Intense competition in the global marketplaces today, products and service with decreasing life cycle and growing expectation of customers force the corporate sector to review the logistics and supply chain activities and increase the investment in SCM. It has helped many reputed companies to gain competitive advantage in the marketplace (Barratt, 2004). The concept of SCM gained significance in the modern business as it plays a crucial role both in the service sector and manufacturing sector
Logistics and Supply chain management is a significant activity in the operation of the company as it helps in the integration of manufacturer, supplier, distributor and customers. The aims and objectives of the report is to understand the application of Logistics and supply chain concepts, methodologies, tools and on providing a critical analysis and discussion of the SCM in McDonald, AU (Barratt, 2004). This report include brief literature review that aims to understand the logistics and supply chain industry and problem faced by the sector, empirical part that deals with the detailed description, analysis and presentation of the supply chain of the company along with the process of SCM with special focus on logistics.
The previous research on the Logistics and Supply chain management activity always considered the activity as a support process that enables the marketing and sales activities of the company that generates revenue. When the customer did not receive the goods and escalates to the higher management that the company discusses about the problem of Logistics and Supply chain management (Min, & Mentzer, 2004). This brings to the forefront the importance of Logistics and Supply chain management in the success of the company and how it can help the company to improve the competitive edge along with the enhancing the brand image of the company in the Logistics and Supply chain management sector.
Brief Literature Review
Definition of supply chain
Today many companies are compelled to improve the market share in the global market with the objective of promoting sustainability and survival of the business. On the other hand these same companies need to protect their market share in the domestic market. The challenge faced by companies is how to make the distribution network and global logistics strong so that the goods shipped to the customers whose demand in growing in the dynamic market supported by rapidly changing distribution channel. This state that the strategic positioning of inventories to be effective to make the product reach the customer on time (Handfeld et al., 2002).
According to Handfeld et al., (2002) the supply chain management (SCM) of the company should be effective and efficient. In case of SCM, efficient is related with the using the resource to the minimum to achieve the required output and effective is related with the well designed channel of distribution. The measurement of efficiency is depicted in the performance of delivery, backorders and inventory level and product quality while measurement of effectiveness is defined by the service needs and service quality.
Therefore the long term competitiveness depends on the ability of the company to design the Logistics and Supply chain management to meet the requirement of customers with regard to cost, service, quality and flexibility and it should be more efficient and effective compared to competitors in the market (Min, & Mentzer, 2004).
Many strategic decision needs to be undertaken along with the many coordinated activities to be able to optimize this equilibrium. This demands effective designing and management of supply chain. The process of Logistics and Supply chain management is crucial activity that helps the company to create value with innovation and differentiation (Handfield, & Nichols, 2002). The challenge of designing the supply chain management is related with the capability to design and bring together assets, skills, organization and competencies. It includes process, products, team and partners.
To get a better understanding of the process of supply chain management in detail, it is essential to understand the term supply chain. According to Mentzer, et al., (2001), the term supply chain is defined as supply chain management in more consolidated way. In the research the author defined supply chain in a common way that was based on the comprehensive research undertaken by different co-authors. They team of authors presented the definition of supply chain as group of three or more individuals or organization involving directly in the inbound and outbound movement of goods, services, information and finance from the company to customer.
The supply chain activities of company may include internal division along with external suppliers who give inputs to the parent company. Again a supplier related with this company may get input from his own group of suppliers and they are known as second tier suppliers (Handfield, & Nichols, 2002). In fact supply chains are generally a range of associated suppliers and customers that enable the movement of products until it reach the end customers.
Supply chain process of a company includes network of upstream supplier and its distribution channel downstream. A company can comprise of several supply chain. Mentzer, et al., (2001), has identified three kinds of supply chain based on the complexity of the supply network. They are explained below.
Supply chain management versus Logistics
In the process explaining the supply chain management, it is essential to explain tyhe process of logistics as well to understand the total concept as the process of supply chain management has its root in logistics. Halldorsson, et al., (2007), state that the relationship between supply chain management and logistics can be explained in four different ways. The reason behind this different perspective is that there is not a single universal definition of supply chain management.
Based on the traditional perception the supply chain analyst is hired by the logistic function to handle the issues related with inter-organizational and cross functional nature.Though some researcher don not differentiate the logistics function from the supply chain function. They merely make a change in the name. On the other hand the unionists view consider supply chain to a broader function than limiting it logistics only and include operation, purchasing and marketing activities as well (Feller, Shunk, & Callarman,2006). Again intersectionists consider the supply chain as internal consultants or staff functions. In fact Supply chain management (SCM) integrate elements of several functional areas strategically like logistics operation, purchasing and marketing though it does not include tactical elements like picking in a warehouse.
For the supply chain management implemented at McDonalds, from the various definition discussed above it is the Unionist view of supply chain management that is more relevant. The justification for the same is that the supply chain management in McDonalds include decision related with the movement of product (purchasing, production, logistics and customer service aspect. This is based on the review of literature that considers supply chain management as extension of the logistics function (Christopher, 2016).
Thus logistics is basically a framework that is planning oriented and promotes developing a single plan to promote the movement of products and information within a business. On the other hand supply chain develops upon this framework and aims to promote coordination between business processes in the pipeline. So supply chain is not limited to logistics and includes organization that integrates the processes, going beyond boundaries of the organization to make a linkage of the internal operation within the system. The supply chain identify that there are coordination that link the company to one another and in the process relate their success to the whole supply chain (Christopher, 2016). The scope of SCM is wide and covers total activities of the company starting with the procurement of raw material and management of inventory to the process of delivering the finished goods to the end customers.
The logistics function can be compared with the supply chain with the help of the value chain model explained by Porter. All entity undertakes a set of activities in the process of conducting business like designing, production, operation, marketing and delivering. They are explained as the primary and secondary activities in the value chain model. Companies operating under the same industry follow the similar kind of chains but the major rivals in the industry try to differentiate (Feller, Shunk, & Callarman,2006).
These differences in the supply chain help to gain competitive advantage in the industry. The value chain of the company is implanted in a wide range of activities known as the value system. The supplier not only delivers a product but can influence the performance of the company in different manner. On the other hand the product of a company undergoes value chain of various distribution channels before reaching the end customers. Thus the differentiation basis ultimately is the company and the role of the product in the value chain of the buyers and it determines the need of the buyers.
Empirical Part
McDonald’s Corporation has emerged as one of the largest chain of hamburger fast food restaurants in the world and the company serves around 68 million customers across the globe daily with its presence across 119 countries. The company has its headquarter in United States. The McDonald’s international expansion strategy is based upon franchise model and thus it has been observed that McDonald’s restaurant is operated across the globe either through the franchisee model, an affiliate model or the corporation itself (Mcdonald’s, 2017).
The major source of revenue for McDonald’s include the rent, the royalties and the fees that is paid by the franchisees together with the sales in the company operated restaurants. This has facilitated the company to experience an increase in revenue by 27% over the past three years and within the same span of time period, the company experienced 95% increase in its operating income. The company in order to cater to the specific needs of the customers strive towards offering wide range of products that include the hamburgers, the cheeseburgers, chicken, French fries, breakfast items, soft drinks, milk shakes and the deserts. Moreover, taking into consideration the changing tastes and preferences of the customers, McDonald’s have expanded its menu to incorporate items like the salads, the wraps, smoothies and fruits (Mcdonald’s, 2017).
Internal analysis of McDonald’s revealed the fact that the supply chain of the company is designed in a manner that assures the fast food chain of delivery. It has been observed that a typical McDrive has to handle 120 cars per hour in Europe and around 150 to 160 cars in Unites States (Mcdonald’s, 2017). Moreover, on the global level, McDonald’s is committed towards selling hundred million items on a daily basis and the restaurant chain also strive towards ensuring the fact that customers are facilitated with what they have asked for (Sheffi & Rice, 2008). The company has outsourced its supply chain as 100 per cent outsourced and thus the company does not own a factory or a distribution centre. The company owns 30% of the restaurants and the rest of the restaurants are franchised.
McDonald’s is characterized with 16 major suppliers and the most important key performance indicator of the supply chain of McDonald’s is that none of the items of the company ever go out of stock (Heizer & Barry, 2013). This has been achieved by the company by working in accordance with the various supply chain planning principles and this has facilitated the company to acquire the third position in the Gartner Supply Chain Top 25.
Thus it can be said that McDonald’s has been successful in achieving sustainability in its supply chain and this has proved to be beneficial for the company to achieve the position in the industry in which it is at present. Moreover, the value chain analysis of McDonald’s proved to be beneficial in analyzing the business activities that has created value and competitive advantage for the business (Dunne, 2008). The value chain analysis of McDonald’s can be illustrated with the help.
From the above figure it is observed that the McDonald’s business process is characterized with two types of activities that include the primary activities and the support activities Where the support activities include the firm infrastructure, the human resource management, technology development and procurement, the primary activities include the inbound logistics, the operations, the outbound logistics, marketing and sales and the services (Tate et al., 2012).
In context to the inbound logistics, it is observed that McDonald’s strive towards purchasing its raw vegetables and other raw materials from its fixed, pre-defined suppliers only (Supply Chain Movement, 2013). This proves to be beneficial for the company to increase its production by making proportionate increase in its capital and labor.
McDonald’s has also adopted the backward vertical integration by replacing most of its suppliers. The main reasons for this decision includes the company has emphasized upon reducing its cost of operation and also is also committed towards ensuring the fact that its products are served to the customers with unmatched quality. The suppliers that have been integrated by the company include the milk and beef that are used in its products and at present the company source these materials from its farm to define the quality standards.
The suppliers like the local grocery stores supply McDonald’s with fresh vegetables, the company source its soft drinks from Coca-Cola that is also its ally and the company supplies the materials like sugar, flour and yeast from the local suppliers.
In context to outbound logistics, McDonald’s is observed to be committed towards facilitating its customers with highest quality of food and services at a great value within an environment that is clean and welcoming in nature (Kane, 2008). So, in order to achieve the above aspects, the company works in close collaboration with its employees, the franchisees and the suppliers in order to serve a balanced array of the food choices and also facilitate its customers with all the relevant information in context to the nutrition that needed for the customers for making sound decisions.
Moreover, at the restaurant level, it has been observed that McDonald’s emphasizes upon sustainable packaging, energy conservation and efficiently managing the wastes. The company has been observed to be committed towards innovation and improving its operations for building a sustainable and environmental friendly and a profitable business (Transportation and Logistics, 2014). The company in this context has also been observed to have been committed towards re-optimizing its menu and modernizing its customers’ experience and broaden the accessibility of the customers to the brand. This would prove to be beneficial for maximizing the experience of the customers while enjoying McDonald’s foods and services.
Conclusion
From the above discussion it can be concluded that the supply chain management of the McDonald’s is hinged upon three basic parameters & these are company itself, the suppliers of the company & different franchisees associated with the company in different parts of the world. It could be seen from the above study that the supply chain of McDonald’s is unique in nature & it provide large importance on this (Jonsson, 2008). The cold chain of the company consists of the procurement of different products to produce varieties of delicious food products, the warehousing mechanism, the transportation facility & finally supplying the food products at the particular destination, i.e. the retail stores.
Since the products supplied by McDonald’s are perishable in nature, therefore, it is mandatory to provide large emphasis on the supply chain mechanism of the company & particularly the cold chain management system. This company also get provide importance on the drip- irrigation system, the transportation system with the refrigeration technology (Christopher, 2016). This helps in keeping foods fresh for longer period of time. One of the most important parts from the point of view of supply chain in case of McDonald’s is its e-procure system. Through this supply chain mechanism system the organisation has been able to improve the competitiveness in the market. Emac digital is one of the essential components of the e-procurement system.
The logistic system associated with the supply chain of the McDonald’s is also very effective in nature. McDonald’s mainly emphasises on three factors & these are cold technology, cleanliness & the efficient delivery system. In the supply chain of McDonald’s around thirty suppliers are situated across the world (Stadtler, 2015). In case of logistics the AFL Logistic Ltd & the RFPL are primarily responsible for maintaining the standard of the whole supply chain of the company. The main task of the Coughlin was to ensure the adequate supply of variety of food products in all restaurants. In case of the supply chain management the main challenging task is the inventory management. To maintain the effective supply chain, the primary hindrance for the organisation is the infrastructure of different parts of the world. McDonald’s has to take any decision keeping all these factors in mind.
Recommendations
References
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Christopher, M. (2016). Logistics & supply chain management. Pearson UK.
Dunne, A. J. (2008). The impact of an organization’s collaborative capacity on its ability to engage its supply chain partners. British Food Journal, 110(4/5), 361-375.
Feller, A., Shunk, D., & Callarman, T. (2006). Value chains versus supply chains. BPTrends, March, 1-7.
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