Managing Business Operations Assessment 2: Data Analysis Case Study

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.

McDonalds Corporation Case synopsis Operations Management Overview of McDonalds

Founded in the 1940s, McDonalds is the best-known fast-food brand in the world with over 36,000 restaurants in 100 countries. McDonalds 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 companys success is their policy of introducing new items in their menu to attract new customers.

McDonalds 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 McDonalds 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 models 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 McDonalds 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).

McDonalds 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 McDonalds has some essential aspects which includes the following:

1. 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.

2. It applies a pull system which is referred to as Kanban in the control of production and raw materials.

3. It also involves the commitment of employees regarding their involvement and participation.

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

1. Uniform and smooth production flow

2. The pull method of stage coordination during production

McDonalds Performance Objectives

Performance objectives are developed by an organisations management to serve as guiding principles for the companys 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).

McDonalds performance objectives enhance the quality of products and ensure the maintenance of good customer service and relations. Customer satisfaction is a key aspect in McDonalds 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 McDonalds outlet as fast and efficient. The firm has strived to ensure that customers have good customer experiences in all McDonalds food outlets. The firm has also adopted and implemented modern technology to enhance their service delivery; such digitalising of their operations has enabled the McDonalds 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. McDonalds 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 McDonalds. 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 McDonalds restaurants. Speed is the time it takes for the customers to have their products or services delivered. McDonalds 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. McDonalds food chain has implemented the use of job promotions and

competitive wages where hardworking employees are recognised and rewarded. McDonalds 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 McDonalds

The following are the main challenges facing the management of operations at McDonalds:

• 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

  McDonalds 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 McDonalds 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 McDonalds 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 McDonalds branch in Dorchester (Munbodh, 2020). Across the Britain McDonalds 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

• Provide information about the company. Make sure you cover areas such as the Strategic direction, the product and services.

• You will also need to touch on the current situation (covid19 and the lockdown).

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

1. What approach(es) does McDonalds seem to take for its capacity management to reconcile capacity and demand? 600 words

2. Analyse the implementation of the four Ds by the McDonalds restaurants? 600 words

3. Evaluate what the five performance objectives mean for the operationin McDonalds? 600 words

4. At the Dorchester McDonalds branch, cars arrive at the Drive-Thru at a rate of 25 (300words)

   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 McDonalds Drive-Thru. You are encouraged to use calculations to prove any challenges if there is any and suggest any solutions, based on the calculations.