Operations Management

OPERATIONS MANAGEMENT

Introduction: Overview of McDonalds

Founded in 1940, McDonalds is one of the largest food service retailer in the world. It has around 35,000
restaurants all over the world which serves approximately 70 million customers daily. The food retail
chain has operations in over a hundred countries and has employed over 1.7 million individuals. The
company has franchised majority of its restaurants, and this serves as one of their main revenue
sources. Other revenue sources of the include royalties and rent collection (Vignali 2001); additional
revenue comes from the sales of the restaurants that are directly ran by the company. The highest
revenue ever generated by McDonalds stands at USD 27.5 billion of which USD 5.5 billion was profit. The
company offers a wide range of foods such as French fries, cheeseburgers, chicken, hamburgers,
milkshakes as well as a variety of deserts. McDonalds has its headquarters in Illinois, US. 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 company’s success is
their policy if introducing new items in their menu to attract new customers. Inventory AppraisalIn the
traditional operation management, inventories of finished products and raw materials were held as a
reserve in case needed items ran out of stock. However, in the recent years, organization management
have to know such large inventories are expensive. As a result, majority of organizations and large
businesses have changed their methodology in inventory and production management (Patton et al.,
2011). McDonalds have been left behind as they have alsoimplemented new strategies in the control of
flow of food processing in a multi stage 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 have 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 have some essential aspects which includes the following:

i. It reduces inventory in the supply chains. This system of inventory management gainssubstantial
efficacies through numerous deliveries of minimal quantities to cater for the instant demands in the
food production chain. ii. It applies a “pull” system which is referred to as Kanban in the control of
production and raw materials. iii. It also involves the commitment of employees in regards to their
involvement and participation. It specifically involves the commitment as well as work ethics and
practices which leads to the elimination of wastes (Greasley 2013).Since its adoption of the JIT system,
McDonalds have managed to significantly reduce the cost of production. The following important
characteristics of the JIT approach are behind these cost savings:i. Uniform and smooth production flow:
The JIT approach establishes a smooth flow of production which starts with arrival of raw materials and
ends with the successful andtimely delivery of final products to the customers. Wide fluctuations in the
rates of production can result in unnecessary delays and excessive “work-in-progress”. The JIT approach
eliminates such non-value-added costs (Greasley 2013).ii. The pull method of stage coordination during
production: Food processing at McDonalds occurs in several stages. Using the pull approach, goods and
raw materials are only produced in a production stage only if they are required in another production
stage. Such an approach eliminates or reduces “work-in-process” during the production process. The
final result of this approach is a significant reduction in the waiting time of customers and the resultant
non-value-added cost (Greasley 2013). Operational Management at McDonaldsQuality operation
management at McDonalds has been considered as one of the main factors that has catapulted the
company to the top of the food retail business. The firm has digitalized its information systems and
implemented well-founded corporate standards that ensures quality in all aspects of the company. One
of the measures that the company uses to maintain quality standards is through regular inspections (at
least twice per year) in each of its restaurants (Linn, and Golin 2006). Additionally, the company
conducts regular training and education workshops to create awareness among its employees on quality
standards of the company and measures and techniques of customer satisfaction (Bamford and
Forrester 2010).McDonalds prioritizes the improvement and maintenance of the provision of high
quality products and services. One of the company’s requirements for prospective business partners is
that one must attend training and education workshops where one learns of the organization culture
and the quality standards of the company. One of the reasons behind such workshops is toensure that
McDonalds franchisees do not compromise the food quality of the company which has become part of
their identity. All stores are required to have similar interior and exterior design and décor. To maintain
the quality of food supplies, the organization has a list of pre-qualified suppliers who have been vetted
and approved to do business with the franchisees (Peters 2009).The selection of the franchisees is a
thorough process which also employs quality operational management. The selection process is
comprehensive and the applicants must meet all the requirements to qualify for franchising. First, all
prospects have to be acquainted with the operation and training manuals of the company. McDonalds
business procedures and standards of quality are detailed in 600-page manual; the applicants must
master the contents of the manualwhich is very challenging to many. The other requirement is
mandatory training for all applicantswhich is held at Hamburger University which is paid for by the
applicant. After successfully completing the training, the qualified individuals sign a franchise agreement
with McDonalds and are free to establish a franchise store under McDonalds brand name. The
agreement further details the obligations of the franchise and regulations in regards to quality
control.McDonalds Performance ObjectivesPerformance objectives are developed by an organization’s
management to serve as guiding principles for the company’s vision and mission to accomplish set
objectives in all aspects of the organization. They are developed based on the specific activities and
operations performed by the organization (Johnston, Clark and Schulver 2012). They primarily describe
the acceptable and desirable activities and outcomes in regards to output and organizational behavior.
they should be set in a way that they are in line with the organization’s objectives and goals. An
organization can have both organizational and departmental performance objectives.

However, the performance objectives shouldn’t clash but rather should be aimed at accomplishing the
general organizational goals and objectives (Patton et al., 2011).At McDonalds, performance objectives
are used to enhance the efficacy of operations. One of their notable accomplishments is the provision of
quality fast foods at convenient prices. Performance objectives has assisted McDonalds in enlarging
their market share and sales volume; it has also defined the organizational behavior that is expected
from the employees in regards to the standards of quality. The establishment and implementation of
quality control strategies have aided the food retail giant to establish a competitive environment and
catapulted it to become one of the top players in the food retail industry. At McDonalds performance
objectives enhances the quality of products and ensures the maintenance of good customer service and
relations. Customer satisfaction is a key aspect in McDonald’s 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 implementedmodern technology to enhance their service delivery; such digitalizing of their
operations has enabled the McDonalds employees to serve more customers daily. FindingsCostCost is an
important aspect of any business enterprise which wants to have competitive prices and McDonald’s
realizes this too well. Some organizations sore cash on employee wages, purchase of tools and
machinery and provision of services which minimizes their profits. McDonalds have mastered the art of
minimizing their operating costs. They are thus able to sell their food much lower than their
competitors. They frequently give promotional offers to their customers which attracts more customers
and increases customer loyalty. The large number of their customers contributes to lower operating
costs due to economies of scale. To further reduce their operating costs, the company plans to use
equipment which is energy saving (Kaplan 2009).

SpeedThis is the time taken by the customers to have their products or services delivered. The company
aims to reduce this waiting time to 95 seconds. The objective of the company is to achieve a drive
through experience and hence the company needs to fine tune this aspect. If the company fails to
deliver this customer service experience, they mind end up losing lots of customers (Kiley 2007).
QualityOne of the main emphasis of McDonalds is food quality. The company has established measures
and regulations to ensure that all their stores high quality standards. Some of the measures whichare
defines by the quality management operations include regular inspection of food quality at
allMcDonalds stores. The company has also put lots of emphasis on training and educating employees
on the importance of maintaining high quality standards. The quality and variety of their food has
continually changed and improved over the years (Kaplan 2009). Employee ManagementEmployee
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 have implemented the use of job promotions and competitive wages where
hardworking employees are recognized 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 2009). The organization 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.
McDonalds hire employees who possess the required skill set, abilities, and competencies, to work so
that to build a team capable of running the business and achieving the set long term and short term
goals. The process of selecting and hiring employees at the food retail giant is rigorous and thorough
and involves three aspects: A Behavioral InterviewJob AnalysisScreeningThis selection process
ensures that only the qualified individuals, with the relevant skills, get the chance to work at McDonalds.
Another motive behind the selection process is making thehired employees believe that they have skills
and abilities which are essential to the successful running of the company. Such kind of beliefs enhances
individual and team operations which contributes to the overall success of the company. The selection
process also ensures that there is no recruitment of individuals who don’t need the required
qualifications for any particular job at McDonalds. Hiring such individuals can be detrimental to the
organization in that it can create instability and loopholes in regards to skill sets within the company.
Incompetent and unskilled workers can negatively affect the productivity of McDonalds. Another
important aspect of employee management at McDonalds is treating and relatingto the employee in a
good manner. This helps in ensuring that the interactional and procedural justice is practiced and
embedded in the organizational culture of McDonalds (Peters 2009). The company’s management have
made this a core aspect in all operations at McDonalds. The company believes that after acquiring the
best employees in the job market, they have an obligation to treat them right. The Principle of
performance management is another principle which is being employed by various organizations in the
management of employees in regards to quality operations management. This process is continual
process which defines the hierarchal targets and visions, introduces and distinguishes authoritative
measures of execution. The principle also makes the curative approaches to warranty the achievement
of the models which utilizes techniques and frameworks which are coordinated with culture and
practices. Administration systems concentrates on the collecting, analyzing and transmission
information in an opportune manner (Rugman and Verbeke 2004). The performance management
framework at McDonalds incorporates arranging execution, bolstering for superiority, improvement of
execution, and evaluation of execution. Administration of execution is used to distinguish essential
authoritative goals and set execution methodologies that are identified together with those targets.
These principles encompass both group and individual execution. McDonalds doesn’t require to enlarge
their administrative tools or pay for frameworks that are prearranged by exorbitant specialists. Directors
should be responsible and mindful so as to effectively oversee the execution of duties which is a
combination of setting objectives and constant inputs from all the departments of the organization so as
to enhance execution.Job DesignThe job design at the food retail giant’s quality controls is guided by the
personal management models. The jobs under this department is also designed and guided by specific
management principles. The employees at McDonalds are allowed to use self-control mechanisms and
measures in regards to their specific job descriptions and the overall discipline and quality of the
organization. Working as a team and units is a common feature in McDonalds job designs.Environmental
and Ethical IssuesJust like majority of the food companies all over the world, it is important for
McDonaldsto consider the environmental and ethical issues. The company employs quality operation
mismanagement so as to ensure that the food products are safe for human consumption. However, the
company is still faced with a number of issues and the management have expressedtheir intentions to
handle the environmental issues. The major environmental issue at McDonalds is waste resulting from
packaging materials. This waste results from the company’s plastic materials which are used to wrap and
pack food products. Such packaging materials include burger wrappers, fries’ boxes, drinking cups,
straws, napkins and packaging lids. In addition to this, McDonalds uses lots of unnecessarypackaging
materials which end up on the streets and in landfills. The primary reason behind the prevalent waste
products in the food industry is convenience and portability involved in the food packaging. The fast life
of the modern era has resulted in individuals who are all busy and in a hurry; they thus prefer easy and
quick foods which have resulted in a significant increase of the waste generated in the food industry. In
this light, survey statistics indicate that the cups and packaging materials from McDonalds accounts for
30 per cent of the entire street litter in the United States.Waste generation and inappropriate disposal
causes adverse effects to human life, animal life and environmental pollution. Therefore, McDonalds
needs to take relevant action so as to curb the waste from their stores that finds its way to the
environment (Gereffi and Christian 2009). In its European, McDonalds produces and disposes off 50
million packaging annually. Getting rid of this waste by burning is not a viable option because it produces
harmful gases and chemicals which further destroys the environment and is detrimental to the human
health. Alternatively, used of landfills results in land polluting which harms the flora and fauna in the
surrounding lands. Some of the waste produced may find its way to the sea where it poisons marine life
leading to decreased population of ocean life. McDonalds management are looking to reduce the
company’s contribution to global warming through the emission of greenhouse gases. Studies show that
5% of the greenhouse emissions in the US is from livestock (Daniel and Wilson 2003); McDonalds is one
of the largestcattle buyers in the world, purchasing approximately 36,000 cattle per year. Operation
management also involves the acquisition of raw materials. McDonalds also outsources meat from
private supplies which is used to make burgers. Majority of the private suppliers have constantly been
accused of degrading the environment by grazing in forests and destroying natural habitats.
Additionally, McDonalds have been accused of using poultry feed whose ingredients are grown in the
forests to fed their poultry. Operation Management ChallengesThe 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.ConclusionsThe food retail giant can make numerous changes that can
potentially enhance the operations management at the organization. The company can apply and
implement six sigma in their operations management can be effective in enhancing and improving the
quality of their products. The concept of sigma is designed to mitigate the defects of the operation
systems. It is thus important to identify the deficiencies in the company’s food products as a crucial
aspect of the framework. The six sigma model has five functions which include defining, measuring,
analyzing, improving and controlling. The management at McDonalds can apply and implement these
aspects and use them to analyze how they can simplify their operations management so as to
accomplish maximum efficacy.There is need for McDonalds to increase their efforts in reducing the
negative impact towards the environment. The company should increasingly invest in research which is
aimed at minimizing the greenhouse emissions from the organization. McDonalds should also ensure
that their suppliers to adopt safe practices in reducing the impact of their livestock to the environment.
Greenhouse emissions from agriculture and livestock can be mitigated in the long run through carbon
sequestration. Lastly, McDonalds needs to curb the amount of waste they generate through packaging.
They need to adopt packaging materials which are reusable; they can also reward customers who use
their own plastic bags by giving them incentives. Some of the big players in the food industry have
started the use of renewable ecofriendly packaging materials in the US and McDonalds should follow
suit.