Improving Logistics at McDonald’s
Logistics is the integration of the activities that procure materials, transform them into intermediate goods and final products through manufacturing and assembly, and deliver them to customers. Comprising all movement of materials from incoming shipments, inventory, production and the final delivery to consumers, logistics managers are responsible for the right goods being where they need to be at the right time. For a firm as large as McDonald’s logistics is an area where proper planning results in increased efficiency. Because of its size, little improvements in the way it handles materials adds up. Conversely, a few, seemingly simple lapses can cost the company millions.
Purchasing is the most costly activity in most firms. For the fast food industry, the cost of purchases as a percentage of sales is often substantial. Because such a huge portion of revenue is devoted to purchasing, an effective procurement strategy is vital. Purchasing provides a major opportunity for management to reduce costs and increase contribution margins. Because the cost and quality of goods sold is directly related to the cost and quality of goods purchased, McDonald's must examine a number of strategies for effective purchasing. Because of the perishable nature of food, a system of just-in-time ordering and delivery is most effective for the company. For such a system to work, solid ties must be forged with a lot of suppliers. Ordering huge quantities of beef, chicken, and vegetables and expecting them to arrive at the shortest possible time requires coordination with capable suppliers.
The company stands to gain the most with improvements in production – the actual preparation of food. Raw agricultural materials arriving at its commissary must be turned into buns, hamburger patties, french fries and McNuggets™ with minimal waste. It must then carry over this practice of efficiency into its outlets. Also, managers at McDonald's must decide...
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