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    McDonald's initial attempts to create a French fry supply chain in India faced several pitfalls: inflation increased costs, ideal potato growing conditions did not exist, Indian potatoes were unfit for fries, and outdated farming, logistics, and lack of temperature-controlled warehouses posed challenges. McCain Foods succeeded by developing joint ventures with local and international suppliers, investing over $100 million before opening stores, augmenting imports with a local supplier, and building relationships with farmers to guide potato production. Farmer collaboration and capability building helped McDonald's lower costs, reduce inventory levels, and ensure supply. While the McCain model is effective, dependencies and low bargaining power pose risks, which McDonald's can address through developing alternative

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    LD MCD

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    McDonald's initial attempts to create a French fry supply chain in India faced several pitfalls: inflation increased costs, ideal potato growing conditions did not exist, Indian potatoes were unfit for fries, and outdated farming, logistics, and lack of temperature-controlled warehouses posed challenges. McCain Foods succeeded by developing joint ventures with local and international suppliers, investing over $100 million before opening stores, augmenting imports with a local supplier, and building relationships with farmers to guide potato production. Farmer collaboration and capability building helped McDonald's lower costs, reduce inventory levels, and ensure supply. While the McCain model is effective, dependencies and low bargaining power pose risks, which McDonald's can address through developing alternative

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    MacDonald supply chain

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    McDonald's initial attempts to create a French fry supply chain in India faced several pitfalls: inflation increased costs, ideal potato growing conditions did not exist, Indian potatoes were unfit for fries, and outdated farming, logistics, and lack of temperature-controlled warehouses posed challenges. McCain Foods succeeded by developing joint ventures with local and international suppliers, investing over $100 million before opening stores, augmenting imports with a local supplier, and building relationships with farmers to guide potato production. Farmer collaboration and capability building helped McDonald's lower costs, reduce inventory levels, and ensure supply. While the McCain model is effective, dependencies and low bargaining power pose risks, which McDonald's can address through developing alternative

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    393 views8 pages

    LD MCD

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    McDonald's initial attempts to create a French fry supply chain in India faced several pitfalls: inflation increased costs, ideal potato growing conditions did not exist, Indian potatoes were unfit for fries, and outdated farming, logistics, and lack of temperature-controlled warehouses posed challenges. McCain Foods succeeded by developing joint ventures with local and international suppliers, investing over $100 million before opening stores, augmenting imports with a local supplier, and building relationships with farmers to guide potato production. Farmer collaboration and capability building helped McDonald's lower costs, reduce inventory levels, and ensure supply. While the McCain model is effective, dependencies and low bargaining power pose risks, which McDonald's can address through developing alternative

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    of 8

    MCDONALDS INDIA :

    OPTIMIZING THE FRENCH


    FRIES SUPPLY CHAIN

    PRASHANT YADAV II PARASURAMAN S.


    ABOUT

    ENTERED INDIA IN 1996 THROUGH A JOINT


    VENTURE
    BY 2011 240 RESTAURANTS IN INDIA
    SPECIAL MENU WITH VEGETARIAN SELECTION, NO
    BEEF
    WHAT WERE THE PITFALLS OF THE INITIAL ATTEMPTS BY
    MCDONALD’S INDIA TO CREATE ITS’ FRENCH FRY SUPPLY
    CHAIN? WHAT WERE THE CRITICAL FACTORS THAT ENABLED
    Pitfalls of Initial Attempts MCCAIN’S SUCCESS?
    Critical factors enabled success
     Double digit inflation in India had been adding huge cost
    pressures  Company Developed Joint ventures between Indian and
    International suppliers.(Lamb Weston and Tarai Foods)
     In India ideal potato growing and storage conditions were
    not available.  Started creating backward linkages all the way to the farm
    level
     Typical Indian Potatoes are not fit for long French fries
     Spend over $100 million to develop the supply chain before
    stores were opened
     Outdated farming and irrigation practices in the country
     Mc Donald also bring additional supplier McCain to augment
     Logistics and distribution were also not supportive(Bad import supply and to develop Potato for Fries.
    roads, only 200 refrigerated trucks existence)
     Vista foods provided capacity for McCain which reduced
     Temperature controlled warehouses for perishable products huge investment.
    is not available
     Building and developing relationship with local farmers and
     Buying processed chicken was not possible as India is guiding them in producing product as per requirement.
    mostly live bird market
     McCains conducted regional trials with 13 varieties of
     Fist JV invested $10million and was unable to develop potatoes.
    potato as per Mc Donalds requirement
     Developing farmer life style and teaching them new
     Process of obtaining import license is complex in India and harvesting techniques
    Import duty is 56%
    HOW DID FARMER COLLABORATION AND
    CAPABILITY BUILDING HELP PROMOTE
    MCDONALD’S GROWTH AND QUALITY
    OBJECTIVES?
     Lowering 30 percent of cost structure and no exposure to the
    fluctuating exchange rate

     Saving an additional 19 percent in import costs


     Reducing inventory levels from 15 days (imported fries) to 6 days (local
    fries)

     Close relationships with farmers helped ensure a secure supply


    UNDER MCCAIN’S MANAGEMENT, THE MACFRY SUPPLY
    CHAIN HAS BEEN EFFECTIVE. WHAT ARE THE RISKS OF
    THIS MODEL? HOW CAN MCDONALD’S ADDRESS THE
    COMPETITIVE THREATS FROM OTHER FIRMS MOVING IN
    AND CAPITALIZING
     Dependency ON THE LARGE INVESTMENTS OF TIME
    on supplier
    AND MONEY THAT MCDONALD’S HAS MADE?
     Low bargaining power
     Competitive Rivalry

    HOW CAN MCDONALD’S ADDRESS THE COMPETITIVE


    THREATS FROM OTHER FIRMS MOVING IN AND
    CAPITALIZING ON THE LARGE INVESTMENTS OF TIME
    AND MONEY THAT MCDONALD’S
     Develop other suppliers HAS MADE?
     Have long term contracts with McCain
     Get the potatoes quality/farming methods patented
    WHAT ARE THE OPTIONS MCDONALD’S INDIA CAN PURSUE
    TO MEET THE HUGE GROWTH IN DEMAND THAT HAS BEEN
    PREDICTED IN INDIA? IS IT BETTER TO PUSH FOR 100%
    LOCALIZATION USING ONE SUPPLIER OR TO USE A MULTI
    SUPPLIER STRATEGY BY CONTINUING TO IMPORT SOME
    SUPPLY?
     McD should go for multiple suppliers, region wise
     Invest in R&D for increase of production and also for increased shelf life
    of potatoes

    Yes it should push for 100% localization with multiple


    suppliers.
    WOULD VERTICAL INTEGRATION
    STRENGTHEN MCDONALD'S ABILITY TO
    HAVE ASSURED SUPPLY, OR WEAKEN
     Yes, vertical integration would strengthen McD’s ability to have assured supply,
    IT?
    however the initial cost need to be considered. As the plan is to expand to 500
    stores from 240 McD can continue with macain.

     Reduce Cost, Better control of quality and better flow and control of information
    across the supply chain

    Prashant

     No vertical integration would not strengthen MC Donalds ability as inherting a


    process of supplier will add additional investments rather than concentrating on
    expansion of business. Multiple supplier strategy will help in meeting the
    growing demand.

    Parasuraman
    THANK-YOU

    QUESTIONS ?

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