In the foodservice industry, there are few better examples of great procurement management than McDonald's. Excellent procurement is part of the reason that McDonald's has been able to grow from a small family barbecue restaurant into a global conglomerate with more than 35,000 restaurants in over 110 different countries. Today's food industry supply chain operators would do well to learn from the excellent procurement management example that McDonald's has set.
Here are six of the most important things that we have learned from the way that McDonald's handles procurement and other crucial supply chain matters:
1. Relationships with Suppliers are Essential
One of the most impressive things about McDonald's to date is the company's ability to maintain long-standing relationships with suppliers. In some cases, the suppliers that still provide materials for McDonald's menu items are the same ones that McDonald's pioneer Ray Kroc negotiated with back in the 1950s. Keystone Foods, for example, a McDonald's supplier that provides the company with 400 million pounds of chicken and 260 million pounds of beef each year, has been doing business with McDonald's since the 1960s. Great relationships with suppliers will help you get more favorable terms and partners who have a deeper understanding of your business.
2. Changing with the Times is Important
In 2014, McDonald’s developed its Global Sustainability Framework, meaning that it aimed to find suppliers who produced more sustainable products. McDonald’s has new goals that it wants to achieve by 2020, including purchasing sustainable beef and sourcing 100% recycled fiber packaging. Although the company is an old one, they demonstrate their commitment to changing with trends of the modern day and the needs of the 21st-century consumer.
3. You Must Devote Resources to Planning and Forecasting
Originally, the task of forecasting demand and ordering the necessary supplies to cover this demand was left to individual McDonald's restaurant owners. This process was an arduous one that took up a lot of the owners' time and resources. To improve the situation, McDonald's created the Restaurant Supply Planning Department in 2004 to help restaurant owners do a better job at procurement management, based on both store-specific data and national factors like holidays and promotions. This department has been a big part of McDonald's supply chain success.
4. Transparency in Procurement Management Can Win You Customers
McDonald’s won customers, especially in Europe, when it demonstrated that it knew its supply chain in and out. When questions arose about the company’s environmental policy, McDonald’s launched “Our Food/Your Questions” series about its food and supply chain. These promotional videos traced the sourcing of McDonald’s products, including its beef. In the end, McDonald’s transparency demonstrated that it knew where it’s food was coming from, and its products were what the company said they were.
5. Contingency Planning is Essential
The Martin-Brower Company is McDonald's biggest distributor. According to Brian Hancock, the president of The Martin-Brower Company in North America, McDonald's is among the best-prepared supply chains in the entire world. This is how the company can consistently meet customer demands and provide almost everything they have available on the menu. A supply chain that does not have a plan for when things go wrong is a ticking time bomb, waiting to explode and provoke chaos in the supply chain.
6. Timing is Crucial
Even though McDonald's has tens of thousands of restaurants, with almost 16,000 in the United States alone, the company still has to plan its supply chain logistics in a way that accounts for even the smallest detail. As an example, consider the way that McDonald's handles delivery timing. Drivers delivering to McDonald's are instructed to call before they get there to ensure that the restaurant can handle delivery when they are scheduled. Because McDonald's plans its delivery timing so carefully, interruptions during the peak breakfast and lunch hours are minimal.
The timing of your deliveries, shipping, and receiving will all have a huge effect on your supply chain and procurement management abilities, which is why it's so important to keep these numbers as favorable as possible.
While you may not have the resources or huge worldwide supply chain network that McDonald's does, there are still lessons to be learned from the fast food conglomerate. By adopting these principles, you can breathe some life into your supply chain and make it exponentially more efficient.
Editor's Note: This blog was originally published April 23, 2015 and has since been updated and expanded upon with new information.
