Mcdonald's Case Study

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Operating System Evolution 1980 - 2003

Although McDonald’s production processes continue to evolve, their strategy at a store-level granularity has been to make profit by exploiting their process as best they can to make quality burgers and other food quickly. In order to improve their process and product, they need to look at ways to decrease the lead times, enhance the quality of the product while still empowering employees to quickly prepare the product, and automate process to remove human labor costs (even if that would mean increasing capital labor costs).

Production Process (1980 - 2003)
McDonald’s VS. Burger King Operationally, the McDonalds and Burger King stores are quite similar, however, some significant features stand out. First, Burger King (at the time of the case) does not serve breakfast. Additionally, Burger King makes at most 2 sandwiches on each of their board stations at one time, whereas McDonalds makes 6-12 sandwiches at a time, such that McDonald’s operations maintain more of a production line appearance while sandwiches are made. When a “grill” or special sandwich is needed, a paper tag is placed under the first sandwich of a batch of sandwiches and follows the sandwich through the line in McDonalds’ process, while Burger King’s process used a loudspeaker to announce special sandwich orders to the board so that they could be assembled to order. Operationally, Burger King starts to add additional workers at lower sales than McDonalds, but after the first few matches McDonalds in adding them at the same rate. McDonalds has a slightly lower margin than Burger King, but McDonalds also has greater total revenue than its competitor down the street. As shown in the attached exhibit 1, both processes use a production line in order to produce their burgers. A significant difference between the Burger King process and the McDonalds process is that the speed of the cooking step. Burger King’s cooking process takes only 80 seconds, while McDonald’s process takes 100 seconds for the regular patties and 270 seconds for the quarter pound patties. Additionally, although the cooking time for McDonald’s burgers is longer, they do several on one grill so that they increase the throughput of them (as mentioned above). The two large cost factors of McDonald’s and Burger King’s processes is their food cost and their wages costs. It is striking that both processes add human resources to their process at almost the same volume points, as seen in exhibit 2. Burger King’s food costs as a percentage of sales are also lower, which may be due to the fact that their process has a lower waste factor. Indeed, when comparing costs as a percentage of sales, Burger King has only a slight advantage over McDonalds at the time of the two cases. McDonalds is known for inexpensive and fast burgers, indeed their production line is a source

of their speed in high volume and high demand times of the day. Their operations allow a customer to make custom orders, but with a slightly longer wait for the next batch of the type of sandwich they ordered (which may provide a disincentive to those customers). Burger King’s advertising has always promoted the customer’s ability to get what they want, and their jingle was always (until recently) some variation of that. Since Burger King has built its marketing around such customer control, their operation is a flexible operation that allows for fast transmission of special orders and the ability for the production line to produce them in a minimal amount of time. It is also important to note that even though both Burger King and McDonalds may apply condiments that should be cold, their buffer inventory of the bin winds up warming the final burger product resulting in a mediocre product. In either process, ordering a specially prepared item decreases the likelihood of such temperature changes in the product, and gives the customer a strong incentive to order a...
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