Managing Business Operations

Assessment 2: Data Analysis Case Study

Instructions

Please refer to the given case study and answer the four questions given at the end. You are
encouraged to refer to external sources and references to back up your arguments.

McDonald’s Corporation

Case synopsis Operations Management Overview of McDonald’s

Founded in the 1940s, McDonald’s is the best-known fast-food brand in the world with over 36,000
restaurants in 100 countries. McDonald’s serves approximately 70 million customers a day. The
company has franchised majority of its restaurants, and this serves as one of their main revenue
sources. Other revenue sources include royalties and rent collection (Vignali 2001). Additional
revenue comes from the sales at the restaurants directly run by the company.

The company offers a wide range of foods such as French fries, cheeseburgers, chicken,
milkshakes as well as a variety of deserts. The food retail giant has continually recorded high
sales and profits such as the record sale of 100 billion hamburgers in 1993. According to Gilbert
and Veloutsou (2006), one of the reasons behind the company’s success is their policy of
introducing new items in their menu to attract new customers.

McDonald’s has come to epitomise the ‘fast-food’ industry. Central to its early success was the
‘Speedee Service System’ – an operations process that prioritised a standardised process that
prescribed consistently high quality, exact preparation methods, specially designed equipment
and strict product specifications. In particular, operating procedures were specified in minute
detail with prescribed specific cooking instructions and operating procedures, defined to ensure
a required customer experience.

With the increasing number of recently established ‘fast food’ brands in the market competing in
various ways, has forced McDonald’s to become more innovative when delivering its quick
service. Quality operation (management) at McDonalds has been considered as one of the main
factors which has catapulted the company to the top of the food retail industry. The organisation
has digitised its information systems as well as implementing it with an objective of facilitating
revolutionising how customers pick up their food. McDonalds prioritises the improvement and
maintenance of the provision of high-quality products and services. Their business model’s focal
point is service based, and they have continually improved their customer services to the extent
that the current waiting time for customers has been significantly reduced. Thus, resulting in the
process of pick-up orders at any McDonald’s outlet being fast and efficient.

Inventory Appraisal

In the traditional operation management, inventories of finished products and raw materials are
held as a reserve in case needed items run out of stock. However, in the recent years,
management has realised such large inventories are expensive. As a result, majority of
organisations have changed their methodology in inventory and production management (Patton
et al., 2011).

McDonald’s has also implemented strategies in the control of flow of food processing in a
multistage process of production. This inventory and production management approach is
referred to as Just-In-Time Management (JIT), in which goods and raw materials are acquired
when they are to be used in a certain production stage. This type of production and inventory has
brought significant savings to the cost of production due to decreased inventory levels. The key
aspect of JIT is its use of the “pull” strategy in the control of production (Patton et al., 2011).

The JIT system at McDonald’s has some essential aspects which includes the following:

I. It reduces inventory in the supply chains. This system of inventory management gains
substantial efficacies through numerous deliveries of minimal quantities to cater for the
instant demands in the food production chain.
II. It applies a “pull” system which is referred to as Kanban in the control of production and
raw materials.
III. It also involves the commitment of employees regarding their involvement and
participation.

Since its adoption of the JIT system, McDonald’s has managed to significantly reduce the cost of
production. The following important characteristics of the JIT approach are behind these cost
savings:

I. Uniform and smooth production flow

II. The pull method of stage coordination during production
McDonald’s Performance Objectives

Performance objectives are developed by an organisation’s management to serve as guiding

principles for the company’s vision and mission to accomplish set objectives in all aspects of the
organisation. They are developed based on the specific activities and operations performed by
the organisation (Johnston, Clark and Schulver 2012).

McDonald’s performance objectives enhance the quality of products and ensure the maintenance
of good customer service and relations. Customer satisfaction is a key aspect in McDonald’s
business model mostly because the firm is service-based. They have continually improved their
customer services to the extent that the current waiting time for customers has been significantly
reduced. Kaplan (2009) describes the process of picking up orders at any McDonald’s outlet as
fast and efficient. The firm has strived to ensure that customers have good customer experiences
in all McDonald’s food outlets. The firm has also adopted and implemented modern technology
to enhance their service delivery; such digitalising of their operations has enabled the McDonald’s
employees to serve more customers daily.

McDonald's also focuses on costs as one of the performance objectives. Cost is an important
aspect of any business enterprise that aims to have competitive prices. Some organisations lose
cash on employee wages, purchase of tools and machinery and provision of services which
minimises their profits. McDonald’s has mastered the art of minimising their operating costs. They
are thus able to sell their food much lower than their competitors.

Food Quality is one of the main emphasis of McDonald’s. The company has established
measures and regulations to ensure that all their stores maintain high quality standards. Some of
the measures defined by the quality management operations include regular inspection of food
quality at all McDonald’s restaurants. Speed is the time it takes for the customers to have their
products or services delivered. McDonald’s aims to reduce this waiting time to 95 seconds. The
objective is to achieve a drive through experience and hence the company needs to fine tune this
aspect.

Employee Management

Employee management in quality control operations is primarily based on scientific management

principles. This principle suggests that workers should be rewarded for accomplishing their set
objectives and goals. They should also be rewarded with promotions for achieving certain degrees
of academic education. McDonald’s food chain has implemented the use of job promotions and
competitive wages where hardworking employees are recognised and rewarded. McDonald’s
rewards exceptional and outstanding employees in different ways such employee of month
awards and positive remarks and cognitions (Slack, Chambers and Johnston 2013). The
organisation has implemented some thorough and precise procedures that govern the employees’
working environment and ensures the food products being sold to customers are of high and
uniform quality in all its franchises.

COVID-19 Related Operation Management Challenges at McDonald’s

The following are the main challenges facing the management of operations at McDonald’s:

• Variety of overall output

• The varying demand for the end products
• Degree of visibility of the end products to the potential customers
• The volume aspect

McDonald’s is popular for its inexpensive prices, and regularly faces the problem of long queues.
For fast food restaurants, fast queuing times and short queuing lines are important in attracting
customers, besides inexpensive price, good worker attitude and superb food quality. Initially it
was known that customers arrive at a rate of around 10 per hour and that an average time it takes
to complete their order was within 5 minutes.

With new social distancing measures in place across the UK and Ireland McDonald’s has had to
adjust their day-to-day operations. The restaurants closed seating areas and temporarily moved
to only offering Takeaway, Drive Thru and McDelivery. The My McDonald’s App would continue
to offer the opportunity to order and pay ahead for collection and Drive Thru.

After the lockdown it was reported that the expected number of customers was estimated at
around 123k vehicles at the only McDonald’s branch in Dorchester (Munbodh, 2020). Across the
Britain McDonald’s drew largest number of customers over one weekend as seen in the table
below:

• Dorchester, 1 drive-thru branch, 123,900 visitors expected over the weekend

• Slough, 3 drive-thru branches, 318,930 visitors expected over the weekend - 106,310 per store
• Hereford, 1 drive-thru branches, 102,159 visitors expected over the weekend
• Guildford, 6 drive-thru branches, 509,643 visitors expected over the weekend - 84,941 per store
 • South West London, 3 drive-thru branches, 230,698 visitors expected over the weekend - 76,899
per store
• North London, 3 drive-thru branches, 224,025 visitors expected over the weekend - 74,675 per store
• Halifax, 1 drive-thru branches, 72,591 visitors expected over the weekend
• West London, 2 drive-thru branches, 138,527 visitors expected over the weekend - 69,264 per store
• Harrow, 3 drive-thru branches, 198,764 visitors expected over the weekend - 66,255 per store

Questions

Note: Answer all questions. Each question carries 25 marks.

1. What approach(es) does McDonald’s seem to take for its capacity management to
reconcile capacity and demand?
2. Analyse the implementation of the four Ds by the McDonald’s restaurants?
3. Evaluate what the five performance objectives mean for the operation in McDonald’s?
4. At the Dorchester McDonald’s branch, cars arrive at the Drive-Thru at a rate of 25
per hour and only one drive-thru till is open. The average time it takes for an order
and collection is 5 minutes. Assuming that the interarrival time and the service time
are both exponentially distributed. Calculate the average number of customers
arriving at the till and the average time they must wait before exiting McDonald’s
Drive-Thru. You are encouraged to use calculations to prove any challenges if there
is any and suggest any solutions, based on the calculations.
References

Corporate.mcdonalds.com. 2020. Our History. [online] Available at:

<https://corporate.mcdonalds.com/corpmcd/our-company/who-we-are/our-history.html>
[Accessed 6 December 2020].

Gilbert, G. R., and Veloutsou, C. 2006. A cross-industry comparison of customer satisfaction.

Journal of Services Marketing, 20(5), 29-30.

Johnston R; Clark, G, and Schulver, M., 2012 Service Operations Management: Improving
Service Delivery, Fourth Edition, Pearson. ISBN 978-0273740483.

Kaplan, R. 2009. Measuring performance: expert solutions to everyday challenges. Boston,

Mass: Harvard Business Press.

Munbodh, E., 2020. Busiest McDonald's drive-thru queues - the 24 restaurants to avoid this
weekend, [online] 5 June. Available at: https://www.mirror.co.uk/money/busiest-mcdonalds-
drive-thru-queues-22143246 [Accessed 07 Dec 2020].

Patton, S; Clegg, B; Hsuan, J, and Pilkington, A., 2011. Operations Management. McGraw-Hill.
ISBN 978- 0-0771-2617-9.

Slack N, Chambers S and Johnston R., 2013. Operations Management, Seventh Edition.
Financial Times/Prentice Hall. ISBN 978-0-273-77620-8. [e-book].

Vignali, C. 2001. McDonald’s: “think global, act local”--the marketing mix. British Food Journal,
103(2), pp.97--111.