McDonald’s wants to be assured of delivery

The McDonald’s supply chain is designed to assure the fast-food chain of delivery. “A typical McDrive needs to be able to handle 120 cars per hour in Europe, and as many as 150 to 160 cars per hour in the US. That leaves us no time to suggest alternatives if a product is out of stock,” said Alex Bahr, director of Global Supply Chain Integration and Logistics at McDonald’s, during SCL Europe on 20 June 2012 in Berlin.

Globally, McDonald’s sells a hundred million items every day, and the restaurant chain wants to be sure that all its customers get what they ask for. The McDonald’s supply chain is 100-percent outsourced: the company owns no factories and no distribution centres. McDonald’s does own approximately 30 percent of the restaurants although the rest are franchised, with the franchisees operating within a certain framework.

Supply chain planning principles

McDonald’s has 16 major suppliers. The most important KPI is ‘no item may ever be out of stock’. In order to achieve this, the company works in accordance with several supply chain planning principles. The expectations have to be crystal clear at both restaurant level and menu-item level.

McDonald’s does this by using just one forecasting application, namely JDA Manugistics 7, and by taking a consistent approach to evaluating and reporting its data. Daily point-of-sale (POS) data at item level, the product list, stock levels at the restaurants, and inventory and shipments at the distribution centre are used as input for the forecast. In addition, the marketing plan is taken into consideration – e.g. whether the data concerns a standard product or one on promotion – as are the plans of each franchisee, whose own promotional campaign or local adaptations may need to be factored in. The forecast’s output is validated by forecast accuracy measures.

Bahr emphasised the importance of agreeing on the planning principles: who plans what, and who is responsible for executing the plans. He suggested that there were a number of misconceptions, of which ‘Everyone should make forecasts’ was one. He also did not believe that everyone necessarily knew what they needed to plan, nor that forecasting was a process triggered by time.

“Planning requires cross-functional collaboration and trust. Demand needs to be predicted in the market itself, close to real life,” concluded Bahr. “It’s all about the people and the processes.”

McDonald’s ranked third in Gartner Supply Chain Top 25

McDonald’s has climbed five places since last year to the No. 3 position in the Gartner Supply Chain Top 25 of 2012. The Gartner report states: “The restaurant chain has managed the fine balance between new product growth and the resulting complexity in the supply chain planning and execution. In particular, it has seen great success with the launch and expansion of its McCafe product line to compete in the specialty beverage business, while maintaining leadership in traditional food categories.”