McDonalds Case Study

INTRODUCTION

The purpose of this assignment is to develop a theoretical framework of Operations Management and to apply and analyse a specific industry. The group has chosen to visit a manufacturing industry in Richards bay, called McDonalds. The site visit took place on 9 July 2012 at 5pm. The team has attempted to get visit confirmation from the host manager. Regrettably the branch does not have email facilities to sent follow ups. We have repeatedly visited the branch and unfortunately the host manager is always not available and not returning our calls. We will persist on this matter, where possible. In the event that the confirmation is not in receipt by assignment due date, we will still attempt to get the letter to substantiate the visit.

The body of this assignment will place emphasis on the operations management processes that McDonalds follows, with regard to the product/services it offers, the supply chain management process and its quality management aspects, with a view of understanding the theory learnt as compared to reality. The shift manager, Siyabonga Ndwandwe, was interviewed on areas around the management of the store in Richards bay. The Richards bay store has 43 employees, with 3 shift managers. 12 of the staff are permanent with 6 in management positions. There are 22 females employed at the store.

The choice of McDonalds was mainly for taking a simple approach, visiting a simple industry, to better understand what is expected.

2. BACKGROUND

McDonalds belong to a manufacturing/services industry mix, meaning: a product is made for the sole purpose of selling it to make a revenue. McDonalds sells food based on a given menu. It offers a variety of services, like birthday parties.

McDonalds started out in 1940 by brothers, Richard and Maurice McDonald. It was a drive-in with a large menu. Over the years, the famous French fries and thick milkshakes made their debut. IN 1955, Ray Kroc opened his first McDonalds after becoming a franchising agent. By 1965, there were 700. By 1958, 10 years after opening, the 100 000 000 burger was sold and in 1959, the 100 store opened up. What started out as a small vision became an American dream. By 1963, there were 500 stores throughout America. The franchising concept revolutionised the economy. The first public stock offering was in 1965. In 1966, Ronald McDonald appeared in his first television commercial, the use of media proved an instant hit. The first international McDonalds opened in 1967 in two countries, today McDonalds is a favourite in 119 countries around the world. McDonalds relocated geographically and improved on profits by expanding globally. Today, McDonalds is still looking for opportunities to further attract new and retain existing customers by continuously improving on its menu and service offerings. There are currently more than 33000 restaurants around the world.

3. THEORY VERSUS APPLICATION

"A theoretical framework is a theoretical perspective" (www.analytictech.com). This can be simply a theory or in more general terms, it can be a basic approach to understanding something. It is a collection of interrelated concepts. The theoretical framework of an organisation is all about giving a clear indication, theoretically, on how the organisation operates and how it deals with critical issues involved in operations.

As discussed in the background above, The corporation is listed on the New York Stock Exchange (NYSE) and is the world's largest chain of hamburger fast foods restaurant. McDonalds serves the average of 68 million customers daily in 123 countries. The corporation is operated by a franchise, an affiliate or the corporation. McDonalds was the first to introduce the "Drive-In restaurant" services in the United States in 1961. The corporation employs more than 1.5 million employees around the world. The restaurant offers both counter service and drive through service (McDrive) with indoor and sometimes outdoor seating. In some countries "McDrive" located near highways do not offer counter service or seating set up. Strategic locations for McDonalds restaurants are near petrol stations, shopping malls and truck stop zones targeting truckers and travellers. Most restaurants strategically feature large indoor or outdoor playgrounds. 15% of McDonalds restaurants are owned and operated by McDonalds Corporation directly and 85% is operated by others through variety of franchise and joint ventures. The theory was to start a drive-in restaurant, but the application resulted in global expansion of fast food restaurants that took the world by storm.

The framework chosen is Just-I- Time (JIT). This is a production strategy that aims at improving a business return on investment by:

* Reducing in-process inventory

* Associated carrying costs

The production line process relies on the signals or flagging between different points in the process on when to make the next part of the product. JIT focuses more on problem solving, meaning that there should be a demand of a certain product in order to be produced. "Just in time an approach of continuous and forced problem solving via a focus on throughput and reduced inventory" (Heizer & Render: 654) With a Just In Time strategy, products arrive where they are needed, only when they are needed. In this way, the problem will be identified as soon as the product does not reach the point where it's demanded at a certain time. Benefits of Just In Time (JIT) strategy:

* Flow of goods from warehouse to shelves improves

* Minimizes storage space needed

* Smaller chance of inventory breaking/expiring

* Production scheduling and work hour consistency synchronised with demand

* Reduced setup time - to reduce or eliminate inventory for "changeover" time

* Supplies come in at regular intervals throughout the production day

* Increased emphasis on supplier relationship

McDonalds Richards uses this strategy to basically achieve the above benefits. They keep their inventory semi prepared in the cold preservation room/storage (not frozen). When the customer orders the product, it is when they finalise preparing the product and serve the customer. They adopted this strategy in order to:

* Maintain the freshness of their inventory

* Maintain freshness on their products