McDonalds, as we all know is the world's largest chain of fast - food suppliers. The business began in 1940, with a small restaurant Bar - B - Que run by two brothers Dick and Mac McDonald in California. It was a drive way restaurant which served a limited menu of burgers, fries etc. Mr. Ray Kroc, a paper cup and multi-mixer salesman got an order of multi-mixer from the McDonald brothers. He was impressed by the organization of the restaurant and came up with the idea of McDonald's Corporation, which was founded in 1955 by Mr. Ray Kroc.
The first McDonalds was opened on April 15, 1955 in Illinois. By 1960, he bought the exclusive rights to the name 'McDonalds'. And by 1965, there were 700 restaurants throughout United States. It was the first time that McDonalds shares went public at $22.50 per share.
McDonalds opened the first international restaurant in Canada in 1967. In 1974 McDonald's opened its first restaurant in the UK. Today, it has a chain of restaurants in 118 countries around the world. It celebrated its 50th anniversary on 15th April, 2005.
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Mr. Kroc had the vision of creating a restaurant system, known for its consistency and quality of food. To achieve this, he needed his franchisees and suppliers to work 'with' McDonalds and not 'for' McDonalds. He promoted the slogan, "In business for yourself, but not by yourself." He encouraged entrepreneurship as much as the commitment to his visions. This has led to the introduction of many new products into the supply chain, most of which were the contributions of franchisees.
"If I had a brick for every time I've repeated the phrase Quality, Service, Cleanliness and Value, I think I'd probably be able to bridge the Atlantic Ocean with them." -Ray Kroc. This very well illustrates the significance of these four aspects in the excellent execution of the restaurant services at McDonalds. The quality and cleanliness is unparalleled.
But, what is unique in this restaurant chain that has travelled past 50 years and emerged as a market leader and promises to continue the same.
McDonalds business runs on 3 pillars:
The McDonalds corporation itself
The business model that the organization follows is Franchisee Model. The company provides training to the prospective franchisees and operators' regarding the ways a McDonalds is run. There is a Research and Development Lab that provides facilities for all trainees to experiment in cooking. McDonalds as a company owns only 15% of the restaurants. The remaining 85% are taken care by the franchisees. There are stringent policies of monitoring the franchisees to assure that they are adhering to the McDonalds promises of Quality, Cleanliness, Service and Value offered to its customers.
The Product Consistency across all the outlets is guaranteed by a supplier networked operation and distribution system. This has resulted in consistency not only across the restaurants in a region but worldwide.
The brand building mechanism of McDonalds is not to cater the needs of the current market demand, but also ensures the brand value in years to come. The organization ensures that the promises to the customers are not compromised which ensures repeat business.
It is considered to be the management of an organization capable of transforming an input to output. This transformation is performed by following a particular process. The transformation can be applied to different categories based on the nature of the business. The three main categories being - materials, customers and information. Most of the organizations rely on a combination of these.
However, in this particular example, the input is the raw materials going into the making of any of the eatables in the restaurant. The process is the conversion of these products to deliverables. These processes are repetitive throughout the organization except for the minor changes resulting due to an introduction of a new recipe which, at a later point of time, become repetitive. The output is the finished eatable that is been supplied to an end user, here the customer.
Strategies of Operations Management
Operations management plays a very significant role in the building up of any organization. The Operations, when put into place, help the organization achieve its basic goals. It is well established by the Potter's value chain model.
Always on Time
Marked to Standard
"Value is the amount the byers are willing to pay for what an organization provides them . . . creating value for buyers that exceeds the cost of doing so is the goal of any generic strategy. Value, instead of cost, must be used in analyzing the competitive position. . ." Potter M. (1985)
According to Potter's analysis, the value chains consist of basically two activities, viz. primary activities and support activities.
The Primary activities are -
Marketing and Sales
The Support activities are -
Technology and Development
Human Resource Management
Further, the operations management is not constrained to value addition task alone. It is a process of Planning, Organizing and Controlling of the operations to ensure that the customer satisfaction is achieved.
Planning and Control
Planning is the major step in Operations management. Planning helps serve many objectives that can contribute to the profit of an organization. Proper planning helps reduce the cost of the production. This is achieved because proper measures are taken to ensure availability of raw materials at reasonable cost even in bleak periods, hence avoiding a stall in the production scenario. Moreover, proper planning also takes care of measures to avoid excess production. There is a better control of the cash flow, which can be the expenses incurred and future investment of the profit earned.
Moreover, the planning strategies will also help make proper use of available resources, raw materials as well as human resources. It also mitigates the causes of dissatisfaction among the employees at times of unexpected workload and among the customers at times of unexpected delay in the services.
Any organization would perform to the best of its abilities when the planning is proper and the plans are put into action as well as process control systems are enforced to make sure that the system is running as per the planned schedule. The control can be implemented by system or manually monitored by people. It does not matter as long as the processes are being followed without fail.
The process is monitored meticulously and the reports are created for every output produced. In the case of our example, the reports would be the profit and the customer feedbacks obtained. These reports are analyzed to detect the deviation from the expected outcome. If the deviations are trivial, corrective measures are taken at the franchisee level. If the deviations are significant, corrective measures are incorporated at an organizational level.
The challenge for fast - food joints like McDonalds in structuring their strategies are better ways to provide variety of end products to the consumers in large quantities, at the same time maintaining the quality and value of the product and keeping it cost effective.
Since the fast - food joint McDonalds has a global presence, the competitive priorities can be analyzed on the following parameters.
Cost - Any customer of a fast - food joint has various options to choose from. This leads to tuff competition for an organization. The cost is sometimes the major factor influencing a customer choice. The customer in most cases won't be able to distinguish the difference in the cost of the commodities put together to produce the end product. So, the organization needs to make sure that the cost of the end product is lucrative for any prospective customer.
Quality - The product quality also plays a significant role in customer satisfaction. Low cost ensures initial customer flow, but low cost put together with superior quality ensures repeat business. The quality of product is an impact of the quality in process. The process quality is significant as it takes care of delivering product to the customers worldwide having a uniform taste and quality. This is very important for fast - food joints as their taste is expected by the customers at various geographic locations to be same.
Delivery - Another major significant priority is the speed of delivery. Most of the customers going to a fast - food joint are expected to be short on time. Hence, they would prefer places which have the fastest customer service even at peak load times, like lunch time. But even with the best processes in place, there can be delays due to unanticipated circumstances. McDonalds has schemes in place to avoid customer dissatisfaction on such uncommon situations. They offer the ordered items for free in case of delay beyond a threshold time. Some joints provide additional items free of cost too.
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Flexibility - Flexibility can be the variety of products provided to the customer. Since during a peak time, there would be far too many customers ordering a variety of items, the supply chain is well organized to cater to the requirement of each and every customer in the least time possible. Moreover, it also requires the organization to adapt to the changing demands of the customers, which may vary based on basically the geographical locations. McDonalds is dominantly a fast - food joint which specializes in beef and pork varieties, but they have a wide range of menu for the Asian customers, where vegetarian and chicken recipes are more in demand.
Service - Since fast - food joints are a service oriented industry where in business depends not only on the above mentioned factors, but to a large extend on the customer interaction. The customer service employees, who are responsible for interacting with the customers while taking orders and delivering them, undergo a proper training before being assigned the job. This gives an advantage over the competitors as customers tend to prefer joints having better customer services.
Along with all of these strategies, the competitive nature of the global fast - food market requires the organization to keep on innovating new products to lure various ranges of customers. McDonalds has in place various product packages that cater to the needs of customers of various age groups. The ranges include the inclusion of 'HappyMeal' option for kids which include toys from the latest animation movies along with food for the kids.
Customer satisfaction is the key to success for any fast - food joint. According to David Garvin of Harvard Business School, quality is defined as transcendent, product - based, user - based, manufacturing - based or value - based .Based on these five definitions, Garvin(1984) compiled together eight quality dimensions which are as follows .
With respect to our example of fast - food joint McDonalds, only a few of these are significant. They are as follows -
Conformance - This is one of the major concerns of a product developed by any organization that it should conform to some pre - defined standards that are expected for that particular range of product. The fast - food joints are expected to conform to the food quality norms and nutritious value.
Performance - Performance is the measure of how efficient a product is to perform its intended purpose. In case of fast - food, the objective is to relieve a customer of hunger and provide the necessary nutrition to the body. The better the performance of a food item in this respect, the more is the demand for that particular item.
Features - These are the additions to the product that can enhance its performance. The addition of accessories in electronic equipment can enhance its performance. Similarly, fast - food joints provide a wide range of additional products like soft drinks, sweets, coffee etc. along with the burgers which fetch more revenue as well as result in the increased service quality and performance. Some of the food packages include additional items like toys etc. that further result in rich features.
Reliability - Reliability is the property of achieving customer trust. A customer should be able to rely on a product for its consistency across various geographic locations. This is crucial for fast - food joints as a person travelling to an unknown place around the globe would be more tempted to walk in to a familiar food joint and hence would expect the same taste and quality that he is used to in his own country or region. This leads to an increase in global business by catering to regular customers.
Aesthetics - It is the biggest concern for any organization dealing with food and drink market. It's the subjective sensory characteristic. There are a lot of competitors in a fast - food business. The customers along with the nutrition and value for money also care for the aesthetic value of the delivered products. These may be the taste, look and feel etc. This may also be the ambience in the fast - food joint. The customer prefers a place where he finds a good combination of all the above concerns. A very nutritious burger in a shabby wrapping won't be popular among the customers on the contrary vice versa can be a market leader.
The Sand Cone Model
An Operations Management Competence Model
Slack et al (2008)
Quality improvement methodologies
Improving the product quality is an evolving process in any business organization irrespective of the domain or range of product it deals with. A variety of norms and paradigms are in place to monitor the Quality improvement processes.
Total Quality Control (TQC)
Total Control Quality is the philosophy of continual improvement in the quality. It's based on the adherence to the 5 S's that are a sequential process that organizations follow to ensure that result in high quality processes and in turn high quality products. According to Ramasamy(2005) The 5 S's are
Seiri - This is the organization by getting rid of unnecessary items. These may include a wide range of objects. The cleaning up of the old files and records in one of them. The old machineries which no longer give optimal results can be discarded or replaced with new one. The machineries may include cutting instruments, baking ovens etc. The constraint for removing the machineries and tools is the once that have been unused for past 2 - 3 years. However, the organization can override these constraints based on their domain and requirements.
Seiton - It's the cleanliness as a result of performing a Seiri. In case of a fast - food joint, keeping the area neat is extremely important as it concerns not only the aesthetics but also hygienic issues of prospective customers. Food outlets need to be well cleaned and maintained so.
Seiso - The equipment and plant where the production happens should be clean to avoid dirt and resultant obscure problems. In case of fast - food joints, the plants where the raw materials for making the food items, the farms from where the vegetables and poultry are being used etc. must be scrutinized to make sure that there is no compromise on the quality of the products used. Moreover, the kitchen in which the food is made should be cleaned. The food items should not at any point of time be touched by bare hands unless it reaches the customer. All these ensure that the food is safe and free from any germs or disease carriers.
Seiketsu - Standardizing the locations of all the items is another way of enhancing quality. The places of raw material in the kitchen needs to be standardized in order to facilitate fast assembling of various items and hence reduce the time of delivery. Moreover, the cash counter has a well-organized cash box which facilitates easy and faster transactions as it becomes easier for the employees to return the change to the customers.
Shetsuke - It is the disciplined way in which the above four S's are implemented and adhered to in any organizations. This doesn't only include the management to take care of the enforcement of these rules. The responsibility lies with each and every employee be actively involved in ensuring that the quality processes are followed.
The three Universal Processes of Managing for Quality
THE JURAN TRIOLOGY DIAGRAM
Determine who are the customers
Evaluate actual product performance
Establish the infrastructure
Determine the needs of the customer
Compare actual performance to product goals
Identify the improvement projects
Develop product features that respond to customer's needs
Act on the difference
Establish project teams
Develop process able to produce the product features
Provide the teams with resources, training and motivation to :
Diagnose the cause
Establish controls to hold the gains
Transfer the plans to the Operating force
Copyright Â© 1989 by Juran Institute Inc
There are many standards in place to ensure that Quality norms are followed. But, these policies seem useless unless there is proper and timely audit for the same. The Quality audit processes would require a team of quality experts to evaluate each and every process for its quality. The above table gives an overview of all the quality planning, control and improvement strategies.
According to Summers (2009), the various standards and criteria that exist globally to support effective quality management systems are:
ISO 9000 - International Organization for Standardization has representatives from the national standardization bodies of over 90 countries. The main objective is to satisfy customer by quality assurance and increase the level of confidence of a customer in an organization. A company can audit itself to gain this particular internal certification. The customers can audit an organization against the set of standards for second - party certification.
ISO 14000 - This is an extension of ISO Standards regarding environmental issues. The organizations are evaluated for environment protection and pollution prevention. These are followed by organizations to reduce negative impact on the environment. The organizations can implement various strategies to achieve this. Like, providing bio - degradable wrappers and glasses instead of using plastics.
SIX SIGMA - The goal of this process is to reduce the process variation to the point where there are only 3.4 defects per million opportunities. This is especially significant for industries whose business involves mass production.
Malcolm Baldrige National Quality Award (MBQNA) - This is another evaluation process which was designed by consulting lots of experts. The main evaluation dimensions are
The soundness of the system.
The deployment of the system across the organization.
The outcome of the deployment.
"If you don't drive your business, you would be driven out of business." B. C. Forbes.
This is the basic principle of business in today's world. The business world is very competitive and doesn't leave room for compromise on any of the aspects of business, be it, Quantity, Quality, Operations Management, Process Management etc. The responsibility of a successful business lies with each and every employee, as was the theory of Ray Kroc, which led him to implement the franchisee business model.
But, implementing alone would not ensure adherence. Adherence can be assured only when measured. Measures literally mean 'dimensions or capacity of anything'. For an organization, the performance has to be measured as well as recognized and rewarded. The performance can be measured for employees, processes, services, suppliers etc. Any parameter that plays a significant part of the organization needs to be measured against certain standards to ensure quality.
Measures of good performance
The performance of the processes in place can be measured on the basis of certain parameters like expenses, income, quality, throughput, delivery time, safety, cleanliness etc. In a fast - food joint like McDonalds, the service time to the customer is a major concern. This can be ensured only if the production time for the food in the kitchen is well defined. Any delay in the production time would delay delivery to the customer hence violating the standards. So, standard time constraints need to be put in place. Moreover, the cleanliness is important as it's a matter of hygiene. The quality of food depends a lot on the incoming raw materials like flour, vegetables, fruits, poultry, oils used etc. All these have to be of superior quality for the proper working of the organization.
The organizational results performance measures are focused on the strategic interests of the organization. The results involve both the organization and customers equally. The customer satisfaction is one of the measures, which can be measured by the amount of repeat business and the number of customers per day. All satisfied customers tend to recommend the organization to their friends hence increasing the business. The performance measure with respect to the organization can be based on its annual financial results, quarterly financial results, deviation of these results from the predicted results, the profits etc. The organizational performance can be measured also by the brand value generated by the organization.
The measures discussed so far were materialistic, but it's the human resources that make a service oriented organization like McDonalds achieve its objectives. There are measures to monitor the efficiency and performance of these human resources. This can be done yearly or half yearly in the form of appraisals. The employees can be rated based on performance. The excellent performers should be rewarded to encourage them to keep up the work and also motivate the rest of the employees to perform better. The extremely poor performers should be given proper mentoring to help them perform better.
The internal process measures are meant to measure the effectiveness and efficiency of the plans and processes that are incorporated inside the organization. The Learning and Growth measures are focused on the growth and well - being of the human resource i.e. the employees. It also encourages innovations, in case of McDonalds, the innovation of new recipes in the R&D department by the franchisees. Financial measures are put in place to analyze the business progress of the organization world-wide in the context of the monetary gains or profits.
These performance measures are used by the organization leaders to analyze and review the existing strategies, plans and processes, and make changes if necessary to improve the present conditions. The quality management systems and Six Sigma are used by organizations to ensure that the organization is moving towards progress in business by balancing the cost, quality and availability of products to the customer satisfaction.
For any fast - food joint, in this case McDonalds, to be a success, the first principle should be 'Customer is the King'. A service oriented industry can flourish only by providing the best customer service in the least possible time. But, service is not the only factor. The quality of the products delivered must be hygienic and nutritious so as to serve their purposes. The competition is fast food industry is on an all - time high, so the cost along with the quality would be a deciding factor for the customer.
An organization's success doesn't rest in the managements hands. The responsibility lies with each and every employee and franchisee. The employee has to work for the organization as their own. The process of the organization has to be adhered to. This measure of these adherences and changes in the organizational strategies according to the requirements would lead to better business. The organizational leaders should not only Implement policies but also incorporate performance measure exercises to ensure that the processes are being adhered to.