McDonald’s Corporation

Sustainable Supply Chain Management

Introduction
• Leading global food service retailer
• Founded in 1955 in Des Plaines, Illinois by Ray Kroc
• McDonald’s serves more than 50 million people daily
• Physical properties around 30,700 restaurants in 118 countries
• Milestone achieved of being largest food service retailer in the world
with $54.3 billion in sales in 2005
• Collaborative culture called the three-legged stool – first leg as
employees, second leg franchise owners and third leg trusted suppliers.
For one member of this trinity to prosper they all must prosper
• In 2016 McDonalds supply chain was ranked no. 2 in the top supply
chains by Gartners
• A model that promotes growth not only of the restaurants but for the
suppliers as well.
Freedom within a framework
Based on belief those closest to customer is best suited to make decisions

• De-centralized structure to manage a global supply chain

• Operational excellence driven through guidelines, standards,audit &
sustainability
• Leverage functions through economies of scale, promote local purchase &
supplies
• Autonomous leadership style to facilitate decision making apt for serving local
communities & customers
• Global supply chain relied on quality, lean business policies & value based
supply chain
Explaining McD’s Purchasing Power
• Consistent supply system through full-proofing & contingency plans
• Multiplicity principle with wide supplier base of products in an area
• Large volume, high quality and competitive pricing through systematic
supply chain & proficient vendor management
• Pre-qualified supplier list post due diligence and quality checks
• Vertical integration in supply chain like chicken & poultry farming
• Consolidation through gap filling in food production & food processing
as well as raw material producers
Sustainable Supply Chain
CEO Jim Skinner ~ “listening to our customers is still the right thing to do. It
always has been and it always will be. Customers will tell us if there are issues
with our products and services”

Protecting
Supply
Doing the customer Mc’Donald
Chain
right thing trust in value chain
Continuity
brand
Salient features in Value Chain
 100 % Out sourced Supply Chain
 Multi-layered Supply Chain includes Direct Suppliers & Processing
companies
 Cold Chain logistics, multi temperature vehicles
 Pull Supply Chain > Order to DC > Routed to Supplier > Supplier
maintain no extra stocks
 Forecasting – DC has 3 months rolling forecast with suppliers
 Long Term Planning > 31Q System
 3 – 3 years McDonalds keep checking it’s plans
 1 – the detailed forecast of next year
 Q – Quarterly monitoring of these forecast
 Lead time reduction through fixed location of suppliers and
restaurants & own fleet of trucks and cleaners
 Non running of fleet enables supply chain to work backwards to
ensure timely distribution, predictable lead times & efficient
inventory turnover ratio
Critical Components in SIPOC
Mc Donald's the king of Vertical Integration
 McDonalds is a fine example of how vertical integration can keep costs down and
profits up.

 They grow their own beef through contracted producers, process their own meat,
create their own spices and mixes in factories that they contract, grow their own
potatoes and other vegetable through contracted producers, transport their goods on
their own

 McDonalds owns the land that their restaurants are situated on, so they do not
have to deal with leases and landlords. They have taken control of their supply chain
nicely.

 Everything that makes McDonalds, McDonalds, is done through a vertical

integration supply chain, and evidently it really works for them.

 One of the clear advantages to their supply chain system is that they have control,
although according to the people in charge, McDonalds does not want to control their
suppliers. However, this system does give them a lot of control over supplies.
Mc Donald's Push & Pull Process

Various suppliers supplies the materials

Products delivered to DC

Products delivered to restaurants

Push stops & pull starts

Customers order at restaurant

Mc Donald's India - Hub & Spoke Model
McDonald’s – Cargill Supply Chain Collaboration
From restaurant to pasture land – Canadian Sustainable Beef Pilot Project

 Cargill is McDonald Canada’s sole Canadian beef supplier, and the company
who makes and delivers all McDonald Canada’s hamburger patties
 Rolling out All Day Breakfast at McDonald’s 14,000 stores in the US in 2016
required McDonald’s and Cargill to find solutions for logistical and supply chain
challenges.
 It was a mutually strategic corporate decision then, both McDonald’s and
Cargill’s, to partner to make sure the customer would always be confident
Canadian beef patties bought from McDonald’s would always be safe to eat
https://www.youtube.com/watch?time_continue=252&v=CRQEPEorE5E.
Triple bottom line

Controversy:

 Soya Bean as food for

Cattles to produce beef

 Overgrazing

 Deforestation of Amazon
Rain Forest

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McDonald’s – Scale for Good
1) How Should McDonalds prioritize sustainability relative to other supply chain goals ?

 Difference between what customer says and what customer does. Price is major differentiator.
 McD Supply chain depends all three factor, McD themselves, Supplier and Customers. In order to achieve a sustainable SC,
change should happen on all these three ends.

• McD:

 Develop Farmer flagship program to farmers and training effectively to achieve environmentally friendly farming

• Supplier:

 Awards and recognition to farmer every year through McD who implement best farming practise (Environmentally Friendly)

• Customer:

 60 million people served every day, initiating “My food My Responsibility “Social cause voluntary program where customer can
contribute some amount for Environmentally friendly agricultural practises.

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• 2) How should McDonalds reconcile different sustainability expectation and
priorities around the world with understanding that local practises sometimes
impact the global brand?

 Collaboration with Environmental activists, launching different campaigns on

environmental awareness, in long term getting an image as McDonalds –
Environmental friendly.

 Increasing Supplier quality by framing firm guidelines.

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3) How Should McDonalds engage supplier activist and
other stake holders in its sustainable supply chain efforts?

 Best way is to include them, there should be greater focus

on partnership, open communication, engagement and
long-term relations.

 Thinking from their perception, what they need, why they

follow certain practise and providing better solution for the
issues faced by the farmers and supplier.

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McDonald’s – Scale for Good
McDonald’s – Scale for Good

McDonald’s Becomes First Restaurant Chain To Set Science-Based GHG Emissions

Reduction Targets https://www.youtube.com/watch?v=2aQBL_4Vv0Y
From the Desk of Chief Supply Officer

“
“Our unique supply chain model is based on an exceptional set
of operating principles that create long-term wealth and
competitive advantage for everyone involved by mitigating
costs, preventing safety issues, and producing quality and
innovative products that delight customers in a uniquely

”
McDonald’s way. The result is increased customer value,
better brand health and stronger business performance.”

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