1. An investigation of the global dimension supply chain of the chosen organisation.
2. An investigation of the role of logistics in the chosen organisation.
3. A mapping of their supply chain based on the availability of information and/or best knowledge about the mode or type of transportation methods used to link the different stages of supply chain to achieve competitiveness.
4. A discussion of how transport logistics shape the greening of the supply chain.
5. A discussion of logistical performance measurement system.
McDonald’s Supply Chain
McDonald’s Corporation is considered to be the leading food service company globally. The corporation was started in 1948 by Dick and Mac McDonald. To maintain its competitive advantage, the corporation constantly creates new items which are added to its menu. This shows that the company aims at maintaining current items while at the same time defending the existing market. The company is a fast food chain that has restaurants across the globe including Singapore. McDonald’s headquarters are in Oak Brooks, Illinois in the United States. The company deals with the sale of buggers as well as other fast foods which are customized to the local’s taste. The company has a philosophy whereby it ensures that its buggers are uniform regarding the quality and cost. To achieve this high standard, it is important that the corporation has a supply chain system that is excellent. A supply chain is a system of activities, people, organizations, technology, and resources that are needed in the movement of a service or a product from the supplier to the customer. Practices associated with the supply chain helps in transforming raw natural resources, components, and raw materials into finished products which are delivered to the consumer.
Supply chain management entails the process of planning as well as management of every activity that involves outsourcing and procurement, conversion, including the management of all the logistics activities. Nonetheless, it also involves the collaboration and coordination with the channel partners who include the customers, suppliers, or even the intermediaries. Supply chain management can thus be viewed as an integrating function with its core responsibility being to link the primary business processes and functions within and across organizations into a business model that is cohesive and high-performing. As such, supply chain seeks to fulfill consumers’ demands by use of the most efficient resources. This essay seeks to analyze McDonald’s global supply chain.
Processes that are performed in a supply chain can be viewed in two main ways: it can either be the cycle view or the push/pull view. McDonald’s supply chain practices are divided into three main process cycles according to the cycle view. These three processes include the Customer Order, the Replenishment Cycle, and the Procurement Cycle. Once the consumer interacts with the corporation’s staff for instance in a restaurant, they order before making payment for the meal ordered, and the Customer Cycle is created (Raghavendra and Nijaguna, 2015, pp.25). Immediately after the order has been taken by the serving employee, the employee makes the order from the counter, which is delivered into the kitchen that is located within the restaurant. At this stage, the kitchen staff gathers various components and goods which are assembled to form an end-product. Demand is external in the Customer Order Cycle.
The Replenishment Cycle is initiated when the retailer seeks to replenish the restaurant’s goods creating safety for future demand. Thus, this cycle creates a connection between the retailer and the distributor (Sawik, 2013, pp.147). For instance, the cycle may be triggered at McDonald's in the instance where there is a deficit in cheese. This cycle is almost the same to the Customer Order Cycle, only that the retailer now becomes the client.
Role of logistics at McDonald’s
Last, the procurement Cycle helps in connecting the supplier to the distributor. This is because the supplier will have to connect with the distributor to obtain supplies and further distribute them to the different retail restaurant outlets. Generally, an order’s scale increases while the order’s frequency decreases within the supply chain when moving further from the consumer. For example, if a set of a daily meal is ordered by a customer from the retailer, heaps of lettuce are ordered by the retailer for its hamburgers, large orders are obtained by the distributor from many retailers on a monthly basis. Additionally, the supplier obtains even large-scale orders to be able to meet the distributor’s demands after every three months.
The second cycle is the push/pull view. This is another way of viewing the activities that are carried out in a supply chain. There are two categories into which processes are divided based on the processes’ timing relative to the consumer’s order timing. When a consumer places an order, the pull processes are triggered (Telang and Deshpande, 2016, pp.374). However, the push processes are triggered when there is an anticipation of a consumer’s order. This is to say that the customer’s order is relative to the pull effects while the push effect is relative to speculations on when a customer will make an order.
McDonald’s Corporation applies both pull and push processes except that the processes which involve the Customer Order Cycle are push strategies. This means that products are pushed from the suppliers to the distributors, and later to the restaurants where consumers demand the product, thus creating a pull effect. As a result, the pull and push boundary is found before the Replenishment Cycle and after the Customer Order Cycle.
The growing trade’s wealth has resulted in an increase in the national and international markets for both goods and services. Gathering issues in the extended markets as well as the increased number of products and services, businesses have increased in terms of complication and volume (Manzouri and Rahman, 2013, pp.41). Products’ distribution from their point of origin to their consumption point has become an essential aspect in meeting customers’ demand. In the current competitive environment, effective logistics management has become a critical element in increasing a company’s competitive performance and its profitability. Logistics play crucial roles at McDonald’s as discussed.
Logistics helps facilitates the efficient movement of raw materials and resources from the suppliers to the restaurants and finally to McDonald’s customers. As such, logistics’ role within the corporation is to facilitate the supply of the required materials to the corporation at the required time and at the required place in the right condition and at an affordable price to the clients.
Also, logistics serves as McDonald’s proprietary asset. The efficient and economical logistic system within the corporation is similar to McDonald’s tangible asset which cannot be duplicated and used by the company’s rivals (BüYüKöZkan and ÇIfçI, 2013, pp.3937). Since McDonald's is capable of availing products to its customers at reduced costs and quickly by having an effective logistics system, it has been able to acquire a competitive advantage over its rivals. The efficiency in its logistics system may as well translate to selling its products at a reduced cost or offering high-quality customer service.
Logistic also has the role of adding value and place utility within McDonald. Manufactured products are considered to possess more value compared to the raw material. For instance, McDonald’s hamburger is more valuable compared to cheese. A utility can be defined as the process of making products in a state that is complete (Maxwell and Lal, 2013, pp.64). However, according to the customers, the product should not only possess utility but should also be available at the right price, time, and be on the shelf for purchase. The logistic system thus helps the organization in providing a place as well as time utility, while additional marketing processes help in providing possession utility. The value added by logistics is of much concern to McDonald's since improvements in time and place utility are positively reflected in the company’s profits. The company’s cost-saving logistic system and its strong marketing position resulting from the enhanced logistic system have played the role of improving its bottom-line performance. The more the logistics system contributes to the product’s value, the more it becomes essential to an organization.
Transportation facilitates the movement of products between different places and different stages within an organization’s supply chain. Transport has a huge effect on the efficiency and responsiveness of an organization. A supply chain tends to be more responsive if it has a faster transportation. However, a faster transportation is less efficient within the same supply chain. Transportation thus has a critical impact since it controls the response and reply speed. In a supply chain, it is necessary to identify the transportation mode that links the various stages in a supply chain (Jiao and Frey, 2014, pp.57). Currently, there are many options for available for transferring goods from one area to another. The situation has been as a result of changes in the business environment and technology. It is important to make a decision on the transportation mode since it affects the transportation costs. The supply chain involves several transportation modes which link its various stages aimed at achieving competitiveness. The modes are as discussed:
- Air Fright
In completing the supply chain functions, the airfreight transportation is very critical in industries and services. This mode of transportation is very important since it provides speedy delivery, it has reduced risks, has enhanced security, it is flexible, and there is ease in accessing good views. However, it faces certain disadvantages which include the high carries charges. This mode of cargo transportation is mostly used by considering two main factors which are the value per unit weight as well as the relativity of high delivery speed.
- Land logistics
Land transportation consists of rail, water, pipeline, and truck transport. This transportation mode is considered to be very essential to the logistics activities. The four modes under land transportation provide services for maritime and air transport from the ports and airports. The main means of land transport are the road, pipeline, and rail transport modes. Rail transport has the advantage of having a high endurance capacity, has low power consumption, and it is less impacted by climatic conditions (Dabiri and Heaslip, 2018, pp.364). However, the mode faces several disadvantages which include basic facilities’ high costs as well as the high costs of maintenance, it lacks flexibility, and it is time-consuming compared to road transport.
In the case of road transport, the transportation mode is easy of access, investment funds are lower, there is ease of mobility, and it is available. The mode also has some disadvantages which include being slow compared to air transport, safety and security is an issue, and it has low capacity. Pipeline transport has a high capacity, less affected by climatic conditions, and is cheaper (Dües, Tan and Lim, 2013, pp.95). Its disadvantages include: it requires costly infrastructure which requires constant maintenance, it is difficult to control, and it transports specific goods only. Excessive use of land transport has resulted in many problems which include traffic congestion, accidents, as well as pollution.
- Package Carriers
These are transport firms which are used in transporting packages. These packages can be small since the package carriers make use of air, thus the package should weigh around 150 pounds. However, the carriers are very expensive making it hard for them to compete with truckload carriers when transporting large shipments (Swami and Shah, 2013, pp.342). Hence, carriers are used in the supply chain to transport small and time-sensitive goods. However, adoption of the just in time (JIT) has resulted in growth in package carriers within the supply chain.
Logistics’ primary objective is coordinating products’ movement along the supply chain in a manner that meets all the necessary requirements at a minimum cost. In the past, the minimum cost aspect was defined purely on the monetary terms (Laosirihongthong, Adebanjo and Choon, 2013, pp.1102). However, as environmental concerns rise, organizations are required to take into account the logistics’ external costs which are associated specifically with changes in the climate, accidents, air and noise pollution, including vibrations. Green logistics helps in analyzing the logistics’ environmental impacts and how they should be dealt with.
Logistics entails moving of products in every stage of the supply chain between raw materials and the finished product. Logistics’ primary focus is to deliver a product that will satisfy the consumer at the lowest cost possible as well as reduce the overall costs. The aspects that make up the logistics system are supply chain management, retailing, safety inspections, warehousing, and manufacturing. In green logistics, all issues which relate to the regular logistics apply, with environmental friendliness as the added factor. Examples of green logistics include:
Green transportation: green transport means building up a type of oil that contains the smallest possible pollution aimed at trying to rehearse the part and the multi-transportation mode.
Green storage: this refers to endorsing the urban development with the extension to storing goods aimed at lowering manpower fee, receipting the centralized-stock’s process aimed at reducing the environment’s radicalization, and reduce warehousing’s poor results to the public.
Green packing: such type of packing material helps in reducing environmental pollution because they can be reused or even renewed.
Reverse logistics: the reverse logistics system is different from the normal supply chain (Dey and Cheffi, 2013, pp.714). The process helps to plan, implement, and control the efficient and the cost-effective flow of resources, in-process inventory, end products, as well as the related information from the consumer to the producer thus facilitating proper disposal.
Green Innovation: this can be defined as the process of producing, assimilating, or exploiting a product, business technique, production process that results to reducing environmental pollution, risks, among other negative impacts that may result as compared to the relevant alternatives.
Additionally, the social issues may as well be considered in green logistics. This is because the customers are more concerned about a product’s social impact (Bhattacharya, et al, 2014, pp.706). For instance, if an organization that grows flowers organically but its staff are underpaid or even restricts them from unionizing, the customers might boycott the firm regardless that the production process is green. Consumers are at times willing to pay an extra mount for products that bear labels indicating that the firm practiced social and environmental responsibility both in the production and in its logistics. This makes the green logistics to be more appealing both from an ethical and a business standpoint.
Chow et al, (1994) were probably the first to try and define what logistic performance is. Their study provided some indicators that would be used to measure logistics performance. However, since that attempt, most of the literature dealing with logistic performance tends to talk more on the models and the framework, and on how to manage the various logistics’ aspects. Logistics performance may be viewed as a portion of an organization’s performance. There are seven dimensions that were put forward by Sink and his colleagues to illustrate what logistics performance entailed. These dimensions were work life’s quality, effectiveness, productivity, innovation, efficiency, quality, and profitability.
Logistics performance measurement like all the other organizational functions starts at the individual metric level. Nonetheless, there is the need of having a method that would be used in evaluating the existing metrics because there are metrics that exist. Logistics’ complex processes are grouped into activities which when they are conducted at high quality, they will not definitely make the process to be a high standard one, but at least they will offer the chance (Upadhaya, Munir and Blount, 2014, pp.861). The quality areas of concern within the logistic system include the logistic facilities, logistics’ processes and sub processes, human services, management, and organization.
Logistics performance measures can be grouped into two categories which include the qualitative and the quantitative measures. The qualitative measures consist of product quality, customer satisfaction among others (Taticchi, Tonelli and Pasqualino, 2013, pp.784). The quantitative measures consist of flexibility, delivery performance, order-to-delivery lead time, resource utilization, chain response time among others. The supply chain’s performance quantitative metrics are classified into two main categories which are financial and the non-financial. Research on logistics performance measurement suggests that organizations within the supply chain should adopt a management and performance measurement approach that is more balanced. Also, in addition to the financial indicators, firms can as well as measure the non-financial indicators adequately.
The importance of logistics performance measurement cannot be denied. Through logistics, firms would gain a competitive advantage if they seek and attain excellence in twin peaks of service leadership and the cost. Metrics are important when evaluating work done and directing the activities because what is measured is an indication of how an organization intends to deliver value to its clients. Thus, performance measurement helps in quantifying an action’s efficiency and effectiveness (Keong, 2013, pp.105). Pressures such as globalization, change in customer demands, and competition is forcing organizations to re-focus on making use of resources and people based on a company’s objectives. As such, firms need to avail a performance measurement system that would be used to evaluate resources’ utilization, to effectively manage and control them to attain the firm’s goals and objectives. Performance measurement is important during the control of processes and to take action if the need arises, to ensure attainment of desired results.
From the analyses of McDonald’s Corporation, it is evident that the supply chain is essential in every organization. This is visible in the company’s interdependency between the restaurants, indirect and direct suppliers. Without the corporation of any one of the parties, there would result in the ultimate customer’s needs not being satisfied. If the customers are unsatisfied, chances of organizational failure ensuing are very high.
In the current mature and competitive market that McDonald’s is operating, it is important that it remains highly responsive to its clients’ orders. Right from the beginning, produce that is quality and fresh should be maintained, all the way until the final consumer gets it if McDonald’s is to remain competitive. The study indicates that for any organization to succeed, it should have a supply chain that is successful. Transportation within the supply chain should be clearly managed to ensure that product delivery is done on time. Transportation modes such as air flight, land transport as well as parcel carriers are used as transportation modes which link the supply chain’s different stages. Transport logistics helps in shaping the greening of the supply chain. This means that the logistics system should be environmentally friendly. A logistics permanence measurement system should be adopted to ensure that it is effective, offers quality service as well as make sure that it is efficient.
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