McDonald's Champions Distribution Network in India
The supply chain for McDonald's is highly complex in India and the following numbers will give you an indication of the size of its Indian operation. It uses around 9000 hamburger buns, 3500 kg of tomatoes, 2000 kg of iceberg lettuce and more than 5000 slices of cheese on a daily basis. These are delivered to 255 restaurants around the country involving 40 different suppliers located all over India and the use of more than 60 refrigerated trucks.
From the Field to the Kitchen
The whole process begins at the grassroots with produce being delivered directly to suppliers by farmers. This produce is then processed and distributed to distribution centers and the quality of supplies is maintained by using customized multi- chamber temperature controlled trucks. These items are stored in rooms with zones at different temperatures and then dispatched to the restaurants depending on their requirements. The driving factor behind the handling of products across the entire cold chain is the expectation of McDonald's about ‘Cold, Clean, and On-Time Delivery’.
This is not an easy achievement in a country in which billions of dollars of produce are wasted every year because of inadequate and poor supply chains. This lack of infrastructure is a major problem that McDonald's has had to overcome. Moreover, the existing supply chains in the retail sector are inefficient and wasteful because of the involvement of a large number of intermediaries and complicated regulation. It is estimated that the country spends around 13% of GDP on logistics compared to the optimum efficiency level of 8%; making the wastage therefore colossal.
The company had to transform the entire basis of logistics and supply chain systems when it first entered the country around 16 years ago. It had to spend millions of dollars and six years in setting up cold storage and cold chain manufacturing systems in an underdeveloped sector but it had to persist because of the importance of cold chains to the success of the entire enterprise.
The Role of Information Technology
A total of around $4.5 billion was invested in the cold chain which is today the backbone of the business and a lot of research and experimentation had to be carried out to ensure the maintenance of quality. Of particular importance was the technology used to control and monitor the temperature on the trucks. The systems used for forecasting and the tracing of products individually managed their own requirements directly with the distribution centers through the use of dedicated systems.
The ability to trace goods is an outstanding example of the use of information technology because it can track the movement of every ingredient that goes into every serving. The temperature and location of every product supplied to any restaurant in the country can be accurately tracked in real time. It also allows the company to take corrective action when the temperature of a product rises above the predetermined parameters. This ensures that customers can be completely confident that the food is safe and inspected scrupulously.
Surprisingly, this system works not because of written agreements, but because of value-based partnerships between McDonald's, the franchisees and the suppliers.