Introduction to operations management

¶ … Strategy and Location Strategy for McDonald's

As the company has become a global leader in the areas of franchising and operations-based process efficiency, McDonald's Corporation excels at a repetitive focused strategy to gain a competitive and pricing advantage in their quick service restaurants (QSRs). To lead this industry, the company has had to standardize on processes to drive out any variability and cost. It has also had to allow for slight customization of burgers, shakes and salads to hold onto the customers they have. The use of Operations-Research based initiatives is common in the company as well. One of the key areas the company focuses on is how to ensure their repetitive focused strategy continues to deliver value in the form of cost reductions is extensive Operations Research and Six Sigma process management (Cramer, 2009). McDonald's has embraced these strategies as a means to drive down costs and also the lag time for fulfilling orders, in addition to managing their supply chains more effectively as well (Cramer, 2009).

As part of the company's focus on the repetitive focus strategy they have also been one of the first QSR-based businesses to adopt advanced supply chain concepts including Vendor Managed Inventory (VMI) and advanced planning and scheduling (APS) to ensure their supply chains run effectively (Cramer, 2009). All of these factors that support their repetitive focused strategy are also supported by the decision to centralize U.S. supply chain operations in the Midwestern city of Oak Brook, Illinois, a suburb of Chicago.

McDonald's chose to do this in order to gain economies of scale in their logistics and supply chain operations as Chicago is a central transportation hub located in the center of the country. There are many suppliers that McDonald's relies on globally located in this area as well. The advantages of having a centralized procurement operation in Chicago has also proven to be highly profitable by minimizing the amount of cross-shipping and less-than-load (LTL) traffic, and has also given the company greater control over product quality as well.

Instead of allowing individual franchisees to source products and perishable fruits and vegetables, McDonalds relies on an enterprise-wide quality management and food compliance division in Chicago as well (Hoffman, 2006). This ensures that all audits of their product quality can be quickly analyzed for any variation and acted on fast to ensure consistency of customer experience with each McDonald's product. The integration of quality management and the supply chain in the Chicago areas also provides the company with greater control over VMI and advanced planning and scheduling operations. The individual franchisees are then freed up to focus on expanding in their local markets as the core areas of the supply chain are managed by McDonalds' at the corporate level.