McDonald’s Operations Management: 10 Critical Decisions, Productivity - Panmore Institute (2024)

McDonald’s operations management (OM) supports the company’s position as the largest fast-food restaurant chain in the world. The business implements solutions pertaining to the 10 decision areas of operations management, such as supply chain management for the movement of ingredients. In these 10 strategic decisions, McDonald’s aims for maximum operating efficiency and productivity to facilitate business strategies that rely on low production costs. For instance, in process and capacity design, which is a part of operations management, the food service company optimizes production processes to minimize costs and enable competitive selling prices. In this regard, operations management effectiveness impacts how the goals of McDonald’s mission statement and vision statement are achieved. Operations strategy and related strategic planning determine the restaurant corporation’s overall business performance.

With the 10 decisions of operations management, McDonald’s optimizes the business to counteract competition. The company competes with Wendy’s, KFC, Dunkin’, Burger King, Subway, and Arby’s. McCafé operations also compete with Starbucks and Tim Hortons, as well as some PepsiCo beverages and Unilever’s Bru coffee, which can bepurchased online in various countries. The Five Forces analysis of McDonald’s Corporation shows that these competing firms impose a strong competitive force, which influences the company’s operations strategy and measures for optimal productivity.

McDonald’s Operations Management: 10 Critical Decision Areas

1. In the design of goods and services, the objective is to develop the best product, given the resources and limitations of the fast-food company. In this case, McDonald’s aims for high efficiency of service operations, and the standardization of goods. High efficiency and productivity in food preparation minimizes production costs. On the other hand, standardization of goods contributes to menu and product consistency and customer satisfaction at store locations. In this strategic decision area of operations management, managers are concerned with satisfying the general public, which is the target market based on McDonald’s generic strategy for competitive advantage and strategies for intensive growth. The company aims to attract everyone to its fast-food restaurants. Also, in making product design decisions, operations managers account for the product element of McDonald’s marketing mix or 4P. Thus, the strategies and tactics in the fast-food company’s marketing mix relate to this strategic decision area of operations management.

2. Quality management involves matching McDonald’s food, drinks, and service to the quality expectations and preferences of target consumers. The operations strategy applies policies and measures to ensure that such matching is achieved at company-owned, franchised, and licensed locations. Product standardization comes with quality consistency, which contributes to the business strengths identified in the SWOT analysis of McDonald’s Corporation. Such quality consistency helps the fast-food business satisfy consumers’ expectations. However, McDonald’s operations management faces the challenge of maintaining satisfactory quality despite cost minimization, which is essential for competitive selling prices.

3. Process and capacity design is a decision area that pushes operations management to optimize production processes, such as the production of intermediate ingredients used to make burgers and fried chicken. McDonald’s operations strategy maximizes the benefits of economies of scale in production processes, in order to support competitive pricing. For example, the company employs custom equipment for large-scale and high-speed food preparation. In this way, operations management achieves high efficiency in production processes and the minimization of costs at corporate facilities, hubs, and restaurants. Also, the production line method maximizes productivity and capacity utilization at McDonald’s restaurants.

4. For its location strategy, McDonald’s has various facilities that support its operations. The operations management objective in this strategic decision area is to establish and maintain locations that optimally account for access to target consumers, access to resources, the supply chain, costs, productivity, and economic variables. For example, McDonald’s production facility locations satisfy restaurants’ supply requirements. Also, company-owned, franchised, and licensed locations are established for maximum market reach. In this decision area, McDonald’s operations management involves restaurants, kiosks, and the company’s websites and mobile apps as venues. Other locations considered are those of third-party distributors or retailers of McCafé products, such as Walmart, Costco, Amazon, and Target. Through these locations or venues, the global fast-food restaurant chain reaches customers in traditional and online ways. Also, McDonald’s business structure (company structure) determines the locations of facilities and resources, including human resources.

5. Layout design and strategy aim for high efficiency in moving resources and information throughout McDonald’s business organization. For the movement of information at the fast-food company’s offices and other locations, information technology offers high efficiency with minimal drawbacks. On the other hand, at restaurants and kiosks, McDonald’s operations strategy involves layouts that maximize space utilization and productivity, rather than comfort and spaciousness. For example, kitchens are designed to match steps in food preparation. Also, many small tables are arranged to accommodate large numbers of diners at the restaurants.

6. In human resources and job design, operations management has the objective of developing and maintaining an adequate workforce for McDonald’s business development. The multinational corporation supports the staffing needs of its restaurants. For example, the company has standardized training programs for skills needed in food production and preparation. This support is in addition to the human resource policies and measures that McDonald’s franchisees and licensees implement on their own. For this decision area of operations management, individual and organizational learning are also emphasized throughout the fast-food restaurant chain. McDonald’s organizational culture or corporate culture influences human resource management programs to facilitate such learning.

7. Supply chain management aims to maintain high effectiveness and operating efficiency throughout McDonald’s supply chain. The food service company’s operations management uses information technology to inform suppliers and enable them to match their operations to the company’s supply needs. McDonald’s has a mixture of regional suppliers for highly standardized ingredients, and local suppliers for perishables. In this context, suppliers’ productivity affects the restaurant company’s productivity. With this consideration, McDonald’s corporate social responsibility (CSR), ESG, and stakeholder management strategy and other business strategiesimpose policies and rules for suppliers, to minimize disruptions in the supply chain.

8. In inventory management, McDonald’s operations management objective is to ensure adequate inventory for smooth business operations with minimal disruptions in resource availability. This decision area of operations management functions as an interface between the supply chain and the rest of the food service organization. Materials from suppliers pass through inventory management, or are stored for later use, depending on the requirements of the corporation and its restaurants. Inventory management effectiveness influences productivity at store locations. In this regard, McDonald’s minimizes inventory costs while supporting restaurant operations.

9. Scheduling at McDonald’s follows industry best practices, with considerations for supply chain capabilities, market conditions, and regulations. The strategic objective in this decision area of operations management is to apply schedules so that resources and assets are utilized to their full potential, while the fast-food chain satisfies its target customers. Regular schedules are used for McDonald’s corporate offices and restaurant locations. Also, seasonal schedules may be applied to support operations during spikes in market demand for fast food. Operational effectiveness is achieved by matching the schedules to the requirements of McDonald’s and its partners.

10. In maintenance, strategic decisions focus on maintaining stable operations, which relate to the stability of operations at the company’s corporate offices and stores. To maintain high productivity, McDonald’s operations management monitors the needs of its restaurants, and uses the resulting data to inform maintenance teams. Third-party service providers are also used in some situations, such as for the repair of cooking equipment and machinery. At McDonald’s hubs for material distribution, maintenance is implemented in terms of matching operational capacity and human resources to the current needs of the business organization. In this context, operations management also uses real-time monitoring and control to ensure that decisions and actions correspond to the current conditions of the food-service company. Considering the international scope of the business, the global, regional, and local trends characterized in the PESTEL/PESTLE analysis of McDonald’s Corporation influence the maintenance requirements and the tools available to maintain stable operations and high productivity.

Productivity at McDonald’s

With regard to the 10 strategic decisions of operations management, McDonald’s works toward maximum productivity in all its business areas. The following productivity metrics are some of the criteria applicable to McDonald’s operations management:

1. Order fulfillment rate (productivity at McDonald’s restaurants)
2. Stockout rate (productivity of inventory management, hubs, warehouses, and distribution facilities)
3. Timely delivery rate (productivity of deliveries, including third-party delivery services)

References

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