FAR EASTERN UNIVERSITY

INSTITUTE OF ACCOUNTS, BUSINESS AND FINANCE

Department of Accountancy & Internal Auditing

Production and Operations

Improvement Plan
BME1101 – Section 21
Production and Operations Management
AY 2021 – 2022 Second Term

SUBMITTED BY:
Alforte , Isaiah Marciano
Banaag, Andrea M.
Castillo, Philline
Catapang, Maryrose
Cosino. Jay
Chavez, Enrique Miguel
Gala, Joshua Marc A.
Punzalan, David
Salientes, Cherrylene

SUBMITTED TO:
Mr. Mark J. Santiago

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 TABLE OF CONTENTS

I. Overview of the Business 3

CHAPTER 1 Introduction to Operations Management 3
a. Company Name, Background/History
b. Nature
c. Management Team and Industry
CHAPTER 2 Competitiveness, Strategy, and Productivity 7
a. Mission-Vision
b. Goals
c. Organizational Strategies
d. Tactics
e. SWOT
CHAPTER 3 Forecasting 12
a. Tools
CHAPTER 4 Product and Service Design 13
a. Product design and redesign
CHAPTER 5 Strategic Capacity Planning for Products and Services 15
a. Capacity Requirements and Tools
b. Strategies
c. Demand management strategies
II. References 19

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Chapter 1 Introduction to Operations Management

a. McDonald’s Corporation Name, Background, and History

McDonald's was introduced in the Philippines by Chinese-Filipino businessman

George Yang, who resided in the United States in the 1970s, though never patronized a
McDonald's outlet during his stay. Aware of the fast food chain's success in North
America and its increasing presence in other parts of the world, Yang researched fast-
food business operations; in 1974, he contacted McDonald's headquarters
in Illinois regarding a proposal for rights to open outlets in the Philippines. Yang's
proposals were initially ignored, though he continued to remind the company regarding
his business interest. In 1976, representatives of McDonald's International sent a
delegation to the Philippines to conduct a feasibility study on establishing presence in the
Philippine market.
McDonald's International was also considering partnering with other local firms in
establishing presence in the Philippines' other than Yang. Yang sold himself as a "long
term partner" and volunteered to work in the then-British colony of Hong Kong where he
networked with the business associate of the holder of the master franchise in the city and
worked with uniformed crew at an outlet in Kowloon. In 1980, McDonald's decided to
award the master franchise to Yang and, shortly thereafter, set up the first Filipino
McDonald's outlet within the University Belt area in Manila the following year.
McDonald's entered the Philippine market in 1981 with McDonald's International
partnering with McGeorge Food Industries of Filipino of Yang due to prohibition
of majority foreign ownership in the country. This gave Yang's firm exclusive rights to
manage operations of McDonald's in the Philippines. By the 1990s, there were already
375 McDonald's outlets in the Philippines, with around 150 operated as local franchises.
In the mid-1980s, multinational fast food chains based abroad with presence in the
Philippines began to introduce food items meant for the local market. During this time,
McDonald's Philippines began to introduce meals served with steam rice, spaghetti and
chicken.

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 In 1991-1992, McDonald's expanded its reach to Visayas and Mindanao with the
opening of non-Luzon outlets in Bacolod City, Cebu City and Cagayan de Oro City,
respectively. In 1996, George Yang launched the Ronald McDonald House Charities in
the country.
In 2005, the company concluded its deal with the American management as the
Philippine division of McDonald's became a 100% Filipino-owned company when
Golden Arches Corporation teamed up with Alliance Global Group Inc., a company
owned by businessman Andrew Tan, to buy the remaining stake owned by McDonald's
Corporation in its local division.
In 2020, McDonald's Philippines closed down 30 stores after lease expirations and
some concerns with financial sustainability, but opened 16 new stores despite the
pandemic. Currently, McDonald's has 655 stores in the country, a decrease from 669
branches at the beginning of 2020 and it has not reached its pre-pandemic growth pace,
which was aimed at operating more than 700 stores by the end of 2021.
McDonald's Philippines maintains a menu catered towards the Filipino market.
Among these items are: the McSpaghetti, a sweet tomato pasta with Frankfurter bits
introduced in 1986; the Chicken McDo, a meal of fried chicken, steamed rice and gravy
was introduced in 1987, and the Burger McDo which was introduced in 1993 which has a
more subtle flavor meant to cater to the Filipino palate, which is averse to sharp and
tangy flavors 
Today, McDonald's has grown to become one of the country's leading fast-food
chains with more than 480 restaurants nationwide. With President and Chief
Executive Officer Kenneth S. Yang at the helm, McDonald's is now a multibillion-
Peso company, with over 40,000 employees serving Filipinos all over the Philippines.
McDonald's strives to deliver quality service and a delightful customer experience.
Our employees enjoy a dynamic working environment, support, training, and
opportunities to help them provide the best possible results and advance their careers.

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b. Nature of McDonald’s Corporation

The Company, its franchisees and affiliates purchase food, packaging, equipment
and other goods from numerous independent suppliers that have been approved by the
Company. The Company has established and strictly enforces high-quality standards.
The Company has quality assurance labs around the world to ensure that our high
standards are consistently met. The quality assurance process not only involves
ongoing product reviews, but also on-site inspections of suppliers’ facilities. Further,
a Quality Assurance Board, composed of the Company’s technical, safety and supply
chain specialists, provides strategic global leadership for all aspects of food quality
and safety. In addition, the Company works closely with suppliers to encourage
innovation assure best practices and drive continuous improvement.

Independently owned and operated distribution centers, also approved by the

Company, distribute products and supplies to most McDonald’s restaurants. In
addition, restaurant personnel are trained in the proper storage, handling and
preparation of our products and in the delivery of customer service.

McDonald’s global brand is well known. Marketing, promotional and public

relations activities are designed to nurture McDonald’s brand image and differentiate
the Company from competitors. Marketing and promotional efforts focus on value,
food taste and the customer experience. In addition, the Company is focused on being
a leader in social responsibility, as the Company believes it is important to give back
to the people and communities around the world who are responsible for our success.

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 C. Management team and Industry

Chris Kempczinski
President and Chief Executive Officer

Lucy Brady Heidi Capozzi

Francesca DeBiase Katie Beirne Fallon Daniel Henry Piotrn Jucha
Senior Vice Executive Vice Executive Vice Executive Vice Senior Vice President,
Executive Vice
President, President and President, Chief President and Chief Global Restaurant
President,
Chief Digital Global Chief Supply Chain Global Impact Development &
Global CIO
Customer People Officer Officer Officer Restaurant Solutions
Engagement Group
Officer

Mahrukh Hussain Alistair Macrow
Senior Vice President
Interim General
and Global Chief
Counsel and Secretary
Marketing Officer
Brian Mullens Mark Ostermann Kevin Ozan
Senior Vice President, Vice President, Strategic Executive Vice
Global Finance Alignment and Chief of President and Chief
Staff, Office of the CEO Financial Officer

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CHAPTER 2: Competitiveness, Strategy, and productivity.
a.) McDonald’s Mission and Vision

MISSION

“to be our customers’ favorite place and way to eat and drink.”

VISION

“to move with velocity to drive profitable growth and become an even better
McDonald’s serving more customers delicious food each day around the world.”

b.) Goal

McDonald's primary aims are to serve acceptable food in an agreeable and fun
environment, to be a socially mindful organization, and to give great re-visitations of its
investors. The company means to furnish its customers with food of an exclusive requirement,
fast help and incentive for cash.

Organizational Strategy

McDonald’s Intensive Strategies (Intensive Growth Strategies)

Market Penetration. McDonald's uses market infiltration as its essential concentrated system
for development. In applying this escalated system, McDonald's develops by arriving at more
clients in business sectors where it as of now has activities. For instance, McDonald's opens new
cafés in North America and Europe by diversifying, joint endeavors or corporate possession. An
essential target associated with this concentrated development methodology is worldwide
extension through new areas. McDonald's nonexclusive technique upholds this escalated
development system since low expenses and low costs engage the firm to effortlessly enter
markets.

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Market Development. In its initial years, McDonald's pre-owned market improvement as its
essential concentrated methodology for development. Be that as it may, market advancement is
presently an optional escalated development procedure on the grounds that McDonald's now has
eateries in many areas all throughout the planet, with the exception of Mongolia, a few pieces of
the Center East and west Asia, and most of African nations. An essential target for this
concentrated development system is to set up new areas in new business sectors, for example,
new McDonald's eateries in African or Center Eastern nations where the organization at present
has no activities. In view of its conventional methodology of cost administration, McDonald's
backings this concentrated development technique by utilizing low costs to contend in new
business sectors.

Product Development. McDonald's uses item improvement as its tertiary or supporting

escalated procedure for development. In applying this escalated development technique,
McDonald's grows new items after some time, for example, new McCafé items. These new items
might be varieties of existing items, or totally new items. The essential target for this escalated
development system is to catch more purchasers by drawing in them to new items. This escalated
development technique concurs with McDonald's expansive separation conventional system
regarding new items that make the organization particular.

Tactics

1. McDonald’s utilizes the five P’s of marketing.

- Price – McDonalds has reasonable pricing and bundling strategies.
- Product – Brings best product of quality and of best features as per the preferences.
- Promotion – contest, coupons, and public relations.
- Place – creating atmosphere customers’ desire.
- People – The value of both employees and customers.
2. McDonald’s uses TV and social media to generate general brand awareness and to
promote new menu items and meal deals.
3. McDonald’s advertises about children and families and produces perceptible images.
4. McDonalds includes particular aspects of its service and products like packaging, looks
and it would be desirable.

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 5. McDonald’s changes with the market demands of customers.
6. McDonald’s focuses on enhancing the restaurant’s image by showing transparency.

7. McDonald's uses branding and co-branding with major well-known companies.

8. McDonald's strengthen their competitive advantage with expansion to dominate the

market by being bigger.

9. Product Consistency – McDonald has been able to attain consistent product taste and
quality.
10. “Act like retailer think like a brand” – Protecting its long-term brand reputation.

SWOT Analysis of McDonald’s

 Strength
 Macdonald’s boosts its reputation for improving their animal welfare and
environmental preservation. It issued a certain standard to the meat suppliers to
ensure humane methods for killing and butchering the animals.
 McDonald’s is one of the most famous fast-food chain world-wide; thus, making
it for other competitor compete for its established reputation.
 According to an article by Deakin Business School McDonald’s is successful
with their cost leadership strategies such as hiring and training inexperienced
McDonald’s employees instead of trained cooks.
 Excellent choice of locations of their branches; most of them are near themed
parks, airports, and places that are easily accessible by people.
 McDonald’s is not only known for their food; instead, they are also the largest toy
distributer thanks to their happy meals.
 Weaknesses
 The variation for their seasonal products is not that rich. A lot of people are
asking for them to reoffer or extend limited value meals and dishes such as
McRib’s, and sechuan sauce; still, they didn’t reoffer them.

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  Since McDonald’s is one of the most in demand food chain supply chain
interruptions often happen.
 McDonald’s is underpaying their staffs and workers which resulted to low
employee’s satisfaction. One of its evidence is that according to
washingtonpost.com; they settled California’s wage case and agreed to pay $ 26
million to settle a lawsuit filed by the underpaid staffs.
 McDonald’s C.E.O. Steve Easterbrook is fired for misconduct. According to
nighttime’s article, McDonald’s is suing it’s former C.E.O. for allegedly lying and
fraudulence. Now the McDonald’s appointed its new chief executive that can
result to a lot of changes.
 Opportunities
 McDonald’s diversification strategies affected its success. Therefore, with
continuous expansion throughout different regions of the world they can explore
more untapped market.
 Advertising through different social-media platform have been successfully
helping the McDonald’s growth. A lot of people in the future will grow to know
more about the fast-food chain since they will be accustomed to using the social-
media platforms.
 McDonald’s can still achieve a luxurious image by opening high-end restaurant
while serving their trademark meals and dishes in a fine-dining fashion. They
already started branching out these kinds of fast-food restaurant like the one in
USA’s Midwest town of Independence Ohio.
 By offering plant-based option they can successfully encourage those who are
vegetarians and health conscious to be their consumers which can expand its
market level.
 Threats
 The issues created by the society that McDonald’s and other fast-food chain is the
main source of obesity can affect its reputation. According to the article by CNN
Money; lawsuit was filed against McDonald’s alleging food from them is the
cause of obesity.

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 McDonald’s is being threatened by its competitor such as Domino’s, Wendy’s
and other large fast-food chains. If McDonald’s advancements and research are
stagnant it can result to lower productivity and they will not be able to compete
against large corporations.
 McDonald’s can also face Cultural threat such as; falsely advertising non-halal
food as halal in USA Detroit which is heavily populated by Muslims.
 Being a giant fast-food chain raises a lot of concerns about the environment. That
is why McDonald’s is continuously threatened by environmental activist. That is
why they feel a lot of pressure improving their practices to help preserve the
environment.

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Chapter 3 Forecasting

A. tools

Time Series Analysis - It is a numerical data points in successive order. McDonalds use this tool
to analyze the product that will be promoted and it is important for a manager in the restaurant
that the data that will be put on the system must be correct to increase the accuracy of the
forecasting.

Historical Data- It is a predictive strategy to the future success and it will also apply to the
upcoming product that will be launch in the restaurant and this may be useful especially for the
promotion just like they did to the current product that brings success to McDonalds.

Exponential Smoothing-McDonalds use this forecasting tool to determine the pattern for the
future trends or seasonality. The purpose of this if the management is having a trouble in any
direction like in the data that will be use in sales.

Salesforce- The significance of this method in McDonalds is wherein allow the staffs or the
customer service can provide a source of information especially in the social media where the
lots of potential customer will suggest their opinions towards to the fast-food chain and it will
help its marketing to reach for more consumer.

Survey- This forecasting method is used by McDonalds to gather more information to their
products and services of their branches in different places. This method helps to determine the
demand of customers and for the product that needs to improve.

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Chapter 4: Product and Service design

Product design and redesign

a. MacDonald’s offer a variety of food product and one of their most popular and in
demand food is Fries. McDonald’s value proposition is that their food is served quickly
and of constant quality across different places and countries. The planning and organizing
of McDonald’s business resources had revolved around their value proposition when they
re-innovate their service design in order to ensure their success

One employee

Back when technology wasn’t still in their work, the cashier was also the food
server. This created an impression that the waiting time was long because the person
being served had to order, pay and collect his food at the same counter (the worst
moment was when that person spent 5 minutes discussing with the cashier and thinking
of what to order. Very considerate). So, the service was not that great. No, the cashier
wasn’t slow. The human just had more than one role to play and the customer being
served just couldn’t make up his mind. The “cashier” was the order taker, the cash
collector and the food server.

Two employees

Later when years past, McDonald’s decided to create a spot just beside the cashier
counter for people to collect their food instead. The cashier only has to take order and
collect payment. At this period, payment can be done electronically. That takes at least 1
minute off from each customer being served at the cashier. Customers in line would feel
that they are being served faster when, in fact, it’s probably the same. It doesn’t matter;
people are probably happy about the improvement in the customer experience.

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 However, with the tight labor market in Singapore, this poses an issue and creates
cost. You need one more person at each counter to serve food. That means, if you have 4
cashiers, you need 4 food servers. The food servers also had to walk a distance from their
station to the food preparation area to arrange and serve food. Depending on their
proximity from the food preparation area, this causes expense of time.

To resolve this problem, McDonald’s create one gigantic spot for food servers
and food collection so that they would not need that many people to serve food. And the
food preparation area is just behind the food collection point. Talk about operation
efficiency! McDonald’s also employ a ticket system which helps their customer
understand where they are in line, managing customers’ expectation and reducing
customers’ anxiety. All in harmony to create a better customer experience.

Pay digital

Then came one day when the demand for service quality became higher, and the
competition within the service industry became intense, technology became the new sexy
thing for businesses. In the recent years, McDonald’s introduced the self-serve kiosk to
enhance customer experience. The touch-screen technology is meant to speed up the
ordering process and give people more control over customising their food, while
reducing opportunities for human error. People don’t like to stand in queues, they love to
pay digitally (because *cough* digital payments are faster and more convenient). And
they like to take their time thinking about what to order, while customizing their orders at
the same time. The self-serve kiosk gives their customers a sense of control over their
order and their order timeframe. It also uses the same ticket system. This sense of control
improves user experience, and reduces interaction anxiety and inconsistency in customer
service quality. Honestly, the introvert geek in me loves it too.

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Self-serve kiosks

When placing an order at the self-serve kiosks, customers can select the table
service feature and key in the number of the tag. After confirming their inputs and
making payment for their order, they can walk to their seats, place the tag on their tables
and wait for their orders to be delivered right to them. Nevertheless, this service would be
beneficial for families who brought their children along with them because they can focus
on looking after their children instead of paying attention to the ticket system at the
collection point.

Redesign using technologies

Customer experience may become more personalized. Technologies such as voice

recognition (think Alexa), facial recognition, gesture recognition, virtual reality and
augmented reality will pave new ways to make customer experience more personal.
Personalization will help streamline the ordering process by easily pulling up past orders
and customization, making customers feel more valued.

However, this may not happen too soon in In McDonalds every branch with our
aging population, as it takes time for the people as a whole to adjust to the recent changes
in the service culture since the older generations are much less technology-savvy as
compared to the younger ones.

CHAPTER 5: Strategic Capacity Planning for Products and Services

Capacity requirements and tools

McDonald's is an American fast-food chain that is one of the largest in the world,

known for its hamburgers. Since its founding in 1948, McDonald's has grown from a
family burger stand to a global fast-food behemoth, with more than 30,000 locations in
118 countries. However, according to fortune.com. McDonalds is reported as the worst
global sales decline, with drive-thrust and delivery unable to make up for the blows from
pandemic shut downs and consumer caution. In the graph the highest revenue that

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 McDonalds achieve is in year 2013 and to observe the following years it is starting to
decreasing until 2019 and continuing in 2020 and 2021 because of the pandemic lots of
branches are closed and it made them slower to progress to their revenue.

Strategies

In the area of quality, McDonalds have been working closely with their key
suppliers to continuously uprise the world class standards while adding menu up to date
that satisfies customer’s expectations. From this information shows that the important
successful factor of McDonald's product is “think global act local". It means that
McDonald's business operation is global, but the marketing action is adapted in each local
because the main heart of McDonald’s is responding the customer's satisfaction and need.
Actually, McDonald's always adapts menus to match with that cultural local though taste,
design. For example, there is Samurai Pork Burger in Thailand but there isn’t this menu
in America because of cultural factor.

The main key success of McDonald’s is the slogan “Think Global Act Local ́ ́in
Philippines and all restaurant chains around the world, and it is the strength point of
McDonald’s. This motto gave the McDonalds a unique quality that people really tend to

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 try. McDonalds really meant as global because it is now having a lot of branches around
the world that people keep on going in that makes the McDonalds one of the cheapest
restaurants/fast food with the best quality. They made the best quality of food,
comfortable aura of the restaurant, fast service around the globe.

Besides, everyone loving the key part of McDonald’s product promotion strategy
to connect with customers in highly relevant, culturally significant ways around the
world. When they are going to launch the new product on certain are initially, they are
focusing the local people’s food habit and their budget. Some time they are depending the
local people to fix their menu like burger campaign. On this issue they are announcing
their web to fix their own burger on the basis of another burger concept. This is very
popular and successful story of MacDonald’s. Then local MacDonald’s choose the menu
from the customer and fix it for couple of weeks. This strategy also attracts the customers
and also fulfill the local customer demand. On this way MacDonald’s fulfilling the local
demand by respecting the local food habit. Before launching the new product
MacDonald’s also survey the local market strategy. To introduce the new product to the
customer MacDonald’s followed the dumping business strategy. On this strategy they are
offering free food item on the new product to get the customer interest on the new
product. So that would be no problem to introduce MacDonald’s in Other more countries

Demand management strategies

Customers perceive a good quality service when they get their product when they
demand for it. When customers walk into a McDonald's to order a meal, they do not
expect to wait long to place orders. They expect McDonald's to have the item they want,
and they expect to receive their orders within a short period of time. An accurate strategy
to customer traffic flow and product demand enables McDonald's to schedule enough
servers, to stock enough food, and to schedule food production to provide high-quality
service. An inaccurate service causes service to break down, resulting in poor quality. 

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 McDonald’s has climbed five places since then to the No. 3 position in the
Gartner Supply Chain Top 25 of 2012. According to the report, this restaurant chain has
managed the fine balance between new product growth and the resulting complexity in
the supply chain planning and execution.

The McDonald’s supply chain is 100-percent outsourced. The company owns no

factories and no distribution centers. McDonald’s has 16 major suppliers. The most
important key performance indicator (KPI) is ‘no item may ever be out of stock’. In order
to achieve this, the company works in accordance with several supply chain planning
principles. The expectations have to be clear at both restaurant level and menu-item level.
In addition, the marketing plan is taken into consideration. whether the data concerns a
standard product or one on promotion as are the plans of each franchisee, whose own
promotional campaign or local adaptations may need to be factored in.

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