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McDonald's can be truly considered the pioneer of fast-food restaurants & food service retailer. It started as a humble drive-in restaurant opened by siblings Richard & Maurice McDonald in California, USA, in 1940. It was typically a self service concept introduced as 'Speedee Service System" that introduced the terminology of fast service across the food industry. In addition to maintaining a low pricing model, due importance was given to speed, hygiene, and service.
The business was soon taken over by an innovative and inspirational person who started off as a distributor for milkshake machines in McDonalds; Ronald McDonald. He was instrumental in introduction of the franchise model whose task was maintaining consistent & stringent standards of hygiene, service, product uniformity, and quality. The first ever franchisee was introduced in Des Plaines, Illinois which has now expanded to more than thirty two thousand local restaurants in more than 120 countries. The franchisees serve nearly 60 million people each day.
The McDonald brand first established its restaurant in the UK in the year 1974 (October). Currently it is operational around 1200 branches across UK of which 60% are owned by McDonald's Corporation (the company entity when it went public in 1965) & the rest are operated by franchisees. For the past year, in 2010, they have targeted acquiring 30 restaurants per year thereby creating 1800 new job opportunities. They are one of the large scale employers with a manpower size of 60,000.
Having been one of the first to perfect the concept of fast food, operations were a critical aspect to ensure delivery of the value proposition to the customer vis-a-vis Quality, Service & Cleanliness. These were the basic philosophy for any McDonald restaurant. The strategies of McDonalds revolved around this philosophy which ensured that the company protects its brand reputation built over so many years. There were many a key operational decisions which were part of the company's overall strategy. The preceding sections discuss the role of operations as an enabler of the corporate strategy.
Operation Management In McDonalds
II.A Concept of Operation Management
Operations management (OM) can be defined as "Managing the available resources by designing, planning, controlling, improvising and scheduling the firms systems & functions and thereby deliver the firm's primary product & services. " It has been an integral part of manufacturing and service organisation and is aimed at timely delivery of finished goods & services to the customers and also achieving it in a cost effective manner. It consist of an amalgamation of different functions including quality management, design & industrial engineering, facility and channel management, production management, operational research, work force management, enhancing product design, improvising productivity, and improve customer services.
II.B Importance of OM in achieving McDonald's organisational objectives
The traditional McDonald's philosophy that acts as the guiding force behind it's operational make-up is "Quality, Service, Cleanliness and Value". The importance of operation management can be divided into three broad categories:-
Assistance in Strategic Decisions (Long term):- Operation management decision at the strategic level affect McDonald's effectiveness to address customers needs world-wide. This would consider the fixed conditions and existing constraints to formulate global and efficient tools/ systems/ process to achieve competitive advantage. E.g. A major technological change resulting in value addition to the franchisee. Such decisions are in the senior management level.
Assistance in Tactical Decisions (Intermediate term):-This will involve helping out in efficiently scheduling the resource and labour under the constraints defined by strategic plan. This includes decision based on number of taskforce required in a particular restaurant outlet, how many shifts to operate, when the material should be delivered, what should be done about the wasted food etc.
Assistance in Operational planning and control Decisions (Short term):- These are operational decision made for a narrow / short period under the constraints defined by tactical decisions. This assists in decisions like what are the tasks we need to finish today, who will clean-up the restaurants for the day, what jobs have priority etc. E.g. this would be typically be the decision made by a shift operator in a restaurant. These would be narrowly focussed on departmental objectives.
II.C Evaluating success of existing Operational Management processes at McDonald
McDonald's existing operations across its world-wide restaurants are closely linked to the overall strategy of the organisation which is evaluated as under.
PRODUCT DESIGN & POSITIONING:-
Product planning in McDonald's includes creating a menu keeping both the economy and quality into consideration. Operation management processes related to product design include
Achieving consistent and similar quality, flavour and taste across their entire restaurant worldwide by development of sophisticated supplier network and distributors' network.
Innovativeness by catering to the changing needs and preference of the customers by removing certain items based on their seasonality or adding new products to the menu list. For e.g. introduction of 'healthy', low carb, low calorie food item in the menu for the health conscious customers.
Re-engineering the menu based on the local market, the local culture, client segment, their perception and lifestyle. For e.g. catering to the differential segment of vegetarians with a large array of customised vegetarian menu.
Modern sophisticated cooking equipments to prepare the products
Pricing the Menus in such a fashion that is affordable to large segment of consumers
McDonald's restaurant is strategically positioned in such a way that ensures maximum visibility and has a large customer base. It takes into consideration the initial investment required which is a strategic operational decision based on expected return on investments. The identified operational processes with respect to location include
Provide a clean and comfortable ambience targeted at families
Close proximity to the raw material suppliers
Suitable transportation infrastructure availability and related costs
At malls and other shopping areas, there are targeted play area aimed at attracting more kids to the restaurants
Considers parking facilities or area required for vehicles, the waiting time incase of a drive-in restaurant. Turn-around time (TAT) of the product becomes a key to determine the number of customers (& thus the respective vehicles) waiting in the queue in drive-ins.
LAYOUT DESIGN & PLANNING:-
Layout implies the area plan within the McDonald's restaurant. The operational management processes aimed at deciding the general environment, the capacity of the restaurant and responding to the customer demands are as follows:-
Planning the interior design which is standardised across all restaurants across the world maintaining the health & safety norms
Design the service area, reception, product area, product delivery area, storage facilities and seating area
Design of the state of art kitchen to ensure faster and efficient production of quality products
Homogeneity maintained by display of the universal brand image - the McDonald's sign board.
Layouts are planned in such a way that the supervision requirement is minimised.
Though human resource department handles the employees at McDonalds, operational management process are typically related to their functioning and also development. This is reflected in the following processes:-
Ensuring guidelines to prepare and serve food in addition to other tasks for smoother running of restaurants
Also would involve the decision regarding functioning like maintenance staffs, cleaners, security, operational shifts, the benefits offered - all related to efficient running.
Identify the best method of hiring, the maximum staff being recruited on an hourly pay. It also includes online psychometric test, interviews and On Job experience before hiring.
The job design aspect of it also evaluates the technical, economic and behavioural aspect of an employee to decide if they can do the job with the assigned resources.
SUPPLY CHAIN MANAGEMENT:-
Supply chain strategy refers to the suppliers and customers, their deliveries, repayments, inventories etc. Operational management plays a crucial role in McDonalds in deciding the product to be delivered and the materials required to be purchased to make this product.
McDonalds have a certified list of suppliers for their raw materials such as buns, meat, sauce, mayonnaise, dishes, drinks, ice-creams, packaging etc.
Timely ordering of scarce resources, proper quantity, costs all form part of operations management.
Maintenance is a critical aspect to achieve MacDonald's strategic goals of enhancing the reputation, brand image and goodwill. Operational objectives include:-
Service and maintenance of office equipments, food equipments to maintain quality, hygiene
Putting safety of employees first by features like fire drills, fire escape, emergency management training etc.
Protect the company's asset that also includes employers and workers.
Maintenance also reduces chances of break down thereby reducing expenses.
Operation management contributes to the McDonald's strategic objectives by strongly aligning the organisational processes thereby help gain competitive advantages. In addition to this, the quality management has a strong relationship with the goals & objectives which is studied in the next section.
Operation management also includes inventory control & flow at McDonald's. This is in line with McDonald's strategic objective of achieving profitability and managing cash-flows
Inventory control follows the FIFO logic (First In First out) at McDonalds. This is to ensure less wastage of raw material & also resourceful use of these items.
The delivery of raw material is based on the business done in a particular branch.
Ensuring proper storage of food for e.g. meat, dairy products stored in specific temperature, dry areas, and freezer facilities etc. Freshness is another important aspect which needs to be maintained by proper packaging.
Quality Management In McDonalds
III.A Importance of Quality Management in achieving McDonald's organisational objectives
Quality is the most critical aspect for a brand like McDonald's. Being in the food service industry adds in the vital responsibility of maintaining a number of practises to ensure only good quality food are served consistently. This again is essential to maintain the McDonald's reputation and goodwill earned over the years. Besides there are many quality standards, government regulations and legal requirements that needs to be adhered to with respect to food quality besides maintaining its own recognised standards.
Quality is not only restricted to its product but it also aims at the quality of service given to the customers which would include friendly and faster service, increase in productivity, understanding the customer needs- thereby living to its goals of not sacrificing quality for value.
III.B Evaluating success of existing Quality Management processes at McDonald
Following sessions briefs the stringent quality standards existing in McDonald's and their role in enabling achievement of the organisation strategic objectives.
Quality management can be incorporated through various means and standards including ISO 9000 series, Six Sigma, Total Quality management (TQM), Business Process Reengineering, etc. McDonald's adopt the TQM methodology for meeting its business goals.
Total Quality Management (TQM):-
Total Quality management at McDonald's is aimed at continuous improvement. McDonald's has introduced the concept of quality in all organizational processes including customers, suppliers and their employees. TQM is introduced right from the starting stage involving the suppliers, to the middle stage which included the employees and the organization process and finally the output stage which involved the customers.
McDonalds spends a lot of expenditures for quality maintenance and research. The following diagram represents all the entities against which quality management process has been implemented which are essential to meet the strategic objectives namely "Rediscovering the McDonalds value." We evaluate the TQM methodologies adapted across all the key players in McDonald's value chain.
Strategic objective: - Increased the revenues and profit of the organization by cutting cost of at supplier end & at the same time not compromising on quality
Methodologies adapted under TQM
Sources of supply, the preparation technique , regional differences are all verified before approving any supplier
Testing of supplier product quality at accredited labs and also providing nutritional information based on ingredients
Establishing synergies with suppliers
Re-engineering operations to meet special requirement, for e.g. using 100% vegetarian products like cheese, sauces etc for vegetarian.
Separations of vegetarian and non-vegetarian items (with respect to equipments, utensils) taken care of during procurement
Strategic objective: - Increase customer satisfaction and delivering greater value to them
Methodologies adapted under TQM
McDonald's does not compromise on quality for value. It maximises the value to customer by leveraging economies.
Striving to always improve the customer service given by training the employees
Customer feedback is taken to ensure constant improvement in the performance of the existing and new products.(as well as staffs)
Providing constant quality improvement to restaurant experience by value added services and innovative plans like kids play area, information about energy-balance, happy meals
Also McDonald's engages in Corporate Social Responsibility which stresses on improving the quality of the society and environment in general.
Strategic objective: - Improve employee job satisfaction and assuring quality in the job performed. (Applicable at all levels of management in the organisation)
Methodologies adapted under TQM
McDonald's at a branch level encourage employees in their decision making process. They are suitably trained to gain customers, make them feel comfortable and provide them with the best service
Provide many training opportunities to enhance their capabilities and skill-set
Employee empowerment at middle management level to ensure quick decision ability, thereby reducing the prospect of job-dissatisfaction and improve job performances.
Having analysed the existing quality management practises, the following section discusses the scope of improvement in the quality processes that are aligned in meeting the organisational objectives of McDonalds.
Strategic Quality Change, Implementation & Evaluation
Typically fostering a work environment wherein quality is an aspect of every process ensures that McDonalds meets the standard of excellence. A Quality management plan is pivotal in to develop a strong focus on proper resource and efficient operations. The business quality plan presented herewith is to improvise the performance in McDonald's business. It will aim to improve customer satisfaction as well as improve of the employee's efficiency.
Proposing the following operation and management changes with respect to quality at strategic level
IV.A Introduce Total Quality Control Concept
The main focus of this strategy is to improve customer satisfaction. This involves terming quality as the key feature in all the products and services offered at McDonalds. The key owners of helping build this strategy would be the management, followed by the staffs more particularly the one who interact with the customers directly. Though quality is given due importance it all McDonalds plans, the main focus here is to move towards a six sigma quality approach that eliminates any defects in any process in product or service within the next financial year.
The other added benefit to McDonald is lowered cost by reducing wastage, improving productivity and cycle times, improvement in streamlined process, superior customer satisfaction, and increased business opportunities.
Drafting out of a 'Standard Operational Process' document by the senior management which will be implemented at all level across the organisation. This document should clearly define what quality means at different levels. Typically it would include guidelines as follows:-
Establish a total quality implementation team
Field level staff to ensure all round cleanliness starting with washing hands often, using plastic gloves whilst food preparation, washing vegetables thoroughly, appropriate meat preparation, temperature control etc
On-the feet staff with high energy so as to reduce the delivery time to the customer; the coordination will be defined. The quality & turnaround time for each stage should be measured. Focus will be on assessment of teamwork
Empower employees to take total control of the quality aspects. This needs to be ensured by developing a bottom to top information flow.
Have customer feedback system in check (24 hour helpline or website) and improve the response to customer complaints in 2 working days.
Quality will be evaluated by measuring customer satisfaction. The assessment parameters will include fast delivery, accuracy, and friendly service.
Establish a Customer Service Measurement System which captures the customer's feedback and preferences. Customer inputs can be used to modify existing process and quality initiatives.
Quantify the measurement of customer satisfaction to which number of customer complaints and resolutions can also be an input.
IT systems should be to capture the time for service to a customer order across peak & non-peak hours. Any big deviations from the mean service time can be studied to check if it is an employee effect or process effect or system effect.
Ensure atleast 30 hours of training in quality improvement is given to employees who closely interact with customers. Atleast 2.5% of the annual revenue should be spent towards this initiative. There can also be on-line training tools. Recognition of good performance is also necessary since happy staff will eventually lead to happy customers.
Have surprise quality checks carried out by quality inspectors with suitable warnings that can also result in change in the restaurant management in the quality compliance fails inspection.
IV.B Implementation of Backward Vertical Integration
The fundamental behind backward vertical integration involves replacing most of the McDonald suppliers. McDonald's should set-up subsidiaries that manufacture the raw materials used in preparation of their food. The primary advantage of such a strategy is reduction in cost, ensuring stable supply, holding near ownership or control and most importantly ensuring consistent top quality products.
The stakeholders for this implementation would be the senior management team who look for suitable acquisition opportunities. This involves a high degree of mutual adaptation, and exchange of internal knowledge and information. This is an on-going process for quality change and the only time lines that can be determined are restricted to identifying the supplier synergies with McDonald's growth and product line. There should be relationship managers developed to handle each supplier across the synergy.
High and significant investment to establish relationship specific to optimal delivery of supplies. This could be a long term investment in research and development program.
Purchase of farms that yields meat, beef, chicken, and also milk products like cheese, butter, etc.
Restructuring the farms in such a manner that result in better treatment of the animals.
Acquiring local grocery store or strategic tie-ups with them for procurement of fresh vegetables
Strategic alliances with companies such as Coca-Cola, Walmart etc.
Develop a new supplier relationship scheme that fine-tunes the supplier processes. With feedbacks on total quality techniques and statistical process control, the quality of supplies can be improved.
Control is exerted over successive stages of the entire production process that takes care of the quality problem. This reduction in risk will translate into increase in corporate value that can be measured (in terms of higher return on assets).
There is a synchronisation achieved in the supply-demand chain that reduces uncertainty and thus pushes quality
Such a methodology is expected to have large proprietary learning curve. Therefore there is a risk of loss incase the relationship with the suppliers get terminated. Hence the intellectual property protection is weak.
This aspect of strategy is focussed on prevention and not inspection. Based on this a vendor rating can be assigned by control charts, measuring performance at various idea and tend towards developing zero defect products in the long run.
IV.C Service Quality Measurement (SERVQUAL)
Service Quality Measurement typically the measures between the service expectation of a customer and the service they perceived to have received at the McDonalds outlets. The measure of the gap will indicate the improvements to be made. It is a scale whose score can bring out the exact areas for managerial interventions.
To develop a SERVQUAL scorecard will require a corporate strategy and analytics team in place to collect data with respect to customer's expectations and thereby assigning suitable weightages to each of the parameters. Building a scorecard is maximum a three months job (maximum of which would go towards collecting initial data)
SERVQUAL is a questionnaire consisting of 22 expected and matching perception questions which are related to five statistically derived dimensions. These dimensions define the service quality viz. Reliability, assurance, empathy, tangibles and responsiveness.
Each of the dimensions are score in a scale of 1 to 7 that correspond to 'strongly disagree' to 'strongly agree'
The weighted dimensions are added to arrive at at overall quality service score.
A standard defined scorecard method helps is consistent assessment across the globe. It also pin points to the manager the bottle neck with respect to service quality.
Rather than have a subjective evaluation of how workers relate to the process, the tendency will not to use such scoring for evaluation.
Training needs of the staff members can be identified based on this.
For fostering all these quality strategic initiatives, McDonalds needs to transform from a fast food company to a information company. It should constantly educate its employees on the quality initiatives undertaken and also identify training needs on a rotational basis. A communication link should be established between the ground staff to line manager to top management to enable information flow regarding quality requirements improvements. Once each employee is empowered and a sense of ownership is developed through various motivational medium, the quality standards would increase.
To imbibe a culture of quality McDonalds should conduct an 'Employee engagement program' across all its outlets. Rewards and recognitions should be made public for the quality program initiators and achievers.
To conclude, McDonalds with its improvised quality management system will increase its brand value and exceed its customer expectations thus helping it retain its dominance in the global fast food chain of restaurants.