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    The Mcdonaldsindia: Optimizing The French Fries Supply Chain

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    Naman Tuli
    McDonald's India optimized its French fries supply chain by collaborating with local potato farmers and McCain Foods. This helped create a 75% local supply and established a sturdy supply chain with lower costs. However, risks remain such as rising inflation, increased competition, and limited cold storage technology. While vertical integration could ensure quality and reduce costs, the challenges of climate, infrastructure, and competition would still exist. Overall, collaboration has strengthened the supply chain more than full vertical integration.

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    The Mcdonaldsindia: Optimizing The French Fries Supply Chain

    Uploaded by

    Naman Tuli
    165 views10 pages
    McDonald's India optimized its French fries supply chain by collaborating with local potato farmers and McCain Foods. This helped create a 75% local supply and established a sturdy supply chain with lower costs. However, risks remain such as rising inflation, increased competition, and limited cold storage technology. While vertical integration could ensure quality and reduce costs, the challenges of climate, infrastructure, and competition would still exist. Overall, collaboration has strengthened the supply chain more than full vertical integration.

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    MCD case study

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    McDonalds Group1

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    McDonald's India optimized its French fries supply chain by collaborating with local potato farmers and McCain Foods. This helped create a 75% local supply and established a sturdy supply chain with lower costs. However, risks remain such as rising inflation, increased competition, and limited cold storage technology. While vertical integration could ensure quality and reduce costs, the challenges of climate, infrastructure, and competition would still exist. Overall, collaboration has strengthened the supply chain more than full vertical integration.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    165 views10 pages

    The Mcdonaldsindia: Optimizing The French Fries Supply Chain

    Uploaded by

    Naman Tuli
    McDonald's India optimized its French fries supply chain by collaborating with local potato farmers and McCain Foods. This helped create a 75% local supply and established a sturdy supply chain with lower costs. However, risks remain such as rising inflation, increased competition, and limited cold storage technology. While vertical integration could ensure quality and reduce costs, the challenges of climate, infrastructure, and competition would still exist. Overall, collaboration has strengthened the supply chain more than full vertical integration.

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    © All Rights Reserved
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    of 10

    THE MCDONALDS INDIA

    O P T I M I Z I N G T H E F R E N C H F R I E S S U P P LY
    CHAIN

    GROUP 1
    A B H I N AV
    J AT I N O B E R O I
    NAMAN TULI
    PIYSUH JHA
    V I C K Y S U R YAWA N S H I
    YA S H A G A R WA L
    McDonald McCain
    • Founded in 1955 by Ray Kroc • Founded in 1957

    • First store in Des Plains, Illinois • World’s largest producer of frozen French fries
    and potato specialities
    • In 2010, the net income was $4.9 Billions
    • Produce 33% of all French fries in the world
    • In 2011, 33,000 restaurant serving 64 million
    customer in 119 countries every day • 3rd largest potato grower of potatoes

    • McDonalds India, joint venture between • 50 manufacturing facilities, 3200 grower


    McDonald’s corp. and 2 Indian businessmen, partners and $6 billion in net sales
    Amit Jatia and Vikram Bakshi.
    • Processing facility in Ahmedabad, Gujarat for
    supply to McDonalds.

    OVERVIEW
    PITFALLS IN LOCAL SUPPLY CHAIN

    Climate limited the


    Less than 1% of locally
    growth period to winters- Outdated farming and
    produced potato were of
    Growing season is irrigation practices.
    process grade.
    between 90 to 100 days.

    Poor transportation Lack of proper storage


    Lack of cold supply chain.
    infrastructure. lead to lower shelf life.
    LAMB WESTON AND TARAI FOODS
    • Joint venture between Lamb Weston and Tarai foods.
    • Invested $10 million in land ,plant and machinery.
    • Venture focused on identifying and growing a suitable breed of potato.
    • Lamb Weston petitioned to allow import of fries.
    • Government allowed import of frozen French fries in 1996 under restricted category.
    • Import duties levied was 56%.
    • Lead time was around 60 days(40 for shipping and 20 for handling and custom clearance).
    • Unfavorable exchange rate meant the fries would remain expensive item on the menu.
    MCCAIN`S SUCCESS
    • McDonalds`s gave localizing French fries another go with McCain in 1998.

    • McCain understood that getting the right potato was key to success.

    • They imported germplasm as importing raw potatoes was not allowed.

    • Instituted Shepody potato seed multiplication program at 13,000 foot.

    • Building up business and relationship with local farmers to produce wedges and patties.

    • Conducted regional trials to identify regions, types of potato and best combination of growing
    practices.

    • Cutting the middlemen from supply chain.


    BENEFITS OF FARMER
    COLLABORATION:
    • It helped creating a 75% local supply for MacFry
    – Cultivating the Process grade variety of seeds
    – Seeds were planted in farms with higher accessibility
    – Frozen Fries sent to 3PL storage facilities & shipped to restaurants
    • Establishment of a Sturdy supply chain
    • High Loyalty of farmers helped ensure a secure supply & assurance of Product quality
    • Mcdonald’s produced fries at 30% lower cost than before
    • There was no exposure to fluctuating exchange rate (Saved additional 19% on Import costs)
    • Average inventory reduced from 15 days to 6 days
    • Better risk management & contingency planning due to reduction in shipping time
    • Assuring the desired quality because of volume increase.

    • Rising Inflation rates, leading to increase in the prices.


    RISKS
    ASSOCIATED
    • Increase in supply chain cost because of growing demand and
    changing cost structure with the restaurant. WITH
    • Competition from other international food companies like
    MACFRY
    PepsiCo.
    SUPPLY
    • Limited cold storage technology, resulting in storage time for
    6 to 8 months
    CHAIN
    • Develop a better and long standing relationship with the
    farmers so as to have them under confidence.
    • Develop better cold storage facilities, so that large TACKLING
    quantities of potatoes can be stored for a longer duration.
    • Optimise the supply chain network to adjust for the rising
    COMPETITIVE
    inflation rates. THREATS
    • Removing commission agent in their multi channel potato
    value chain by using model 4 or 5 in exhibit 6.
    STRATEGIES TO MEET DEMAND
    • Investing in cold storage technology.
    • Reduce quantity in each serving but keep the price same.
    • Identify more ideal growing areas to increase supply.

    100% Localization
    • Lower cost structure- around 30%.
    • No impact of macroeconomic factor like exchange rate.
    • Lower inventory level needed.(From 15 days to 6 days)
    • Reduced transport time.( 60 days from USA to a day)
    • Relationship with farmers ensured stable supply
    VERTICAL INTEGRATION-
    STRENGTHEN OR WEAKEN
    • Challenges faced by McDonald to have Should they do Vertical Integration-
    assured supply No
    – Quality maintenance while increasing the Why
    quantity • The investment needed to Vertically integrate will
    – Serving everyday value without increasing cost take a hit on the business like McCain had in
    1990’s
    – Keeping up production needs without
    • The challenges remain same if McCain, MacD or
    increasing supply chain costs
    any other company who takes up the production
    – Competition from supply from other • Climate conditions
    international food companies
    • Inflation rate
    • Cold storage availability
    • Advantages of Vertical integration • The problems which is faced currently to have
    – Quality assurance can be built to the system assured supply wont be solved if vertically
    integrated, the advantages are limited to
    – Transaction costs are low throughout supply • Lower cost structure
    chain
    • Higher quality

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