Supply Chain Management of Mcdonalds in India

McDonalds opened its doors in India in October 1996. Ever since then, our family restaurants in Mumbai, Delhi, Pune, Ahmedabad, Vadodara, Ludhiana, Jaipur, Noida Faridabad, Doraha, Manesar and Gurgaon have proceeded to demonstrate, much to the delight of all our customers, what the McDonald’s experience is all about.

Our first restaurant opened on 15th April 1955 in Des Plaines, Illinois, U.S.A. Almost 50 years down the line, we are the world’s largest food service system with more than 30,000 restaurants in 100 countries, serving more than 46 million customers every day. Click here for more information on the history of McDonald’s.

Locally Owned

McDonald’s in India is a 50-50 joint venture partnership between McDonald’s Corporation [USA] and two Indian businessmen. Amit Jatia’s company Hardcastle Restaurants Pvt. Ltd. owns and operates McDonald’s restaurants in Western India. While Connaught Plaza Restaurants Pvt. Ltd headed by Vikram Bakshi owns and operates the Northern operations.

Amit Jatia and Vikram Bakshi are like-minded visionaries who share McDonald’s complete commitment to Quality, Service, Cleanliness and Value (QSC&V). Having signed their joint-venture agreements with McDonald’s in April 1995, they trained extensively, along with their Indian management team, in McDonald’s restaurants in Indonesia and the U.S.A. before opening the first McDonald’s restaurant in India.

Respect for local culture

McDonald’s India has developed a special menu with vegetarian selections to suit Indian tastes and preferences. McDonald’s does not offer any beef or pork items in India. Only the freshest chicken, fish and vegetable products find their way into our Indian restaurants.

In addition, we’ve re-formulated some of our products using spices favoured by Indians. Among these are McVeggieâ„¢ burger, McAloo Tikkiâ„¢ burger, Veg. Pizza McPuffâ„¢ and Chicken McGrillâ„¢ burger. We’ve also created eggless sandwich sauces for our vegetarian customers. Even our soft serves and McShakesâ„¢ are egg-less, offering a larger variety to our vegetarian consumers.

International Standards

McDonald’s India’s local suppliers provide us with the highest quality, freshest ingredients. Complete adherence to the Indian Government regulations on food, health and hygiene is ensured, while maintaining our own recognized international standards. Fast, friendly service – the hallmark of McDonald’s restaurants the world over is the mantra we abide by.

Stringent cleaning standards ensure that all tables, chairs, highchairs and trays are sanitised several times each hour. Such meticulous attention to cleanliness extends beyond the lobby and kitchen to even the pavement and immediate areas outside the restaurant.

Supply chain management at McDonald’s (India)

Did you know that every year, Rs. 50,000 crore worth of food produce is wasted in India? This is mainly because of the lack of proper infrastructure for storage and transportation under controlled conditions. McDonald’s is committed to providing quality products while supporting other Indian businesses. And so, we spent a few years setting up a unique Supply Chain, even before we opened our first restaurant in India.

A Supply Chain is a network of facilities including – material flow from suppliers and their “upstream” suppliers at all levels, transformation of materials into semi-finished and finished products, and distribution of products to customers and their “downstream” customers at all levels. So, raw material flows as follows: supplier – manufacturer – distributor – retailer – consumer. Information and money flows in the reverse direction. The balance between these 3 flows is what a Supply Chain is all about.

When there is a balance in the finished product ordering, the Supply Chain operates at its best. Any major fluctuation in the product ordering pattern causes excess / fluctuating inventories, shortages / stock outs, longer lead times, higher transportation and manufacturing costs, and mistrust between supply chain partners. This is called the Bullwhip Effect.

Depending on the situation, the Supply Chain may include major product elements, various suppliers, geographically dispersed activities, and both upstream and downstream activities. It is critical to go beyond one’s immediate suppliers and customers to encompass the entire chain, since hidden value often emerges once the entire chain is visualized. For example, a diesel engine manufacturer may be able to integrate a GPS locator system into its engine control system. Its immediate customer, a heavy truck manufacturer, may see no need for this functionality. However, the downstream customer, a trucking company with a large fleet, may be very interested in a locator system. Understanding the value to the downstream customer is part of the supply chain management process.

Big Mac’s supply chain success

The seed of McDonald’s success was sown in 1990 – six years before it started its actual operations. Sanjeev Bhar traces its supply chain management that played a vital role in its growth.

About two decades ago, the QSR wouldn’t have meant much to the Indian F&B segment. Today, the acronym has been seamlessly absorbed in the industry lingo. McDonald’s, arguably, one of the first brands that left a strong imprint on the Indian QSR history, has much to do with this. And its success is credited to its well-established supply management chain.

According to Vikram Bakshi, managing director and joint venture partner of McDonald’s India (North & East), the company invested about Rs 400 crore even before its first restaurant commenced operations in October 1996. “We had to ensure that we had the back-end linked up to the farm level for delivery commitment.”

The company also deployed the latest state-of-the-art food processing technology for having a sound supply chain. The transition towards the latest technology, which has been subsequently noticed in other QSRs as well, changed the Indian fast food scenario to match international standards.

Tracing its success path

McDonald’s had been working critically on its supply chain part. Considering, an international brand trying to make inroads into the Indian consciousness, its Indian supplier partners were developed in such a manner that made them stay with the company from the beginning. Bakshi explains, “The success of McDonald’s India is a result of its commitment to sourcing almost all its products from within the country. For this purpose, it has developed local Indian businesses, which can supply them the highest quality products required for their Indian operations.” As per today’s standings, McDonald’s India works with as many as 38 Indian suppliers on a long-term basis, besides several others standalone restaurants working with it, for various requirements.

In the supply chain management for a QSR, the distribution centres hold special place for bringing food right to the outlet counters. For McDonald’s India, the distribution centers came in the following order: Noida and Kalamboli (Mumbai) in 1996, Bangalore in 2004, and the latest one in Kolkata (2007).

McDonald’s entered its first distribution partnership agreement with Radha Krishna Foodland, a part of the Radha Krishna Group engaged in food-related service businesses. The association goes back to July 1993, when it studied the nuances of McDonald’s operations and requirements for the Indian market. Recalling the association, Bakshi remarks, “Better facilities and infrastructures were created along with new systems by them to satisfy McDonald’s high demands, which finally culminated into an agreement with McDonald’s India, for Radha Krishna Foodland to serve as distribution centers for our restaurants in Delhi and Mumbai.” As distribution centers, the company was responsible for procurement, the quality inspection programme, storage, inventory management, deliveries to the restaurants and data collection, recording and reporting. Value-added services like shredding of lettuce, re-packing of promotional items continued since then at the centers playing a vital role in maintaining the integrity of the products throughout the entire ‘cold chain’. The operations and accounting is totally transparent and is subject to regular audits.

“McDonald’s had worked aggressively to attain the right suppliers and systems that ensured that 90 per cent of yield was indigenous before the doors were opened to consumers. The only products that we used to import were oil and fries, for which we have had made arrangements to manufacture the oil in India. We ensured that the products developed locally abide by global McDonald’s standards,” informs Bakshi.

Over the last 10 years, the company has gained experience and adopted procedures that helped in maintaining a continuous supply of food products irrespective of the climatic conditions. Bakshi proclaims, “Our logistics and warehousing system is robust that prepares us to deliver products at the same temperature throughout, without a single break in the cold chain.”

McDonald’s suppliers in India

Amrit Foods: Amrit Foods, a division of Amrit Banaspati, has been associated with McDonald’s India as a supplier of Dairy Mixes, Soft Serve Mix and Milk Shake Mix for over a decade now

Cremica Industries: Cremica Industries was started in 1980 as small ice-cream unit run by Mrs Bector out of her backyard in Ludhiana. However after its initial success Cremica added buns and biscuits to its product line and in 1996 McDonald’s selected Cremica to be its supplier for buns, liquid condiments, batter and breading in collaboration with its international partners

Dynamix Dairies: McDonald’s India has approved Dynamix Dairies, Baramati (Maharashtra) for supply of cheese to its restaurants. Dynamix has a modern automated plant that is fully computer controlled

Trikaya Agriculture: Trikaya Agriculture is McDonald’s supplier of fresh iceberg lettuce. The farms at Talegaon, Maharashtra produce the crop throughout the year

Strengthening the backbone

Suppliers are proclaimed to be the backbone of any good business as they are the individual units that build supply chain. On them depends the health of the overall business cycle. Highlighting McDonald’s role in developing its supply chain network, Bakshi says, “Cremica Industries (which provide liquid condiments, batter and breading), for example, worked with another McDonald’s supplier from Europe to develop technology and expertise that allowed the company to expand it business from baking to providing breading and batters to McDonald’s India and other companies as well.”

Another benefit in the company’s favour was its expertise in the areas of agriculture, which allowed it, along with its suppliers, to work with farmers in Ooty, Pune, Dehradun and other regions to cultivate high quality iceberg lettuce. Bakshi says, “There has been a substantial effort on sharing advanced agricultural technology and expertise with farmers/suppliers like utilization of drip irrigation systems (for less water consumption), better seeds and agricultural management practices for greater yields.”

Another area of concern is the sensitive price indexes of the food materials that McDonald’s uses and to tackle price fluctuations, the company goes with yearly rate agreements with suppliers. McDonald’s took special care in identifying the positives of their suppliers and added their expertise to improve on their existing standard. Trikaya Agriculture, a major supplier of iceberg lettuce to McDonald’s India, is one such enterprise that is an intrinsic part of the cold chain. “Initially, lettuce could only be grown during the winter months but with McDonald’s intervention, it is now able to grow the crop throughout the year,” says Bakshi. Also, some of its suppliers with concerns over cultural sensitivities, segregated with a separate work force for the vegetarian and non-vegetarian processing lines.

Refrigerated vans for McDonald’s

National inbound – Supplier to DC: 20 vehicles + 2 for Kolkata

Outbound north – DC to restaurant: 13 vehicles

Outbound west – DC to restaurant: 11 vehicles

Outbound south – DC to restaurant: 1 vehicle

Proposed Kolkata – DC to restaurant: 1 vehicle

Incorporating chill zones

Setting up extensive cold chain distribution system forms the lifeline of any fast food business. In this regard, McDonald’s incorporated state-of-the-art food processing technology along with its international suppliers to pioneering Indian entrepreneurs, who are today an integral part of the cold chain, avers Bakshi. He says, “We have imparted technical training to all our suppliers on how to operate the imported machineries, educated them on the McDonald’s philosophy of Quality, Service, Cleanliness and Value (QSCV) in order to provide standardized food to our customers.”

The ‘cold chain’, on which the QSR major has spent more than six years for setting up the same in India, has brought about a veritable revolution, immensely benefiting the farmers at one end and enabling customers at retail counters. McDonald’s finding the factor of cold room being vital ensured that even before vegetable from farms enters the refrigerated zones, they are locked in a pre-cooling room to remove field heat. Vegetables are placed in the pre-cooling room within half an hour of harvesting where rapid cooling decreases the field temperature of vegetables to 2°C within 90 minutes. Then a large cold room (a refrigerated van) is used for transportation to the distribution centers. In the van, the temperature and relative humidity of crop is maintained at 1-4°C and 95 per cent, respectively and the flavours and freshness are locked at -35°C.

Even in this field, McDonald’s takes the big pie of credit for developing the concept of cold chain. Bakshi claims, “Prior to McDonald’s arrival in India, the concept of a cold chain for the distribution of food and dairy products from the farm to the end supplier, in predetermined and stringently enforced climactic and hygienic conditions, was at a very nascent stage of development. For five years prior to opening our first restaurant, McDonald’s pioneered the effort to develop this aforementioned cold chain so that our high standards would be assured. Various Indian and international players later adopted this system to deliver quality fresh produce to consumers.”

McDonald’s also kept a tab on quality control. McDonald’s, as a rule, throws away burger puffs kept for more than 30 minutes after the final preparation during service. To avoid any wastage, Bakshi says, “The crew is trained and equipped to forecast the requirements at various stages of the day. At the suppliers’ level, care is taken to guard against any possible contamination or interruption in the cold chain that can break the link and have a detrimental effect on the quality of our product.”

Vital Links in McDonald’s Cold Chain

All suppliers adhere to Indian government regulations on food, health and hygiene while continuously maintaining McDonald’s recognized standards. As the ingredients move from farms to processing plants to the restaurant, McDonald’s Quality Inspection Programme (QIP) carries out quality checks at over 20 different points in the Cold Chain system. Setting up of the Cold Chain has also enabled us to cut down on operational wastage

Hazard Analysis Critical Control Point (HACCP) is a systematic approach to food safety that emphasizes prevention within our suppliers’ facility and restaurants rather than detection through inspection of illness or presence of microbiological data. Based on HACCP guidelines, control points and critical control points for all McDonald’s major food processing plants and restaurants in India have been identified. The limits have been established for those followed by monitoring, recording and correcting any deviations. The HACCP verification is done at least twice in a year and certified.

The relationship between McDonald’s and its Indian suppliers is mutually beneficial. As McDonald’s expands in India, the supplier gets the opportunity to expand his business, have access to the latest in food technology, exposure to advanced agricultural practices and the ability to grow or to export. There are many cases of local suppliers operating out of small towns who have benefited from their association with McDonald’s India.

Trikaya Agriculture Supplier of Iceberg Lettuce

Implementation of advanced agricultural practices has enabled Trikaya to successfully grow specialty crops like iceberg lettuce, special herbs and many oriental vegetables. Farm infrastructure features:

A specialized nursery with a team of agricultural experts.

Drip and sprinkler irrigation in raised farm beds with fertilizer mixing plant.

Pre-cooling room and a large cold room for post harvest handling.

Refrigerated truck for transportation.

Vista Processed Foods Pvt. Ltd.

Supplier of Chicken and Vegetable range of products (including Fruit Pies)

A joint venture with OSI Industries Inc., USA, McDonald’s India Pvt. Ltd. and Vista Processed Foods Pvt. Ltd., produces a range of frozen chicken and vegetable foods. A world class infrastructure at their plant at Taloja, Maharashtra, has :

Separate processing lines for chicken and vegetable foods.

Capability to produce frozen foods at temperature as low as -35 Degree Cel. to retain total freshness.

International standards, procedures and support services.

Dynamix Diary

Supplier of Cheese

Dynamix has brought immense benefits to farmers in Baramati, Maharashtra by setting up a network of milk collection centers equipped with bulk coolers. Easy accessibility has enabled farmers augment their income by finding a new market for surplus milk. The factory has:

Fully automatic international standard processing facility.

Capability to convert milk into cheese, butter/ghee, skimmed milk powder, lactose, casein & whey protein and humanized baby food.

Stringent quality control measures and continuous Research & Development

Amrit Food

Supplier of long life UHT Milk and Milk Products for Frozen Desserts

Amrit Food, an ISO 9000 company, manufactures widely popular brands – Gagan Milk and Nandan Ghee at its factory at Ghaziabad, Uttar Pradesh. The factory has:

State-of-the-art fully automatic machinery requiring no human contact with product, for total hygiene.

Installed capacity of 6000 ltrs/hr for producing homogenized UHT (Ultra High Temperature) processed milk and milk products.

Strict quality control supported by a fully equipped quality control laboratory.

Radhakrishna Foodland

Distribution Centers for Delhi and Mumbai

An integral part of the Radhakrishna Group, Foodland specializes in handling large volumes, providing the entire range of services including procurement, quality inspection, storage, inventory management, deliveries, data collection, recording and reporting. Salient strengths are:

A one-stop shop for all distribution management services.

Dry and cold storage facility to store and transport perishable products at temperatures upto -22 Degree Cel.

Effective process control for minimum distribution cost.

Cold Chain

The Cold Chain is necessary to maintain the integrity of food products and retain their freshness and nutritional value. The Cold Chain is an integral part of the Supply Chain

Setting up the Cold Chain has involved the transfer of state-of-the-art food processing technology by McDonald’s and its international suppliers to pioneering Indian entrepreneurs, who have now become an integral part of the Cold Chain.

The term Cold Chain describes the network for the procurement, warehousing, transportation and retailing of food products under controlled temperatures. McDonald’s restaurants store products to be used on a daily basis, within a temperature range of -18°C to 4°C. About 52% of our food products need to be stored under these conditions before they are used.

Local Sourcing

McDonald’s has always been committed to sourcing its requirements from local suppliers and farmers. This assurance is rooted in the philosophy of our company’s founder, Ray Kroc. He firmly believed in mutual benefits arising from a partnership between McDonald’s and the local businesses, thus ensuring that McDonald’s commitment to growth was mirrored by that of its partners.

In keeping with this belief, we have carefully identified local Indian businesses that take pride in satisfying customers by presenting them with the highest quality products. Adherence to Indian Government regulations on food, health and hygiene were a top priority.

McDonald’s India today purchases more than 96% of its products and supplies from Indian suppliers. Even our restaurants are constructed using local architects, contractors, labour and maximum local content in materials.

The relationship between McDonald’s and its Indian suppliers is mutually beneficial. As McDonald’s expands in India, the supplier gets the opportunity to expand his business, have access to the latest in food technology, get exposure to advanced agricultural practices and the ability to grow or to export. There are many cases of local suppliers operating out of small towns who have benefited from their association with McDonald’s India.

All suppliers adhere to Indian government regulations on food, health and hygiene while continuously maintaining McDonald’s recognized standards. As the ingredients move from farms to processing plants to the restaurant, McDonald’s Quality Inspection Programme (QIP) carries out quality checks at over 20 different points in the Cold Chain system. Setting up of the Cold Chain has also enabled us to cut down on operational wastage

Hazard Analysis Critical Control Point (HACCP) is a systematic approach to food safety that emphasizes prevention of illness or presence of microbiological data within our suppliers’ facilities and our restaurants rather than its detection through inspection. Based on HACCP guidelines, control points and critical control points for all McDonald’s major food processing plants and restaurants in India have been identified. The HACCP verification is done at least twice in a year and certified.

SUPPLIERS

Trikaya Agriculture – Supplier of Iceberg Lettuce

Implementation of advanced agricultural practices has enabled Trikaya to successfully grow specialty crops like iceberg lettuce, special herbs and many oriental vegetables. Farm infrastructure features:

A specialized nursery with a team of agricultural experts.

Drip and sprinkler irrigation in raised farm beds with fertilizer mixing plant.

Pre-cooling room and a large cold room for post harvest handling.

Refrigerated truck for transportation.

Vista Processed Foods Pvt. Ltd. – Supplier of Chicken and Vegetable range of products

A joint venture with OSI Industries Inc., USA, and McDonald’s India Pvt. Ltd. Vista Processed Foods Pvt. Ltd. produces a range of frozen chicken and vegetable foods. A world class infrastructure at its plant at Taloja, Maharashtra, has :

Separate processing lines for chicken and vegetable foods.

Capability to produce frozen foods at temperature as low as -35 Degree Celsius to retain total freshness.

International standards, procedures and support services.

Dynamix Diary – Supplier of Cheese

Dynamix has brought immense benefits to farmers in Baramati, Maharashtra by setting up a network of milk collection centers equipped with bulk coolers. Easy accessibility has enabled farmers augment their income by finding a new market for surplus milk. The factory has:

Fully automatic international standard processing facility.

Capability to convert milk into cheese, butter/ghee, skimmed milk powder, lactose, casein & whey protein and humanized baby food.

Stringent quality control measures and continuous Research & Development

Amrit Food – Supplier of long life UHT Milk and Milk Products for Frozen Desserts

Amrit Food, an ISO 9000 company, manufactures widely popular brands – Gagan Milk and Nandan Ghee at its factory at Ghaziabad, Uttar Pradesh. Its plant has:

State-of-the-art fully automatic machinery requiring no human contact with product, for total hygiene.

Installed capacity of 6000 liters / hour for producing homogenized UHT (Ultra High Temperature) processed milk and milk products.

Strict quality control supported by a fully equipped quality control laboratory.

Radhakrishna Foodland – Distribution Centre

An integral part of the Radhakrishna Group, Foodland specializes in handling large volumes, providing the entire range of services including procurement, quality inspection, storage, inventory management, deliveries, data collection, recording and reporting. Salient strengths are:

A one-stop shop for all distribution management services.

Dry and cold storage facility to store and transport perishable products at temperatures up to – 22 Degrees Celsius.

Effective process control for minimum distribution cost.

McDonald’s opened its first store in India in October, 1996 and currently has 113 stores, spread across the North, West & South of the country.

We have the sole responsibility of McDonald’s entire supply chain all across India.

We handle their entire range of services including procurement, quality inspection, storage, inventory management, deliveries, data collection, recording and reporting.

Over the years, subsequent to the commencement of our relationship, Foodland has regularly won the Best Supplier Award from McDonald’s.

McDonald’s – Challenges

Full Supply Chain responsibility

Multi Temp. Products – Over 65 % temperature controlled

Stores as far as 500 – 1000 kms

Drops per month – Over 1000

Movement mainly by road

Regular movement of perishables by air

Routing Challenges

No margin for error – Operations critical client

No Stock Outs at store

On time delivery record – above 97 %

Clean delivery record – above 99 %

Unfailing inbound supply chain

Foodland: how it helps in supply chain of McDonald’s?

Foodland provides Customized Distribution & Logistics services encompassing the entire supply chain, such as storage, handling and distribution solutions to various clients. The services are tailor made to suit each client’s requirements, which include organizations such as

McDonald’s and Radhakrishna Hospitality Services Pvt. Ltd. (RKHS)

Objective

To provide a cost effective solution to our customers ensuring product integrity throughout the supply chain.

Platter Of Services

Supply Chain Structuring

Inventory Planning & Replenishment Management

Warehouse Management

Customer Order Fulfillment

Logistics – Temperature Controlled

It handles bulk transportation of temperature sensitive products.

Key Features:

Dedicated to ‘cold chain’ movement

The only logistics solution provider with expertise in handling agri – produce

Total kilometer run per month is – 7,00,000 km

Perishable tonnage handled per month – 7,000 tons

Robust quality systems & processes

First in the country to use multi temperature vehicles

Use of innovative methods to ensure temperature integrity during transit

Experienced staff – The BEST in the industry.

Its experience of over a decade in the logistics & distribution industry has led us to believe that there is still one area which remains poorly serviced – that of movement of small volumes of perishable items across the country.

Our experience also tells us that many companies, for want of a cost-effective and reliable logistics solution, end up deciding not to market their products which are of a perishable nature in certain markets, thus losing out on potential revenue opportunities. And because currently, there is no reliable service provider to cater to this need, companies have to move goods either by air, which is expensive, or through bulk carriers with very little control on the delivery schedule. Given the current scenario, combined with our domain expertise in the logistics & distribution area, we have launched a new service – Fresh Rush. Fresh Rush is a temperature controlled transportation service addressing the needs of small volume cargo.

Fresh Rush – Features

Multi temperature products, such as Frozen (below -18°C) and Chilled (1°C to 4°C) can be transported

Flexibility of load movement – A minimum of 500 kgs to maximum of 5000 kgs can be transported

In transit temperature tracking

Fixed schedule of pickup and delivery

Well trained and experienced manpower

Adherence to strict hygiene standards

Consignment can be tracked through GPS system

1. Food Park, Kalamboli

First of its kind in India

Designed as per global standards

The centre procures, value adds, stores and distributes various kinds of perishable and non-perishable food products

Food Park – Features

Spread over 33,000 sq meters

Multi Temperature Zones

Integrated Facility – Storage and Value Addition capabilities under one roof

Ensured / Guaranteed Food Safety

Paradigm shift in the way food is handled in the supply chain in India

First of its kind in the region

Benchmarked against global standards

Codex / USDA / PFA compliant

Scalable

Dedicated storage for specific categories

Sanitation / Hygiene standards – Trash handling

Air / Water Quality – Treatment Plant / ETP

Ripening Rooms, Crate Wash Facilities, Blast Freezer, Flake Ice Machine

Value Added Services – Processing of Vegetables & Fruits, Meat, Sea Food and Poultry

Controls – Building Management System (BMS)

100 % Power Back Up

Food Park – Capacity

Capacity to manage over 6000 SKUs

Can store 70,000 cases with 1,700 pallet positions and over 4,000 pick faces

Processing

Vegetable & Fruits – 21 tonnes per day

Meat – 3 tonnes per day

Fish – 3 tonnes per day

Blast Freezing – 6 tonnes – per day

Ice Machine – 2.4 tonnes per day

2. Kanjur Marg DC

Spread over 3,500 sq meters

Dry Provisions DC

Capacity to manage over 9000 SKUs

Can store 80,000 cases with 1400 pallet position and 3,600 pick faces

3. Delhi DC (Noida)

Dedicated to operations in the North

Highly functional DC

Chiller / Freezer / Dry Storage

Capacity to manage 576 pallet positions

FINDINGS

1. Every organisation, no matter how big or small in size, has its own forecasting techniques. This is because without forecastin