McDonalds 1
Prof. Bin Jiang, Ph.D
MGT501
03/17/2020
Final Project: Supply Chain Management – McDonald’s French Fries
McDonald’s brand is recognized globally. Its golden arches can be found in large cities,
rural communities and over-seas. McDonald’s is known for their Big Macs and Happy Meals,
but its all-time best seller has been their french fries. This report provides analysis of
McDonald’s french fry supply chain.
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French Fry Architecture: From Potato to Restaurant
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It is important to note that McDonald’s does not own any of its supply chain.
McDonald’s does not own farms, freight transportation, nor distribution centers. Ready to serve
McDonald’s french fries consist of 19 different ingredients. The architecture above only
represents the potatoes flow process.
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Potato Farms: McDonald’s purchased 1.35 billion pounds of potatoes in 2015. They use three
potato suppliers for its french fries. “They get supplied by 100 Circle Farm, farmer Frank
Martinez, and farmer Jenn Bunger. 100 Circle Farm is a huge farm that grows potatoes in circles
that you can see from space and has a high standard of quality and production, pumping out 24
hundred tons of potatoes per day. The two other farms are family farms run by two people whose
family line has been in the business for generations.” (arcgis.com) It’s important to note that all
three potato suppliers are in the state of Washington and in relatively close proximity to each
other. This may pose a risk to McDonald’s french fry supply chain if unforeseen circumstances
should occur like a natural disaster or drought in the region. I’d hope that McDonald’s would
have a contingency plan in place in the event that the Washington potato supply be disrupted.
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McDonalds 2
Idaho has plenty of potato farms but too close in proximity to Washington. Wisconsin also has a
large potato farm presence in the U.S. and far away enough from the Pacific Northwest to be
impacted from the hypothetical natural disaster/drought. I’d recommend McDonald’s establish a
relationship with Wisconsin potato suppliers as a back-up to their Washington Suppliers.
Potato Processing: McDonald’s processing suppliers are Lamb Weston and Simplot.
These firms receive the potatoes from the potato farms and proceed to peel and precision cut
them. They then apply an ingredient dip, partially fry them, and freeze the fries. These
processing plants are able to process potatoes at high volume. “We can dig anywhere from a
thousand to twenty-four hundred tons of potatoes per day…and the majority of these will go into
McDonald’s Fries”. - Troy Grimes, Director of Farm & Dairy Operations, Lamb Weston. Both
Lamb Weston and Simplot have their manufacturing plants located in the Pacific Northwest.
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Transportation/Distribution Centers: “The Martin-Brower Company is the largest supplier
of food and materials to McDonald's restaurants worldwide. The company delivers more than
510 million cases of its products to about 20,000 Golden Arches locations each year. MartinBrower supplies such items as frozen, refrigerated, and dry food, and bakery and paper products.
In addition to its food-distribution services, Martin-Brower provides global logistics
management services to other food and beverage suppliers through its MBX Logistics unit.”
(dnb.com) The shipping containers that Martin-Brower uses demonstrates efficiency in its
transportation. McDonald’s requires supplies stored at various temperatures. Rather than
transporting an entire container of items of one temperature, its containers have the ability to
customize the temperature in different sections. This flexibility benefits the supply chain as
quantities of various supplies fluctuate per order. Martin-Brower has distribution centers
throughout the U.S. and delivers supplies to almost all the company’s 15,000 locations in North
America.
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McDonald’s Restaurant: The final location the french fries arrive at before being sold to
customers is the restaurant. At the restaurant, french fries are fully cooked/fried and salted
before they’re ready to be served. A bottleneck in this process is when customers request their
fries not to be salted. When this request occurs, employees must wipe down the station, clean
the scoop, and then clean out the entire area. This is particularly problematic during busy lunch
and dinner times. Customers often request no salt simply because they want a fresh batch of
fries and request salt packets instead. It would be much more efficient for McDonald’s
employees to simply fry a new batch and avoid the time cost of thoroughly cleaning out the
entire area. I’d recommend McDonald’s to enforce a policy where customers requesting nonsalted fries will not receive salt packets. Perhaps even displaying a notice that fresh fries are
available upon request might reduce this bottleneck, though may increase costs if too many
customers begin to take advantage.
Capacity
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McDonalds 3
Capacity management can be very challenging to any company as this refers to the act of
ensuring a business maximizes its potential activities and production output taking into
consideration all conditions over a period of time. McDonald in this instance would be asking:
1. What is the number of fries that McDonald’s should order to meet customer demand without
ordering too much where it would increase waste resulting in increase of cost. To understand the
Capacity strategy that McDonald’s has implemented it is important that we understand how
capacity was managed in the past and how technology and data has increased the accuracy &
efficiency of this process.
Old Inventory Management System
Order of Inventory based on Manager
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Regional Planner
Restaurant Manager
In the past McDonald’s relied too much on their store managers to order the correct
amount of inventory that the restaurants needed. However, this process caused problems as
managers made their inventory orders based only on sales not taking into consideration other
factors such as seasons, promotions and even holidays. As such, McDonald’s decided to
implement the a new system which integrated technology and data analysis to increase accuracy
and efficiency which would result in reduction of waste and continuing to meet customer
demands.
New Inventory Management System
Restaurant Manager
Inv. Control System
Regional Planner
Warehouse, Plant, Farm
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The new inventory system was introduced in 2004. In addition to the technology added,
McDonald’s also implemented a new team whose responsibilities were to help manage inventory
at the restaurants. The new inventory supply chain management system consisted in restaurant
managers communication with the planning and forecasting team regarding local events or any
other factors that would need to be taken into consideration that would have an inventory effect.
To dive into how this system affects the orders of fries it is important to understand the types of
inventory that McDonald’s manages. Mcdonald’s has broken down inventory into 3 categories;
1. Raw materials, WIP ( work-in- progress) and Finished goods. These can be frozen, chilled or
ambient which is room temperature. Also, McDonald’s uses FIFO for their inventory; this means
first in first out.
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McDonalds 4
Engagement
Potato farmers for McDonald’s.
McDonald’s is company which is able to build a great relationship with its suppliers.
McDonald’s is able to engage them to be part of the complete supply chain management. As an
example, McDonald’s lists some of its main food suppliers on its website in order to give them
recognition of the great products they offer. By accessing this URL
https://www.mcdonalds.com/us/en-us/about-our-food/meet-our-suppliers.html, users can identify
the different food suppliers. For the potato farmers, McDonald’s has listed these 3 different
potato suppliers:
A potato farmer, Frank Martinez
A potato farmer, Jenn Bunger
A potato farmer, 100 Circle Farms
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McDonald’s create a deep business connection with the potato farmers by making them part of
the whole food business. Then, McDonald’s shares with them information in respect to the
French fries inventory level, making them part of the whole business model. Collaboration is a
key factor that makes its supply chain a success, and that is the reason McDonald’s tracks its
inventory at every stage of the supply chain by using different technologies such us RFID or
barcoding. In addition, McDonald’s consolidates all of its data in a centralized location using a
cloud-based system. So, with all those tools, the potato farmers are able to enter into its system
and they have access to the potato inventory information accurately and on a real time. However,
McDonald’s only grants access to identify inventory levels based on the role of the supplier. So,
for instance, McDonald’s will not share any information in respect to the amount of tomatoes
needed or the inventory levels with the potato farmers, only the information in regards to the
potatoes needed.
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The potato farmers and McDonald’s always maintain a good communication and it makes the
supply chain more transparent. Furthermore, being transparent means that both parties are
sharing the correct information and they are following a code of conduct in respect to the whole
product itself, from its initiation process of harvesting, picking, cleaning, and sorting to the end
consumer who is consuming the final product, the French fries. By doing that, McDonald’s will
make sure that they are not out of French fries which it is one the most important product of its
restaurants, and most important, it makes sure that suppliers will have a long-lasting relationship
with them. As a result, the potato suppliers will be able to run the business for many years
without worrying about the fact of losing market share and to always maintain a constant income
stream.
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McDonalds 5
REFERENCE PAGE
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ClearSpider (Top 3 Supply Chains of 2017: McDonald’s) Retrieved from
https://clearspider.net/blog/mcdonalds-supplychain/
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McDonald’s (McDonald’s Food Suppliers)
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https://www.mcdonalds.com/us/en-us/about-our-food/meet-our-suppliers.html
Mapping McDonald’s Ingredients
https://www.arcgis.com/apps/MapJournal/index.html?
appid=36977f8b4f9d4320a159283fb192ad2a
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Dun & Bradstreet, The Martin-Brower Company LLC - Company Profile
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https://www.dnb.com/business-directory/company-profiles.the_martinbrower_company_l_l_c.cad03437ad4f823b60c1ed909a6f3695.html
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