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McDonalds' Operation Management

In today's business environment, functions management is utilized by companies not only to be competitive, but also to ensure that their goals are fulfilled at a cheapest cost. This may consist of a couple of planned activities that would convert various inputs into goods and services.

This report provides an examination of McDonalds and organisation's Procedures Management, Operational Strategy, process and product design, Source Chain Management, inventory control, JIT and Total Quality Management such as all the different processes and ways to improve the value of products and services that McDonalds provide to its customers at the acceptable cost.

McDonald's is the global fast-food service shop. The company have significantly more than 32, 000 restaurants and provide more than 60 million people in more than 100 countries every day. A lot more than 80% of McDonald's restaurants worldwide are franchised and controlled by local people.

When Richard and Maurice McDonald opened up their first restaurant they developed the thought of an 'set up line' where a reduced menu could be cooked cheaper and quicker, which would lead to an increased turnover of customers.

The history of McDonald's started out with creator, Ray Kroc. He supervised the franchising of the McDonalds' restaurant concept. By 1961 Ray Kroc was working the whole plan. The thing the McDonald brothers does was run their one restaurant, and receive 0. 5% from the bigger company. The development of the McDonald's brand was not something these were really thinking about. Ray Kroc, on the other hand, was. He wanted to put a McDonald's restaurant atlanta divorce attorneys state in the us - which he eventually did. Kroc needed over McDonald's company, at a cost of 2. 7 million dollars.

Anyone who wanted to start a McDonald's restaurant were required to pay Kroc around a thousand us dollars and then 1. 9% from the total annual takings of the restaurant. Then handed 0. 5% of the takings onto the McDonald brothers and retained the other 1. 4%. It is estimated that if the McDonald's possessed continued to receive their 0. 5% it would have been worth around 2 hundred million us dollars by the year 2000.

The McDonald's chain is not without its problems. There was the famous McLibel case - the longest working libel circumstance in British legal history.

Also the breakthrough that some meat products were found in the preparation of their french fries, which led to the business paying settlement of 10 million us dollars to Hindus, Sikhs, and vegetarians.

There have been various criticisms of the McDonald's Organization, ranging from the foundation of their beef, to the treating personnel in the restaurants (BBC, 2005).

McDonald's Restaurants UK Small is possessed subsidiary of the U. S. father or mother company and opened its first UK restaurant in Woolwich in 1974. There are now 1, 200 restaurants functioning in the united kingdom which, despite representing only 4% of the total number of McDonald's restaurants worldwide, add 7% of global income, making the UK an essential financial market for McDonald's shareholders. (McDonald's Organization, 2008)

This report will show the functional strategy of McDonald's and also the way the procedures and products were created in the company.

Furthermore the report explains the move of materials and information between the functions within the McDonald's supply string and also what type of inventory management can be used in the Company, moreover article underlines need for slim management, just-in-time and other systems that are integrated in the Company. In addition report introduces Total Quality Management and its own importance within McDonald's functional process.

3. Operational Strategy

"Procedures strategy concerns the design of tactical decisions and actions which set the role, aims and activities of the operation".

(Slack et al, 2004. p. 67)

The main aim of company in the operational area is that the production process was as effectual as possible. Quite simply, with all the same assets the business produce the utmost amount of high quality product which satisfies customers.

Companies can perform these results through the use of tools such as: minimizing costs, enhancing product quality, punctual delivery, quickness of response, product versatility in adapting to individual customer requirements, amount of resistance to fluctuations in demand, advanced technology and excellent customer service. The listed tools relate with the operational strategies, which by focusing on the development process on certain important elements can give a measurable competitive edge.

To achieve these objectives McDonald's make a balance between customer's needs and minimising waste. Demand is forecasted and stock is handled so that products don't need to be thrown repeatedly.

McDonald's is a global company, however they operate locally. Currently, McDonald's wants to be regarded as a modern company that cares about customers and ecology. They provide fast-serve foods, such as: breakfast, salads, vegetables and dairy products.

In their restaurants people can purchase regional products, including Rice burgers served in Taiwan, Japan shrimp, coconut dairy in Brazil.

3a. Three measurements of operational strategy process


McDonald's sells nearly millions of burgers every day. Careers are organized and repeated in everyday functions. To be able to produce so many burgers every employee have given particular job in which they need to ensure that the product quality and style of the merchandise is the same all the time.


McDonald's give a wide choice of menu items such as: breakfasts, salads, vegetables & fruits and also kids foods to satisfy customer's requirements. McDonald's menu specializes in five main ingredients: beef, chicken breast, bakery, potatoes and dairy. The primary menu items are: the Big Mac and French fries which is one of the key retailers along with local offers and new products that consumers want. Be it McWraps in European countries, Angus Burgers in Australia, or McCaf specialty coffees and smoothies in the U. S. , company is strategically enhancing menu to catch the attention of clients.


McDonald's process is so well-organized it can meet the changing capacity, anticipation for what the client might demand, making sure flexibility.

Demand for products are calculated using store-specific historic product blend data from the

last 2 yrs, store-specific and national causal factors for example dates of events such as

national marketing promotions and school holidays, information from store professionals about factors

that might affect demand, e. g. street closures or local events and deals.

3b. Performance objectives

Performance aims are related to operational processes and their basic function of gratifying customer's needs. You can find five performance objectives:


Most customers want for high quality. Every company wishes to provide error free products for his or her customers and gain competitive benefit. Quality objective brings about certain actions and insurance policies in businesses to give a service that the client wants.

McDonald's serves a variety of nutritious, high-quality foods including salads, fruits, and fruit and vegetables.

At McDonald's the employees are trained to get ready and present dishes relating to very specific methods that are firmly enforced, especially in the prep and handling of fresh and cooked properly products. For example, the ten-minute 'keeping time' for sandwiches ensures maximum quality and freshness to each customer. This means that if the products aren't sold within 10 minutes from the time of their planning, they can be discarded. McDonalds fulfills all the cleanliness requirements, including hand-washing types of procedures. McDonald's succeed on the responses from the clients to continuously improve the quality & service.


Speed is all about how exactly long customers wait before receiving their service organisation increasing the availability of their products or services if the hanging around time is minimised.

The Procedures process is so smartly designed at McDonald's that each customer who comes is served quickly. The business have prep time established for burger and other menu items so that the order is provided within 3-4 minutes. Even during the busy hours the staff members ensure that the order is sent promptly to the client.


An organisation's procedures have to consistently meet a promised delivery time for a product or service.

McDonald's has a more trustworthy process for the customers by offering the meals on time. They have qualified workers to provide products on time each one of them have assigned particular job. McDonald's has predictable opening hours during the weekdays and weekends, the merchandise on the menu are available constantly during any time of the day.


Refers to elasticity of the processes and change in all of the products or services making procedures more flexible to changes in customer requirements.

As customer flavor change, McDonald's must increase the selection of new products it includes. McDonalds offers a whole lot of flexibility to meet customer choices. It offers a balanced collection of culturally relevant menu items in the market segments, for both men and women and kids and is also maximizing the options. McDonalds has a multiple trained personnel in order to be flexible. It maintains shift founded system of work among the crew members permitting them to be flexible enough in the work they actually.


Refers to reducing the price tag on the process, leading to a cheaper service. The simplest way of reducing cost is to give attention to the client requirements i. e. gratifying the quality purpose in both product design and procedure, as a way of reducing rework and waste. Operations should give attention to getting the supplied service right. It should be also co-ordinated with functions like information systems which help reduce errors.

McDonalds have a well planned cost control strategy. The restaurant has a more developed low cost source chain. They adopted Just-In-time strategy that reduces the expense of unnecessary storage space and waste. Food can be sold at a lesser price because the purchase price will not absorb the costs of unsold food. In the long run this means lower charges for McDonald's.

They ensure efficiency and acceleration in distribution and very good food processing technology system. McDonalds has hired the value food strategy which allows customers to buy a sandwich, French fries, and drink at a discount when purchased alongside one another.

"Thus, it is seen that all procedures objectives are connected. If quality is increased, cost is also reduced, thus time is also advanced and which causes more overall flexibility. Thus by starting with quality, along with time reduction the other objectives are straight attacked by firmly taking unique actions to the aim, as needed. Hence, some such actions will result in constant improvement of all four operations objectives at the same time. " (Schroder, 2007 p. 24-25)

3c. PEST Evaluation:

The success of any company depends upon the many external and inner factors that are beyond the control of an organisation. These factors are called Environmental factors. These environmental factors basically include four areas particularly Political, Economical, Community and Technological and the evaluation of these factors is called PEST evaluation. To overcome the problems created by these factors the firms produce various strategies.

Political Factors:

Politics play very important assignments in the working of the business. It is very important for a company to know the prevailing politics factor within it is operating. What type of laws and regulations and legislation exist in the united states and what are the future leads. This is quite important to learn because these factors will determine the strategy required to preserve and work without problems.

Government policy can have a significant effect on the operation of an business. The politics and public issue on over weight and other medical issues negatively affected fast food sales.

In modern times, McDonald's has been facing legal trials of probability in breaking the health legislation by giving unhealthy foods to customers. This acquired made some damage to McDonalds' image. However, McDonald's was already trying to present healthier foods on its menu such as salads, fruits and dairy for the youngsters.

Economic Factors:

Similarly it's important for a company to learn the economy of the country it is functioning within. The factors like unemployment, bare minimum salary, exchange rate, interest, economic progress inflation rate etc are quite important for a company to know. Monetary factors might impact it. If the economy of the united states is bad then the number of McDonald's customers can decrease.

Economic factor can impact the potential earnings of a business. One of the economical forces which might influence McDonald's is the change in interest rate. The majority of McDonald's restaurants are franchises, therefore, franchisees would put up with on the borrowing if interest rate increases.

Social Factors:

Social factors are the demographic and ethnical aspects of the environment. Sociable factors play important role in a small business. The business must value the culture it is functioning in. For instance it cannot sell meat products in a hindu community and pork products in woman community. After that the business has got to know the taste and desire of its customers.

The fast food industry has been hit by negative publicity in recent years due to the increasing amount of diabetes, unhealthy food and years as a child obesity. In order to overcome the issues, McDonald's has been launching much healthier foods and educational programs to bring a healthier environment. McDonald's also offers been heavily added in the charity situations to make contribution to the society.


Every organisation must monitor innovations in technology. These can affect the production methods employed by the organisation. Because of the increasing importance of internet, regional planners work with restaurants and by interacting with them on a regular basis via email and mobile phone.

McDonald's likewise have a friendly use website with more details and information available

4. Process design

Process design is the process by which some efficient requirements of men and women are satisfied through the shaping or configuration of the resources and/or activities that consist of a product, or a service, or the change process that produces them (Slack et al 2004, p. 94).

The process should be designed to deliver the merchandise in the perfect way. Before design the process every supervisor should ask some questions, e. g. what process should give to customers? How much overall flexibility do customers want? How much will they purchase the products? (Waters 1999, p. 65).

Each restaurant is headed by the Restaurant manager who's accountable for the daily operation and customer discussion. The crew associates carry out the normal operation at the restaurant and ensure the customer satisfaction.

The Process at McDonalds starts with the client order and then after receiving the order, the design must be completed and provided. With this operations process, McDonald's aims to have the ability to deliver a reasonable product within reasonable time. The nature of the task is to provide customers ordered products within few minutes.

The order put by the customer is considered by one of the team members operating at the tills, as the order is joined into till, a note is offered to the correct staff member in your kitchen for the prep of the order.

In preparing food McDonalds have their own strategy and criteria; the Crew participants cook burgers over a grill that heat both attributes of the burger in just a little significantly less than four minute where in fact the Patties are "batch grilled" beforehand. The hamburger buns toaster time is somewhat less than about a minute to give it a darkish texture and somewhat crusty, the assembling of hamburger is done by laying out the toasted bottom, pass on mayonnaise, add grilled meat, on top lettuce and onions close it with the toasted top and is also wrapped and placed into the Universal cabinet ready to be sold to customers. Finally the customer is asked for the mode of repayment to complete the transaction.

The process stream in McDonald's:

Customer order

Toast bread product

Cook freezing products

Place product in packaging

Add ingredients

Holding Pantry (Wrapped burgers are kept max 10min)

Delivery to the Customer

Having a planned process design, McDonalds is able to produce and service including customer's standards keeping their quality, decrease the customer waiting time at the counters. They may have dependable crew users and learning resource for on-time delivery of products and service. The flexibility is attained by processing a wide variety of products and changing the price tag on the things and reduces their processing costs by eliminating waste in conditions of getting ready the burgers in mass.

5. Product design

The objective of designing products and services is to satisfy customers by get together their needs and objectives. This enhances the competitive good thing about company (Slack et al, 2004 p. 129)

McDonald's product design specializes in maintaining consistency in how products are prepared as well as what raw-food components are widely-used. They serve a variety of products, sandwiches with meat, fish, and chicken products, menu also include salads, fruits and milk products. The product quality is ensured through standardized and careful employee training initiatives.

The Company frequently introduce new products and a reason for this is the fact customers are demanding more choice. McDonald's menu concentrates on five main substances: beef, rooster, bakery, potatoes and dairy. The business's main menu lists offers: the top Mac and French fries, which still is present as a significant seller. AN ENORMOUS Mac consists of a bun, two beef patties, lettuce, cheese, pickles, onions, sauce and a tiny amount of seasoning. The restaurant is only going to combine these things just before the client orders. Other standard product labels result from the McDonald's convention of adding a 'Mc' to a specific item.

Although McDonald's is a global company, they operate locally. In restaurants people may buy regional products, including Grain burgers offered in Taiwan, Japan shrimp and coconut dairy in Brazil.

Ethical factors about product design could be that to be able to minimise the negative responses about poor food, increased amount of diabetes and obesity among children the business created healthier foods in their menu. They purchase from suppliers that ensure the health and protection of their workers and the humane treatment of pets or animals. The business is also aiming to minimise the effect on environment.

6. Supply string management

Supply string management is the management of the interconnection of organisations that relate with each other through upstream and downstream linkages between different processes that produce value by means of products and services to the final consumer (Slack et al, 2004, p. 445).


Coordinated delivery of products and services from the resource chain


The market

Customer requirements


The operation

Operations resources

Required time, number and quality of products an services

Figure 1. Supply Chain planning and control

Supply string management is concerned with controlling the circulation of materials and information between the businesses, which form the strands 'chains' of an source network. (Slack et al, 2004, p. 444).

McDonalds ensures its suppliers follow the precise specifications of quality, value and sanitation placed by them. With regards to tracing the products substances, great emphasis is positioned, so McDonalds have the ability to control every website link in the resource chain.

Wherever possible, McDonalds will try to use suppliers who are based in the UK, as they choose them, but saying this, they still have to meet McDonald's exact product and cleanliness standards.

All with their European sold beef is supplied from European countries and almost all of their British sold meat is sourced from Britain. McDonald's is rolling out a 'supplier quality index' (SQI) where all suppliers are measured. It allows the business to screen performance of suppliers over the many agricultural and non-agricultural products and services purchased (Food String Centre, 2003).

In 2004, McDonald's unveiled an expert central stock management function known as the Restaurant Source Planning Department. This team communicates with restaurant managers frequently to discover about local occasions. The team develops these factors in to the new planning and forecasting system - called Manugistics - to forecast likely demand of done menu items, for example Big Macs.

Raw materials include the buns, beef patties, paper cups, salad substances and packaging are sent to the restaurants between 3 and 5 times a week. At any time, a restaurant will have a range of products ready for sale, for example Big Macs, seafood and area salads.

At McDonald's, all raw materials, work-in-progress and finished products are completed on a First In, First Out (FIFO) basis. This implies raw materials are used in the order they are really received. Therefore stock is usually fresh because products can be purchased in the order they are made.

Ongoing communication between the central Restaurant Supply Planning team and specific restaurants really helps to deal with the stock better. This team of regional planners works with around 80 restaurants each and communicates with them frequently via email and phone. Any factors which could affect the amount of customers visiting an individual restaurant have to be logged with the team. They are considered in determining the forecasts. Source Planners work with the stock control system, to ensure enough recycleables leave the McDonald's circulation centres. This means that restaurants can produce the foodstuffs required for the level of demand forecasted.

Supply Planners doing work for McDonald's include range of causal factors in the calculation with their forecasts, so that predicated on past performance they can predict future demand for every single restaurant. McDonald's Restaurant Managers need to ensure that the data they enter into the system is really as accurate as you possibly can. For example, each day Restaurant Managers record starting and closing companies of key foods. They record all the items each week (McDonald's Company, 2008).

Vertical integration the amount to which an procedure chooses to own the network of functions that produce a service or product. The strategy of extending on the source area of the network is named backward (upstream) vertical integration, and widening on the demand part is called forward (downstream) vertical integration (Slack et al, 2004 p. 169, 779).

McDonald's has applied a backward (upstream) vertical integration, by exchanging almost all of its suppliers. It did so for two reasons, 1) To lessen costs, and 2) To ensure that they make top quality products. One of the caffeine suppliers of the Company is Distant Lands which have its own espresso farm. Within this example vertical integration reduces the chance of delayed delivery (dependability).

Inventory planning and control compensates for the differences in timing between the way to obtain an operation's products and services and the demand for them (Slack et al 2004, p. 405).

There are 5 types of inventory:

BUFFER INVENTORY compensates swift variations in supply and demand.

ANTICIPATION INVENTORY is employed when changes in demand are big but relatively predictable. It is also used when source changes are large.

DE-COUPLING INVENTORY creates the chance for independent scheduling and processing rates of speed between process levels.

PIPE Series INVENTORY prevails because material can't be transported right away between your point of source and the idea of demand.

CYCLE INVENTORY occurs when a number of stages along the way cannot supply every item it produces at exactly the same time (Slack et al 2004 p. 411-412).

McDonald's method of keeping burger lanes full during top intervals is a recognizable example of a take system in a service application.

McDonalds has made billions of hamburgers using components of just-in-time, from enough time of order from the clients to the payment from them; the burgers or the meals are prepared to be consumed. If they are later than the time purchased, customers will be dissatisfied. So that it is very important to McDonalds to work with the JIT process to keep quality and satisfied customers.

Just-in-time means producing goods and services exactly when they are needed.

Lean development system is the traditional western term for Toyota Development System. Lean procedures and just-in-time planning and control aim to meet demand right away, with perfect quality and no waste. Lean operation means waste elimination in order to generate procedure that is faster, more dependable and this produces high quality products and also functions at low costs (Slack et al 2004 p. 518, 519).

There are two major pillars of trim production system. The first is Just-in-Time system and other is Kaizen.

Kaizen is a Japanese term for constant improvement including everyone - managers and workers as well.

Kanban is a Japanese term for greeting card or transmission, it regulates the copy of materials between your stages of procedure. (Slack et al, 2004 p. 533, 653)

McDonald's use lean production system and minimise waste materials by accurate stock management and by developing correct demand forecasts so that products do not have to be discarded.

McDonald's is an exemplory case of a JIT system, they doesn't begin to cook its requests until a customer has located an order. McDonald's can make their products fast enough because of technology they use, eg. bun toaster. The Company provide fast service and at the same time the finished products aren't put in inventory for long time.

The major benefit of using just-in-time system for McDonald's are good quality food at a lower cost and also better quality customer support. This top quality customer service is the ability to actually produce faster. Without this potential, McDonald's purchasing costs would be higher because the expenses associated with buying would be the increased loss of customers sick and tired of ordering fast food that really isn't fast (Atkinson 2005).

8. Total Quality Management (TQM):

Total Quality Management is a beliefs of how to overcome the organization of quality improvement. This process puts quality at the heart of everything that is done by an procedure and including all the actions within the operation (Slack et al, 2004, p. 722).

Feigenbaum described TQM as; "An effective system for integrating the product quality development, quality maintenance and quality improvement initiatives of the various groups within an organisation, so as to enable development and service at the most economical levels which allow for full client satisfaction"(Cited in Slack et al, 2004, p. 720).

McDonald's goal is easy: to provide customers high quality products anywhere in the world and keep maintaining high criteria of service. Every member of the organisation must be involved from the highest exec to the crewmembers of McDonalds. The dedication to quality must be instilled into everyone as soon as they sign up for McDonalds in every dimension of the company, e. g. Procedure, Finance, Marketing, Human Resources, Health and Security and Food Safety

The basics of McDonalds are:

1. Putting the client first by causing sure all customers are completely satisfied with McDonalds, predicting and rewarding their needs, exceeding their anticipations, by using market research to find out what they need, they aim to surprise you with their quality, choice and service and ensuring all service standards are met.

2. Making constant improvements by reducing costs, maintain good buying procedures in every restaurants.

3. Shoot for zero defects - do it right first time, it could be very expensive placing it right later on. Prevention is preferable to cure. This involves rigorous quality screening and control so that faulty products are noticed immediately.

The advantages of using TQM:

Every individual in McDonalds is responsible for quality

Quality becomes the target for any activities

Everything McDonalds will is designed to fulfill their customers. This can lead to a greater market show and also increased profit

The cons for using this system are:

Requires well-trained, accountable staff, this may cost more income for training each staff.

Some of the employees can be protected to change

Gives visible results in the long run

9. Finish.

Operation management function is out there in every organisation. It is concentrating on achieving the operations of change of recycleables into a completed product. Furthermore effective procedure management enhances performance along the way.

McDonald's Company is one of the very most known companies on the planet. In their functional strategy company made a decision to reduce costs, improve product quality, punctual delivery with their product to customers and ongoing performance of most operational areas of company. All departments of organisation and every employee have to interact to ensure that the strategy grows to its objectives. All the procedures in McDonald's reflect the needs of the customers and products are designed taking into account high quality, rate of service and cost.

McDonald's working together with suppliers that fulfil all the requirements of quality placed by the business. To fulfill customers needs of fast offered quality products their strategy included just-in-time system. As a result the restaurant is offering fresh food in a short time.

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