is thanks to
the rent, royalty income, and fees it collects from its army of franchisees.
Selling franchises, not burgers
McDonald's runs a franchising business model under which it trades access to its brand,
its operating infrastructure, and its resources to restaurant operators -- for a hefty price.
These entrepreneurs pay an initial fee at the start of their franchise. They also send in
an ongoing royalty that's based on a percentage of their sales. Finally, franchisees pay
McDonald's rent for the property that, by the way, can't drop below a certain rate and is
set on 20-year terms.
This approach is an incredibly efficient way to run -- and expand -- a fast food empire.
Since the franchisee puts up all the capital, McDonald's can quickly scale up its market
footprint with almost no financial risk. It also benefits from the fact that rent and royalty
fees carry much higher margins than do direct markups on fast food sales. That's how
its profitability stays around 20% of sales, or roughly double the best
that Chipotle could manage before its food-safety scare problems pushed results lower
last year. The burrito specialist doesn't franchise at all, opting instead to own all its
locations.
There are significant trade-offs to a franchising setup. Among the biggest is the fact that
McDonald's has little control over the employees who serve as the main point of contact
between the corporation and its customers. While Chipotle places significant emphasis
on attracting and grooming the best crew that it can with an eye toward developing them
into management positions, McDonald's leaves those kinds of decisions up to each
individual franchise owner. The corporation also has little say in how the franchisee
chooses to market and price its menu, or whether it is taking all the right steps to protect
the brand.
Opting for higher profits
Yet this setup is extremely profitable. Most of McDonald's revenue comes from the 15%
subset of its restaurant base that it directly owns and operates. Last year, those
locations generated $15.3 billion of sales, compared to the $9.3 billion the company
booked in revenue that came directly from franchisees who run the remaining 85% of its
fast food restaurants.

Pom Assignment

Uploaded by

Copyright:

Available Formats

Pom Assignment

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Pom Assignment

Uploaded by

Copyright:

Available Formats

Operations Management in McDonalds

Goods & Service Design

McDonalds makes and implement its location strategy in following way: -

b) Play Lands and Shopping Areas:

Right Person on Right Job:

McDonalds has differentdepartments for different

Proper Utilization of Resources:

Employee’s Job Satisfaction:

McDonalds provides training opportunities to itsemployees to improve their skills. So it results in

Supply Chain Management

The ability of a product or service to meet customer’s needs is termed as quality.

SUPPLY CHAIN ACTIVITIES:

Structuring the supply chain requires an understanding of the demand patterns,

You might also like