McDonald’s operations management (OM) implements solutions pertaining to the 10 critical decisions, including supply chain management and inventory management for materials and ingredients.
In these 10 strategic decisions, maximum operating efficiency and productivity facilitate McDonald’s generic competitive strategy, which focuses on low production costs that enable competitive selling prices.
McDonald’s operations management optimizes the business to counteract competition with Wendy’s, KFC, Dunkin’, Burger King, Subway, and Arby’s, as well as McCafé competitors, like Starbucks and Tim Hortons, PepsiCo and Coca-Cola beverages, and Unilever’s Bru coffee.
The Five Forces analysis of McDonald’s shows a strong competitive force, which influences the company’s operations management strategy and measures for achieving optimal productivity at its restaurants.
McDonald’s Operations Management: 10 Critical Decisions
Design of Goods and Services
In the design of goods and services, the objective is to develop optimal products, given the resources and limitations of the fast-food company. In this case, McDonald’s aims for high-efficiency and standardization in establishing product specifications.
High efficiency and productivity in food preparation minimizes production costs. McDonald’s standardization of goods and services contributes to menu and product consistency, competitive selling prices, and customer satisfaction.
In this strategic decision area of operations management, managers are concerned with satisfying the general public, which is the target market based on McDonald’s strategies for intensive growth. The company aims to attract everyone to its fast-food restaurants.
Also, in making product design decisions, operations managers account for the product element of McDonald’s marketing mix (4P). Thus, the fast-food company’s marketing strategies and tactics relate to this critical decision of operations management.
Quality Management
Quality management aims to align McDonald’s food, drinks, and service with the company’s quality standards and target customers’ quality expectations and preferences. The company’s policies ensure this alignment at company-owned, franchised, and licensed locations.
Quality management needs to ensure that actual quality levels fulfill the goals of providing delicious food and beverages, as required by McDonald’s mission statement and vision statement.
Quality consistency is achieved through product standardization, which contributes to the business strengths identified in the SWOT analysis of McDonald’s. Such quality consistency helps the fast-food restaurant business satisfy consumers’ expectations.
However, McDonald’s operations management faces the challenge of maintaining satisfactory product quality despite production cost minimization, as costs are minimized to enable competitive selling prices.
Process and Capacity Design
Process and capacity design is a decision area that pushes McDonald’s operations management to optimize production processes, such as the preparation of burgers and fried chicken at the company’s restaurants.
McDonald’s operations strategy maximizes the benefits of economies of scale in production processes in order to support competitive pricing, high efficiency, and cost minimization at corporate facilities and restaurants.
For example, the company employs custom cooking equipment for large-scale and high-speed food preparation. Also, the production line method maximizes productivity and capacity utilization at McDonald’s restaurants.
Location Strategy
For its location strategy, McDonald’s operations management objective in this critical decision is to establish and maintain locations that optimally account for access to target consumers, access to resources, the supply chain, costs, productivity, and economic variables.
For example, McDonald’s facility locations support the supply requirements of restaurants. Also, the locations of company-owned, franchised, and licensed restaurants and kiosks are selected for maximum market reach along with the company’s websites and mobile apps.
Other locations considered are those of third-party distributors or retailers of McCafé at Home products, such as Walmart, Costco, Amazon, and Target. These locations or venues extend McDonald’s ability to reach target customers.
The divisions and offices of McDonald’s business structure (company structure) determine the availability of corporate support, which influences the locations selected and maintained in this area of operations management.
Layout Design and Strategy
Layout design and strategy aim for high efficiency and minimized costs in moving resources and information throughout McDonald’s business organization. This critical decision of operations management optimizes the speed of activity in the foodservice workplace.
For the movement of information at the fast-food company’s offices and other locations, information technology offers high efficiency with limited drawbacks. For example, information technology facilitates efficient communication among restaurant employees.
At restaurants and kiosks, McDonald’s operations strategy involves layouts that prioritize space utilization and productivity to maximize profitability, rather than spaciousness and employees’ comfort.
For example, McDonald’s kitchens are designed to match steps in food preparation. Also, numerous small tables are arranged to accommodate as many diners as possible at the restaurants.
Human Resources and Job Design
In human resources and job design, operations management has the objective of developing and maintaining an adequate workforce for McDonald’s business development. The restaurant chain’s human resource management programs are a key factor.
For this critical decision of operations management, McDonald’s supports the staffing needs of its restaurants. For example, the company provides standardized training programs for skills needed in food preparation.
This support is in addition to the human resource policies and measures that McDonald’s franchisees and licensees implement on their own, as deemed appropriate to the specific characteristics of their stores and local markets.
In human resources and job design, individual and organizational learning are also emphasized throughout the fast-food restaurant chain. McDonald’s organizational culture (corporate culture) influences human resource management programs for this purpose.
Supply Chain Management
Supply chain management aims to maintain high effectiveness and operating efficiency throughout McDonald’s supply chain, involving coordination and collaboration with the company’s suppliers.
McDonald’s operations management uses information technology to communicate with suppliers and enable them to match their operations to the company’s supply needs. Suppliers’ productivity affects the fast-food restaurant chain’s productivity.
The supply needs of restaurants and the condition of local markets are factored into this strategic decision. McDonald’s has a mixture of regional suppliers for highly standardized ingredients, and local suppliers for perishables.
McDonald’s corporate social responsibility (CSR), ESG, and stakeholder management strategy, particularly programs for the supply chain, reinforce stable and profitable relationships with suppliers.
Inventory Management
In inventory management, McDonald’s operations management objective is to ensure adequate inventory for smooth fast-food business operations with minimal disruptions in resource availability.
This decision area of operations management can function as an interface between the supply chain and the rest of McDonald’s business. Materials from suppliers pass through inventory management or are stored for later use, depending on corporate and restaurant requirements.
Inventory management effectiveness influences productivity at the restaurants. McDonald’s balances inventory cost minimization efforts and support for adequate inventory levels for restaurant operations.
Scheduling
Scheduling at McDonald’s follows industry best practices, with considerations for supply chain capabilities and market conditions. The strategic objective of this critical decision of operations management is to apply schedules so that resources are utilized to their full potential.
Regular schedules are used for McDonald’s corporate offices and restaurants. Seasonal schedules may be applied to support business operations during occasional or seasonal spikes in market demand for fast food.
Operational effectiveness is achieved by matching the schedules and related activities of McDonald’s, franchisees and licensees, suppliers, and other parties involved in the fast-food restaurant chain’s operations.
Maintenance
For this critical decision, McDonald’s focuses on maintaining stable business operations, which equate to the stability of operations at the company’s corporate offices and at the stores/restaurants.
To maintain high productivity, McDonald’s operations management monitors the needs of its restaurants and uses the resulting data to inform decisions on the maintenance of resources and processes.
Third-party service providers are also involved in McDonald’s maintenance in some situations. For example, these service providers help maintain and repair cooking equipment and machinery used at the restaurants.
The global, regional, and local trends characterized in the PESTEL/PESTLE analysis of McDonald’s influence the industry and, thus, the requirements and tools available to maintain stable and productive foodservice operations.
Productivity at McDonald’s
With the 10 strategic decisions of operations management, McDonald’s works toward maximum productivity. The following productivity metrics are applicable to McDonald’s operations management:
- Order fulfillment rate (productivity at McDonald’s restaurants)
- Stockout rate (productivity of inventory management, especially at restaurants or as aggregated per geographical area)
- Timely delivery rate (productivity of deliveries, including third-party delivery services)
References
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