Name: Rochelle George

Roll No: 0938

McDonald’s Corporation: World Class Operating System

Introduction:

McDonald’s provides its customers a unique and uniform experience in all its restaurants be it in Paris or
Pune. The chain enjoys a huge clientele and serves more than 40 million customers a day through its
30,000 and more outlets. McDonald’s menu is quintessentially American-hamburgers, cheeseburgers,
sandwiches, nuggets, French fries, salads, milkshakes and soft drinks. With such a broad menu offering
and thousands of franchises to monitor it faced the daunting task of making sure that its burgers and
fries were not only of exceptional quality but also consistent throughout its chain. To this effect, it
implemented a very efficient operating system that focused on product and process uniformity.

Models of excellence:

The secret of McDonald’s success is its willingness to innovate, even while striving to achieve
consistency in the operation of its many outlets. For example, its breakfast menu, salads, Chicken
McNuggets, and the McLean Deluxe sandwich were all examples of how the company tried to appeal to
a wider range of consumers.
 
The company has also made convenience its watchword, not only through how fast it serves customers,
but also in the location of its outlets. Freestanding restaurants are positioned so that you are never
more than a few minutes away by foot in the city or by car in the suburbs. Plus McDonald’s is tucking
restaurants into schools, stores, and more.

1) Mc Donald’s started off in 1941 as a drive-in restaurant which later on became a self service
restaurant. Richard and Maurice identified speed, customer service and cleanliness as critical
success factors. The brothers designed their kitchen with assembly line procedures similar to
that of Ford’s. They standardised food preparation methods. This self service proved useful and
soon many small businessmen expressed interest in taking up franchises.

2) Ray Kroc founded the McDonald’s chain. He bought out the brother’s share and named the
company McDonald’s corporation. He also emulated Ford’s mass production techniques and
 designed a system to apply the same rigor to the preparation of sandwiches and hamburgers.
He established a training program called the Hamburger University where franchisees were
taught about the scientific methods of running a successful McDonald’s. He founded a new
corporate policy “Quality, Service, Cleanliness and Value”. In 1975 the drive-thru was
introduced.

3) During the 1990’s McDonald’s began to face problems. To face competition it started to fill
every possible niche area for fast food. It also opened smaller outlets known as “ express stores”.
Under Greenberg it decided to diversify its food offerings. It bought Donatos Pizza chain, took a
minority stake in Chipotle Mexican Grill and acquired Boston market restaurants. In 2001 it
opened up a gourmet coffee shop “McCafe”.

4) In 2001 McDonald’s underwent a comprehensive review operation to ensure quality and service
levels. It planned to scrutinise operations through the use of mystery shoppers. Customers were
provided with toll free telephone number for complaints.

5) McDonald’s introduced the “Made for You” concept where customers could choose their own
ingredients. McDonalds’ operating procedures concentrated on “Improving the product,
Developing outstanding customer relationships, providing a clean ambience and Training and
monitoring franchisees – QSCV”. It refined the production system; crew members began to
perform specialist functions. McDonald’s began the practice of cooking and packing food instead
of waiting for orders. Standards were also developed on when to discard cooked products that
had not been purchased.

6) McDonald’s treated its suppliers as partners. It employed quality assurance and purchasing
specialists, who worked closely with suppliers to ensure that every product met the quality
norms.

7) McDonald’s also worked closely with its franchisees. Kroc saw them as business partners, not as
customers. Kroc sold them the operating systems instead of just the ingredients. McDonalds’
developed an extensive training program for its franchisees.

What brought McDonald’s to the current situation:

McDonald’s used controlled experimentation to maintain the McDonald’s experience, all the while
expanding the menu to appeal to a broader range of consumers. For example, in June 1976, McDonald’s
introduced a breakfast menu as a way to more fully utilize the physical plant. In 1980, the company
rolled out Chicken McNuggets. Despite these innovations, McDonald’s tremendous growth could only
continue for so long. Its average annual return on equity was 25.2% between 1965 and 1991. But the
company found its sales per unit slowing between 1990 and 1991. In addition, McDonald’s share of the
quick service market fell from 18.7% in 1985 to 16.6% in 1991. Plus growth in the quick service market
was projected to only keep pace with inflation in the 1990s. McDonald’s faced heightening competition
on several fronts. First, its traditional rivals—Burger King, Wendy’s, and Taco Bell—were eating into its
margins through promotions and value pricing strategies.
McDonald’s had done well with a fairly limited product range. But falling per unit sales is a danger sign
for the firm. With competitors gaining ground on McDonald’s, it may indicate a need to refresh its
product line. Perhaps the best way to do that is by rotating in a couple highly promoted new menu
items. This would have the effect of enlivening the product menu, without the need to go head to head
with competitors on price.

To maintain consistency in new products as it expands the product line, McDonald’s must rely on test
marketing new menu items in pilot locations. This approach will let the firm identify which items are
likely to prove popular with consumers while ensuring that the company can deliver new products with
consistent quality nationwide. McDonald’s already has a history of doing this so it will not require major
changes to its operations strategy—at least initially. If the product line-up gets too large, then the task
of maintaining quality becomes exponentially harder. The trick is to consider how to eliminate some of
the existing menu items when you introduce new ones, while making sure the staff is fully trained in
how to execute these products successfully.

Because McDonald’s has pretty well saturated the U.S. market, it’s only real opportunities for growth lie
abroad, where the competition is not so cutthroat or by introducing new restaurant concepts under
brands other than McDonald’s. After all, McDonald’s is known for fast food. It’s not really a pleasant
dining experience, just a cheap and convenient one. I feel that McDonald’s has reached the point of
diminishing returns with the McDonald’s brand and now needs to roll out new types of restaurants.

indeed, McDonald’s has the opportunity to apply its core competencies—scrupulous adherence to
quality standards and continual promotion of experimentation—in new venues. Imagine, if you will,
McDonald’s opening a new casual dining restaurant under the name of Splendor. It could then franchise
that concept nationwide and get some of the dollars from consumers who have grown past fast food.
But its fastidious approach to operations would ensure that consumers everywhere would experience
the same dining experience—a tremendous advantage for consumers who don’t want to be surprised
with a bad meal.
 
McDonald’s could try a number of concepts simultaneous in different parts of the country. Those that
seemed promising could be rolled out further. The duds could be left to die quickly. While this will be an
expensive undertaking, it holds the potential to unleash new areas of growth in a maturing market.
 
Conclusion
McDonald’s faces some difficult challenges. Key to its future success will be maintaining its core
strengths—an unwavering focus on quality and consistency—while carefully experimenting with new
options. These innovative initiatives could include launching higher-end restaurants under new brands
that wouldn’t be saddled with McDonald’s fast-food image. The company could also look into expanding
more aggressively abroad where the prospects for significant growth are greater.
 
The company’s environment efforts, while important, should not overshadow its marketing initiatives,
which are what the company is all about.
 
Introduction

The Made for You production process was both a natural extension of McDonald’s use of process
automation and a radical departure from the make-to-stock philosophy. Costing an estimated $25,000
to $85,000 per store, the key elements of the system were steamers, flash toasters, and a computerized
ordering system. Some stores already had automation for french frying or even computerized order
entry.

The objectives of the system were to:

1)allow for customized customer orders

crispness of the lettuce, and the sogginess of the bun.

Description of “Made for You”

The key kitchen positions included at least one person on “batch” cooking meats, one “initiator”
beginning the sandwich assembly process, and one “assembler” completing it. A fourth person cooked
french fries. The batch person placed a number of burger patties on four two-sided clamshell grills (so
called because they closed like a clamshell)—two designated 10:1 for “regular” burgers (10 patties to
one pound of meat) and two designated 4:1, specifically for quarter-pounders. Actually, only nine
burgers fit on the 10:1 grill at any one time, so the maximum simultaneous output of a batch person was
30 patties (18 on 10:1 and 12 on 4:1 grills). Cooking was automatically timed; the clamshell popped open
when the meat was cooked. Patties were then placed on trays and stored inside universal heating
cabinets (or steamers), known as UHCs—covered units heated to 200 degrees that kept the patties hot.
Trays were timed to remain in the UHC only 20 minutes. After this time, the patties were discarded. Only
enough patties were cooked to meet the level of current sales or volume pattern for each hour.

Once a customer ordered a burger, the counter person punched the request into the computer and the
order appeared on overhead monitor in the assembly, or prep, area. The predominant feature in this
section was a two-sided prep table, affixed with a top-loading toaster at one end, condiment guns in the
middle, and UHCs at the other end; wrappers and boxes were stored underneath. Two monitors were
stationed overhead at both extremes. Generally, two people—an initiator and an assembler— worked
this table, although their number doubled during peak hours. When an order appeared on screen, the
initiator took a split bun from the bun cart and dropped it into a high-efficiency toaster
removing the toasted halves that slid out, placed them on the correct wrapper (color-coded and clearly
labeled), and applied condiments in pre-measured doses from an automatic dispenser. The bun was
then passed to the assembler, who added appropriate toppings, such as pickles, lettuce, and cheese, to
one half and placed a meat patty from the UHC on the other, wrapped the sandwich securely, and
placed it on the heated landing zone—a heated table within the counter service area—where it
remained warm until it was passed to the customer who ordered it.

The initiator and assembler worked together, so the division of labor was not always strictly observed.
Fries were cooked separately by another staff member on a robotic automatic machine (RAM)
dispenser. Six-pound bags of frozen fries were loaded into the RAM’s hopper that was calibrated to
dispense one and a half pounds of fries at a time into a fryer basket. The baskets were dropped into
wells filled with hot cooking oil and, although automatically timed, were manually removed from the oil.

Conclusion
The Criteria for success of the Made for you system were:
1)Service – which would be 90 secs or less from the time of order to delivery.

2) Quality – by maintaining high quality standards and food health and safety requirements
3) Food preparation – must be consistent
4) People – by increasing job satisfaction

5)Profiti

removing the toasted halves that slid out, placed them on the correct wrapper (color-coded and clearly
labeled), and applied condiments in pre-measured doses from an automatic dispenser. The bun was
then passed to the assembler, who added appropriate toppings, such as pickles, lettuce, and cheese, to
one half and placed a meat patty from the UHC on the other, wrapped the sandwich securely, and
placed it on the heated landing zone—a heated table within the counter service area—where it
remained warm until it was passed to the customer who ordered it.

The initiator and assembler worked together, so the division of labor was not always strictly observed.
Fries were cooked separately by another staff member on a robotic automatic machine (RAM)
dispenser. Six-pound bags of frozen fries were loaded into the RAM’s hopper that was calibrated to
dispense one and a half pounds of fries at a time into a fryer basket. The baskets were dropped into
wells filled with hot cooking oil and, although automatically timed, were manually removed from the oil.

Conclusion
The Criteria for success of the Made for you system were:
1)Service – which would be 90 secs or less from the time of order to delivery.
2) Quality – by maintaining high quality standards and food health and safety requirements
3) Food preparation – must be consistent
4) People – by increasing job satisfaction

5)Profitibilty – by reducing costs and increasing customer satisfaction and hence sales.

McDonalds successfully met all these criteria’s. However it did not deliver completely on its promises.
The system was found to be slower than expected during peak hours or lunch and dinner. More often
than not, customers ended up waiting for more than 90 secs for their order. Though as a plus point, the
quality and consistency of the food was never compromised on. The food was always fresh and hot.
McDonalds did end up making a few changes to their unique delivery model over the next couple of
years. Also, the huge cultural shift required to switch to new procedures was greater than expected.
Among other things, the company had to retrain thousands of crew unfamiliar with the high-tech
system, a tough challenge for a business with a turnover rate in excess of 60 percent.

In the end though, credit must be given for McDonalds to streamline the entire kitchen deliv