Management of the Supply Chain: Case of Centrifugal Fast Food Industry (McDonalds)

Author: Iloka Benneth Chiemelie
Published: 30th August 2015

CHAPTER 1

INTRODUCTION

The fast food industry is fast growing in demand for their services and products, and the main attribute has been associated with increase in population and higher demands for faster and healthier food. The increase in such demand can be linked to less time availability as a result of higher time allocated for work and other leisure. Eating outside is most common amongst single people because they have lesser time to spend with their families like the married ones do.

McDonald represents quality in terms of service and product offerings, and it has been the reason for the company’s success. Since inception, the company has been successful in branding its corporate image as reliable, healthy and eco-friendly. The company adopted franchising as it business model and it is the force behind their great success. Currently, they maintain high presence in fast food markets of the world, benchmarking competitors in different areas and defining the right models for management across the industry.

Currently one of the biggest fast food chains in terms of market share, McDonald’s has been able to achieve its tremendous success through numerous approaches to business which has influenced their performance in the global market as well. It is s true definition of what quality means in terms of offering healthy products and quality services in the industry.

The increasing globalization and internationalization of means has raised issue on the sustainability of firms, in relation to their supplier networks. Suppliers are vital for sustainability for a number of reasons because they represent the link through which necessary raw materials are made available for production and the finished goods made available to the final consumers. Thus, suppliers play the vital role of creating and maintaining sustainability in the business process because they serve both the producers and the customers. Their close relationship with final consumers is significant in the sense that they are better positioned to understand the needs of the final consumers and advise the producers on how to meet these needs.

However, recent years have witnessed changes in the supplier network, in relation to changes that are associated with policies, approaches to business, commitment and contracts, as well as financial requirements. The reason for that is the increase in globalization which has increase the penetration of firms into other countries, as well as increase in entrepreneurship that has increased the entrants of new firms in the fast food industry. These factors have increase the suppliers’ power and made supply management more difficult because suppliers have more options and will always take the option that offers the highest price value in order to increase their business profitability. This is a big issue to McDonald’s because lack of understanding of their supplier network and proper management will mean that the company will not be able to meet their customers’ demands, maintain the brand value of quality and good health, as well as sustain and improve their financial performance.

Thus, this is the background for the development of this paper, which is designed to understand how the company currently manages its supply network – in relation to relative efficiency and effectiveness of the network. This paper will undertake such process by highlighting their current supply practices, discussing the issue highlighted above which is the high competitiveness of the supply network for fast food industry, illustrating how the company has ensured sustainability through its current practices and demonstrating ways that the company can further improve their performance in terms of supply network management.

1.1.            Background / history of McDonald’s

McDonald’s was founded in 1937 by two brothers, Richard and Maurice McDonald. These two brothers developed the food processing assembly line with a simple technique in the form of drive-in in Pasadena, California.

In 1954, Ray Kroc, a milk-shake salesman, discovered an opportunity for profitability in this market and negotiated to go into franchise deals with McDonald’s; by taking the exclusive right to franchise McDonald’s in the entire USA. Mr Kroc made an offer of franchise at a price value of $950, during a period where the ice-cream and restaurant franchise where sold at a market value of $50,000. With the deal concluded, Mr Kroc made a service fee of 1.9 per cent for every sale for himself, plus another royalty fee of 0.5 per cent for McDonald’s. in 1961, McDonald’s was sold out for $2.7 million. This sale opened the gate for internationalization of the company.

The first international venture was established in Canada in 1967. Shortly after that, the license for McDonald’s was purchase by George Cohon to operate in Eastern parts of Canada, with the first restaurant opened in 1968. Cohon proceeded to open 640 outlets all over Canada, and this made McDonald’s Canada more lucrative than any other McDonald’s franchise outside of the US.

Claudio (2001) attributes McDonald’s success to the company adoption of franchising. Through franchising, the corporate value has been transferred to both local and international markets, making McDonald’s the success story of franchising across the world. Currently, the company has over 20,000 restaurants in more than 100 countries, and about 80 per cent of these restaurants are franchise based.

The company success is a result of their continued franchising network and centralized approach to business operations. The company adopts the same format for its businesses across the globe, and their business code of conduct is designed to ensure adoption as well as maintenance of the same principle in all their franchise. This enhances the uniqueness of their product offerings, as it makes a McBurger in Malaysia taste exactly as that in Singapore, Indonesia, China, Japan and other parts of the world.

1.2 Research objectives

Based on the discussions above, it is clear that understanding McDonald’s supplier network is important for maintaining sustainability in the business process because it will help to highlight the weakness in the system and drive the right approach to handle these weaknesses. Thus, the objective of this paper is to critically evaluate the supply network of McDonald’s in relation to how they can use it to maintain business sustainability and enhance profitability in the fast food industry. Thus, this paper will look into:

1            How McDonald’s maintain the quality of their foods and beverages, with special reference to their burger.

2            How the company adopts necessary strategies to ensure that the raw materials required for production are steadily available – in terms of the amount of raw materials that come from suppliers and the amount that the company manufactures on its own.

3            How the company segments its supply network in terms of the raw materials they provide. Segmentation is important because no single supplier can provide all the necessary raw materials needed for production.

4            How the company manages lead time in terms of how fast suppliers can provide the raw materials to ensure efficiency in the production system.

From the objectives above, it is that this paper is supplier centred, in the sense that it focuses on understanding McDonald’s supplier network – in relation to how the company is currently performing, the setbacks in its operation process, and the rightful approach to ensure sustainability in their operations.

1.3 Research question

In view of the research objectives above, this research paper will ask the following questions in order to meet the set objectives.

1.          Has McDonald’s been able to maintain the quality of its foods and beverages? If so, what are the right approaches applied by the company?

2.          Has the company been able to adopt the necessary strategies to ensure sustainability in its supply network? If so what are the strategies adopted by the company?

3.          Does McDonald’s segments its supply network to ensure sustainability of the supply of its raw materials? If so, what are the segmentation strategies adopted by the company?

4.          Is McDonald’s properly managing the lead time for the supply of its raw materials? If so, what are the strategies adopted by the company.

It can be seen from the above research question that this paper doesn’t focus on understanding whether the company has done the right thing or not, instead the paper also looks to understanding the strategies adopted by the company. This understanding will help to highlight the weaknesses in their strategies and design the right approach to their business process.

1.4 Scope of study

This paper will focus on McDonald’s located in Bukit Bintang area of Kuala Lumpur, the capital of Malaysia. The focus on this section is to ensure that the research process is able to enhance data gathering because of the high availability of McDonald’s restaurants in these area and the high volume of customers. All these variables makes data gathering easier because more data can be gathered in the process.

1.5 Limitations

Although this paper has been associated with high level of significance, it is also limited in terms of conceptualization of the research work and application of finding. This is because, the research paper focuses on a single company and since the management of corporations can be different in terms of their approach towards quality management and set corporate objectives, there is a high possibility of these corporations also being different in their attitude towards supply chain management. Thus, the generation of a general concept of for supply chain management in this paper will be very difficult as a result of the differences in management style. In that case, the findings from this paper might be limited to application in only McDonalds or other corporations that adopt similar business management formula.

1.6 Methodology

The methodology for this research is primary based. This implies that survey will be conducted with the respective McDonald’s outlets to be studied. The survey will be used to gather necessary information about how the company is adopting the strategies as discussed in the research objectives to ensure efficiency in its supplier network. Additionally, secondary research will be conducted in the form of desktop research to understand the relative application in supply management across the fast food industry.

1.5. Organisation of study

Basically, this paper will be organized into 5 chapters. The first chapter is the introduction which will provide a background overview of the topics and subjects to be discussed. This section will also contain the research objectives and research questions.

The second section will be a review of relevant literatures in relation to the topic of discussion and referenced origination. The review will follow set criteria that will be drawn in the second chapter through the theoretical framework.

The third and fourth chapters involves the design of research methodology and data gathering process respectively, while the final chapter is the discussion of findings in relation to stated hypotheses and literature review.

CHAPTER 2

LITERATURE REVIEW

Introduction

In this chapter, the focus is on understanding what empirical researches previously done in relation to supply chain management are saying. The review will involve a clear understand of what are the processes involved in supply chain management and a broader redesign network in relation to the common trends involved in modern supply chain management. Additionally, the review will be streamlined to focus more on supply chain management in the fast food industry with a clear view on McDonald as a point of references in cases where such journal can be found.

Research framework

Figure 2.1: framework for literature review 

From the above figure, it becomes clear that the focus of this chapter will be to understand the concept of supply chain management and the common trend in the field. Additionally, this chapter will also link such topics to the Fast Food Industry.

What is Supply Chain Management (SCM)?

In an EC funded report for understanding the concept of innovation in SC, Sotris (2000) presented a clear definition and overview of what SC is all about, and his paper will be adopted in this research. It was noted by Sotris (2000) that most of the organizations in the present business are finding new sources of competitive advantage in order to ensure that they constantly increase their market share as well as increase their business profitability. SC incorporates all the necessary functions in an organizational process, into an integrated form of activities that bring products to the market and create a new wave of customer satisfactions.

Sotris (2000) noted that SC is an integration of all topics in the business management field from manufacturing operations, purchasing, transportation, and physical distribution into a uniform program that is designed to ensure efficiency in the organizational process. Successful SC has been noted to be capable of integrating all these activities into a streamlined organizational process. It encompasses and links all flow patterns in the production chain. Additionally, SC also included all activities that are undertaken in the process of making finished goods available to customers or making raw materials available for production.

On an organizational context, SC is used to make reference to the wide range of functional activities that are undertaken in the firm. Such activities include inbound and outbound logistics, warehousing, and inventory control, sourcing, procurement, and supply management. Other activities in the SC process include production planning and scheduling, order processing and customer service, as well as the information systems necessary for monitoring the activities described above. Basically, supply chain deals with all activities in the organizational process that determines the flow of materials for production, and flow of finished goods to the respective markets for consumption.

Importance of supply chain management

In the olden days, there has been a common story in the Greek fable about a race between a tortoise and rabbit. The speedy and overconfident rabbit fell asleep on the job and the “slow but steady” tortoise won the race. Such an incidence is not possible in modern day business, and it must be noted that “slow and steady” will not even get a manager out of the company’s gate, not to mention winning the race. Managers in the modern day business must recognize the fact that getting their product to their customers faster than ever will help improve their competitiveness and provide the right solution to issues in supply chain management such as modal analysis, supply chain management, planning of load, planning of route and design of distribution network. Companies in modern day business must face the challenges in the present business environment that comes in the form of value added supply chain management like reengineering globalization and outsourcing.

In any case, the question is as to why it is important for companies to get their products distributed to their respective customers faster. The answer is that after distribution of products is very important for increase sales in the company (Sotris, 2000). There are a number of benefits for every extra minute that a company spends in the market without its competitors around. The benefits come in the form of increased performance and profitability, which all result from higher demands for the company’s products and/or services. Thus, it is important that companies properly manage their supply chain as it has a direct impact on their profitability and productivity performance. Additionally, the high level of globalization and internationalization of firms across the globe has also made the adoption of fast distribution network even more significant as this new business environment has increased the level of competition across the globe.

Processes involved in supply chain management

Recent studies on SCM has pointed out the importance of collaboration between successive actors from the main producers to the final consumers, in order to increase the satisfaction level customers obtain from the product as well as reduce cost involved in product distribution (see, for example, Scott and Westbrook, 1991; Ellram, 1991; Towill, 1996). Jones and Riley (1985) defined SCM as a business approach used to integrate the process involved in planning and control of the flow of materials from the suppliers to manufactures. In accordance with Fearne (1996), the main objective of SCM is to eliminate the barriers existing between each of the links in supply chain, as a means of increase the level of services obtainable in the supply chain network, and to reduce supply cost sustainably. SCM seeks to increase the relation between mutual benefits by defining new structures in the organization and establishing contractual relationship between sellers and buyers, which will wind up to a new adversarial classification. Iyer and Bergen (1997) present emphasis on Pareto improvement, with reference to the conditions in which all parties involved are at least on the same ground of benefit, and no one is given higher advantage than the other. Stevens (1989) also presented a description of SCM as a system that is made up of material suppliers, production facilities, distribution networks and services, and customers, with all these facets being linked up with flow of materials and the flow of feedback in relation to the experience gained from using the material. In any case, it is still important to understand that SCM also creates some additional flow. This can be seen in the case of reverse logistics, in which the remanufacturing and product recovery system creates room for flow of feedbacks on materials (see, for example, Thiery et al., 1995 and Verrijdt, 1997). Sharing inventory or scheduling of production on a similar hand, also create feed forward flow of information. Additionally, individual firms can also be part of the many different chains in supply network at the same time, and it helps to enhance the focus of the organization by drawing functions that each of these people are expected to perform.

Figure 2.2: reference model for a supply chain

Source as adapted from: Van Der Vorst et al. (1996)

The figure above illustrated the processes involved in SCM, which begins with the supplier of the raw material making available the materials needed for production to the producers. The producers the manufactures the goods and delivers it to the warehouse. These goods are then sent off to the retail outlet where they are being made available to the final consumers. From the above flow, there are two flows in the form of information and goods. The flow of goods is what occurs between the periods at which the materials are delivered for production to the period the final goods reaches the final consumers. The flow of information is what occurs after the consumption, and it includes a detailed analysis of consumers’ experience in relation to the product. This information is usually passed from the consumer to the retailers, then to the final producers. In some cases, the flow of information can also be passed directly from the consumer to the final producers through a direct contact network provided for the producers in such cases. The form of contact established depends largely on the form of relationship between the producers and final consumers.

Although the figure above seems to illustrate that the processes involved in SCM are well coordinated, it has to be noted that the traditional approaches adopted in coping with uncertainties (such as does resulting from differences in quality, supplier unreliability and unpredictability in consumer demand) have been usually been handled by building inventories to carter for excess capacities. However, is now considered to be costly and inefficient (Van Der Vorst et al., 1996).  One of the key attributes that high players must possess in the modern business environment is an ability to rapidly respond to the sophisticated demands from consumers (Stalk and Hout, 1990). As such, the competitions that exist between individual firms are now being replaced by competition between supply chains. SCM should recognize the level of services required by final consumers, and need to position their inventory in such a way that the amount of stock required at each point is documented, and the inventory should develop the appropriate policies and approaches for handling supply chain under one entity (Jones and Riley, 1985). As such, it can easily be deduced that in order to create superior SCM, the company should be able to manage uncertainties.

Supply chain management and uncertainty

From the traditional form of communication and demand as illustrated in the figure 2.2 above, it can be seen that all activities in supply chain are shown in accordance to the flow of such activities. Normally, consumers in each of these stages hide their internal data from suppliers, and examples of such data include their sales patterns, level of available stock, rules of stock, and delivery design. McGuffog (1997) stated that even under stable consumer demands, organizational factors such as structures and timeframe, IT system, capacities of machinery, depots and logistics, or other random factors tend to make the expressed demand at each of these stages in supply chain more cyclical with higher variations. Such phenomenon include situations in which orders made to the supplier seem to be larger than sales made to the buyers (i.e., demand distortion) and the distortion propagates upstream in an amplified form (i.e., variance amplification), is called the Forrester effect (Towill, 1996) or the bullwhip effect (Lee et al., 1997). Such effect influences cost seriously. For instance, if the manufacturer is forced to incur excess raw material costs or material shortage as a result of poor product forecasting; extra material cost will be created as a result of excess capacity, poor utilization of resources and overtimes; and most of the excess warehousing expenses will also be increased as a result of high stock level (Towill, 1996; Lee et al., 1997). Kurt Salmon Associates (1993, p. 83) made the suggestion that these activities can yield excesses in terms of increased cost that can rise up to 12.5% to 25%. Forrester (1961) also illustrated that the effect is as a result of dynamics in the industry, which can vary from time to time, and the lack of correct feedback control in the organization. Lee et al. (1997) conducted an examination of the bullwhip effect in different cases, and made an identification of four main issues in the form of: demand signal process (if the demand for products increases, the firm will be forced to order more raw materials in anticipation of further increase, and in that case, an artificial high level of demand will result on worsened lead time in the long-run); order batching; difference in price; and shortage gaming. As such, it can be stated that the effect might be a result of reactions to uncertainties in demand or supply and also the complexity and structure adopted in the current decision making process. In any case, it is still important to understand the causes of uncertainty and how they can be eliminated.

There are numerous measures that have been discussed in literatures aimed at improving the performance of supply chain. SCM has largely been linked to reduction in numerous variables that influences productivity negatively, such as delays present in the flow of goods and information and operations that add no value in the supply chain. Information flow is considered very important because Braithway (1993) puts it that since millions of dollar are spend to minimize manufacturing time on daily bases, not understanding the ordering time can result in a subsequent low management approach for turnaround time. Stalk and Hout (1990) found from their investigation that work-in-process and level of stock fluctuates with different lengths in order time, making the best approach for handling such fluctuation to be based on increasing lead time, and understanding all main variables that influences performance flow. The idea behind this assumption is that when the forecast horizons are reduced, the error arising from forecast will also decrease. As such, it becomes easy to manage problems arising from control.

Uncertainty is inevitable in SCM and the focus should be on ways to identify the sources of uncertainty and approaches that supply chains can adopt in order to ensure that sustainability is ensure in the business process. The above discussion illustrates that the main sources of uncertainty is from demand variation and over projection. The demand variation is also linked to over projection in the sense that when a demand is varied, the supply will be overly projected and the company will be caught in the mist of defining new approaches for handling such variation. These uncertainties in supply chain pose numerous risk and the preceding section will look to understand the risk posed by these variables.

Supply Chain integration (SCI) and Supply Chain Risk (SCR)

It has been recognized that businesses are becoming more risky in modern times as a result of the increasing adoption of outsourcing, globalization of supply chain, and reduced product life-cycle (Barry, 2004; Waters, 2007; Christopher et al., 2011). Complexity in supply chain is increased as a result of risk, and supply chain risk also makes businesses to become more sensitive to time. Thus, companies need to strategically position their supply chain system in line with attributes from suppliers and customers in order to increase their sustainability, competition and business growth (Bowersox et al., 1999; Frohlich and Westbrook, 2001; Zhao et al., 2008; Flynn et al., 2010). Supply chain integration (SCI) has been identified as the main factor for increasing value of the SCM (Horvath, 2001).

Although SCI has been singled out as the most important tool for gaining competitive advantage, there are also many questions that need to the addressed in relation to how SCI can be implemented (Bowersox et al., 1999; Frohlich, 2002; Power, 2005; Flynn et al., 2010; Zhao et al., 2011). For example, which factors influence SCI? And also, which factors hinder the implementation of SCI? There are few studies in the past that have looked into these questions, such as that from Frohlich (2002) that conducted an investigation of supply, internal, and demand barrier in the implementation of eSCI. Richey et al. (2009) also put internal planning failure and external monitory failures into consideration as barriers to SCI. However, researches in this area are still not well developed, and there is need for more empirical studies to understand the factors that limits implementation of SCI. SCRs have also become more significant problem in the current economic instability experienced by businesses in the modern age – which is also influenced by variations in demand and supply, and unpredictability of disruptions in the highly competitive business environment of nowadays. It is very difficult for most of the supply chains to respond to these changes, and this makes them very vulnerable to risks (Tang and Tomlin, 2009). As such, the main challenged presently faced by companies is about how to implement SCI under this risky environment, and differences in risk factors that also play significant role in the implementation of different forms of SCI. The most common forms of SCR are supply delivery risk (SDR) – which are those supply risk that are mainly caused by delivery failure, and demand variability risk (DVR) – which are those risks that are mainly caused by changes in demand.

High volume of research exist on how SCI influences numerous performance measures in the organization such as operational performance (e.g., Armistead and Mapes, 1993; Frohlich, 2002; Cousins and Menguc, 2006; Swink et al., 2007; Braunscheidel and Suresh, 2009; Flynn et al., 2010; Danese and Romano, 2011), customer service (e.g., Vickery et al., 2003; Swink et al., 2007), logistical performance (e.g., Stank et al., 2001; Gimenez and Ventura, 2005; Germain and Iyer, 2006), and product innovation (e.g., Ragatz et al., 2002; Petersen et al., 2005). Not to forget is the fact that, findings on the relationship between SCI and performance are not consistent. As an example, while most of the past studies on SCI have discovered significant positive relationship between SCI features and performance measures (e.g., Armistead and Mapes, 1993; Vickery et al., 2003), others see no significant relationship (e.g., Droge et al., 2004; Flynn et al., 2010), and even a significantly negative relationship (e.g., Koufteros et al., 2005; Swink et al., 2007). The main reasons for the inconsistencies experienced can be linked to differences in the form of SCI conceptualization and operationalization, differences in terms of performance measurement, and differences in terms of the context of research conducted in order to make the integration process a success (van der Vaart and van Donk, 2008). For the dimensions of SCI, numerous studies have viewed SCI as one construct (e.g., O'Leary-Kelly and Flores, 2002; Vickery et al., 2003; Rosenzweig et al., 2003; Cousins and Menguc, 2006), while other studies have designed their focus on both internal and external integration (e.g., Stank et al., 2001; Frohlich, 2002; Gimenez and Ventura, 2005). Just a handful of studies have focused on three different dimensions in the form of – internal, supplier and customer integration (e.g., Koufteros et al., 2005; Swink et al., 2007). As for this study, the three dimensions of customer, suppliers, and internal integration will be adopted. It is also important to note that past studies have focused on understanding limited performance measures (e.g., Armistead and Mapes, 1993; Gimenez and Ventura, 2005), but there is a need for more studies in the field in order to understand the full context of the review and present a more reliable platform for successful SCI implementation.

Supply chain risk management (SCRM)

Supply chain risks are receiving high attention in modern SCM researches (e.g., Zsidisin, 2003; Peck, 2005; Ellis et al., 2010; Tummala and Schoenherr, 2011). This is in line with suggestions made earlier that there is a great need for firms to manager SCRs in order to enhance agility of their supply chain as a result of the fact that the current economic turbulences present uncertainties in the business environment (Braunscheidel and Suresh, 2009). The importance of SCR management (SCRM) can be seen from numerous trends like increasing outsourcing activities, globalization, increasing on-time delivery demand, increase in technological advancement, and shortened product life-cycle (Zsidisin et al., 2000; Trkman and McCormack, 2009; Olson and Wu, 2011). There have been a significant increase in the volume of SCRM literatures since 2000 (Trkman and McCormack 2009) and special SCRM  issues have been included in numerous literatures in different journals such as Production and Operations Management (2005), Journal of Operations Management (2009), and Supply Chain Management: An International Journal (2011).

Irrespective of the increasing level of interest from practitioners and academia, there still seems to be little studied on the subject of SCRM and this makes researchers consider the subject as still being in its infancy (Juttner, 2005). Most previous studies are conceptual or descriptive (e.g., Zsidisin, 2003; Ellegaard, 2008; Christopher et al., 2011). The main focus has been the definition and classification of SCRM (e.g., Zsidisin 2003; Spekman andDavis, 2004; Tang and Tomlin, 2008), with some of the literatures also discussing on SCRM strategies and procedures (Spekman and Davis, 2004; Kleindorfer and Saad, 2005; Juttner, 2005; Craighead et al., 2007). Current conceptual and descriptive literatures on SCRM offer firm theoretical background for further investigation on the context of SCRs. One of the first attempts to make SCR operational and valid was made by Ellis et al. (2010), through their empirical investigation designed to understand the relationship between environmental factors, risk of disruption in supply and performance of firms. 

Risk is a very board subject and it is defined in different ways which can basically depend on the field of study in which it is applied (Wagner and Bode, 2008). Since the focus of this study is on understanding risk in SCRM, the definition adopted will be that from March and Shapira’s (1987, p. 1404), which defines risk as” variations in the distribution of possible outcome, the likelihood of such outcome occurring and their subjective values of such outcome. As Lefley (1997)  made it clear that risk is produced as a result of uncertainties and it can increase the probability of future occurrence as it is normally related to negative influences like inability of the firm to meet consumer demands and even increased threats to consumers’ safety (Zsidisin, 2003).

There is no common definition of SCRs dimensions, and varying classifications abide in literatures. For instance, Tang (2006) classified SCRs into two dimensions as: risk of disruption and risk of operations. Disruption risk is used to refer to those risks caused by occurrences like bankruptcy, natural disaster, and terrorist attacks. Operational disruption on the other hand is used to refer to coordination of supply and demand, and uncertainties such as uncertainty of demand and supply. Disruptive risks are not common, but in cases where they occur, they are very severe and hard to manage; while operational risk on the other hand can easily be reduced through SCM. Other forms of SCRs can be said to include supply risk, process risk, demand risk and risk of technologies (e.g., Bogataj and Bogataj, 2007; Tang and Tomlin, 2008). However, Trkman and McCormack (2009) presented a summary that risks emanating from constant changes as a result of unstable environment, such as those changes that from demand and supply priorities are usually ignored at large. Supply risk has been defined as the chances of an incident that is related to what has been supplied from an individual fails to meet expectations of the market in terms of quality, and as such results in the possibility of the purchasing firm not being able to meet customers’ demands or even pose a threat to the health of customers (Zsidisin, 2003, p. 222). Of all the types of supply risk, SDR might be the most significant because most of the companies expect their supplier to offer efficient and effective delivery that occur in real-time. When suppliers fail to meet on-time delivery, they cause numerous issues to the purchasing firm. For an example, if manufacturer is experiencing tremendous increase in the demand of his products, and his supplier is not able to make resources readily available for production, the manufacturing will be experiences difficulty of meeting the increasing demands from customers. Demand risk on the other hand is associated with turbulence in the business environment, and instability as well as dynamics of consumer demands (Chen and Paulraj, 2004). Unstable demand is usually the biggest challenge for today’s companies, which leads to high inventory costs, low levels of customer service, and unreliable deliveries.

Impact of SCR on SCI

Having understood that SCI is vital for sustainable productivity, but SCR poses high risk to the successful integration of SCM, it is now considered important to look into understand the impacts of SCR on SCI. SCR has been said to normally include delivery failures, inability of the firm to meet demands of customers in terms of quality, and uncertainties of supply (Zsidisin, 2003). Under high level of SDR, it has been noted that manufacturers don’t like sharing precise information about their inventory and current orders from customers with suppliers as result of long lead time and instability in the delivery network. Additionally, producers don’t like investing on joint process improvement and development of new products with supplier because of the uncertainty and unreliability that such investment can pose. It is also quite difficult for manufacturer to develop a certain level of strategic alliance with suppliers because of failures in delivery.

A high level of SDR also has the capability of hindering integration amongst departments as well as functions in the organization. In cases where the delivery of goods and services are slow from suppliers, delayed, inconsistent, or sometime wrong, the coordination that exist between purchasing and manufacturing will become very difficult and conflicts might arise between these departments. Because of uncertainty and unreliability in the delivery of supply, international functions might experience trouble with working together for designing products and improving processes, which might require the involvement of suppliers. Also, producers might resists changes to their internal operations because of failures (Frohlich, 2002), and this will mean that SDR will result to subsequent failure of internal integration.

On a similar note, the trust that exists between customers and manufacturer might be negatively influenced by the manufacturer’s disruption of supply, missed shipments, and extra costs influenced by SDR. If the suppler is not able to make the materials delivered on time to the manufacturers, the manufacturers can’t deliver finished goods to customers on time as well. In as much as the supplier’s long supply lead-time to manufacturer yield a subsequent long supply lead-time to the consumers; the consumers will not be willing to integrate with manufacturers under an environment that exhibits high level of SDR (Frohlich, 2002; Zsidisin, 2003). Based on the following arguments, it can then be proposed that:

Hypothesis 1a: Supply delivery risk is negatively related to supplier integration in McDonalds.

Hypothesis 1b: Supply delivery risk is negatively related to internal integration McDonalds.

Hypothesis 1c: Supply delivery risk is negatively related to customer integration McDonalds.

The main causes of DVR are turbulence in the market, complexity of demand, and instability of demand (Boyle et al., 2008). Under high circumstances of DVR, the needs of customers are unstable and unpredictable, and their performance can easily change. As such, there is a need for manufacturers to modify their products and market responses, which can result to a subsequent inaccuracy of demand forecast (Trkman and McCormack, 2009).

When the DVR of product is high, information that is related to the demand for materials from manufacturers to the suppliers will change quickly. In that case, it creates a high need for the supplier to change his products from time to time, and this can yield both quality and quantity issues. On the same note, producers are not willing to invest on the improvement of quality and development of new technologies with suppliers because of the risk resulting from uncertainty in demand environments. Incorrect demand information can also cause mistakes within the internal departments. The turbulence nature of the market will also cause a fast change in the information about customer demands, and it will increase complication of their communication with other departments, as such, there is a need to enhance the coordination level that exists between functions in order to reduce the difficulties involved in achieving set objectives. Reoccurring engineering is also made difficult in a high DVR environment, and there is also a need for the producers to understand the uncertainties that this issue can pose. In any case, the frequent change of demand from customers made it difficult for the manufacturer to survey their customers need and gain high feedbacks from their customers. However, the end product of all these is that tight integration is made difficult (Calantone et al., 2003). Thus, we propose that:

Hypothesis 2a: Demand variability risk is negatively related to supplier integration in McDonalds.

Hypothesis 2b: Demand variability risk is negatively related to internal integration in McDonalds.

Hypothesis 2c: Demand variability risk is negatively related to customer integration in McDonalds.

Impact of SCI on performance of company

For this study, three types of performance has been review. They are operational performance; schedule attainment; the other two are finance or market based: competitive performance and customer satisfaction (Bozarth et al., 2009). Competitive performance includes a combination of numerous sub-dimensions that are frequently used: cost, quality, flexibility, delivery, cycle time, new product development, and customer service, which are commonly adopted in SCM studies (e.g., Flynn et al., 1995; Klassen and Whybark, 1999; Das et al., 2006).

Impact of supplier integration on company performance

Based on the earlier discussions, it can be noted that manufacturing firms constantly face the issue of on-time delivery. As a result of subsequent limitation in the production capacity of manufacturers, there is a growing need for these manufacturers to make their limited production resources available for providing the customers demand and variation in demand can also cause subsequent increase in cost. With reference to the attainment of production schedule, it has to be noted that there is a need for firms to receive the materials and components needed for production on time. Through supplier integration, the manufacturing firm is able to share its order and inventory information with suppliers, and it will help these suppliers in delivery high quality products on time. Impulse purchasing from the suppliers however result to expenses on excess raw materials and warehousing (Lee et al., 1997). Furthering the discussion, it is worthy to note that supplier integration also include: communication, sharing of information that are related to inventory data and scheduling of production, and working together with the suppliers in order to reduce subsequent upstream in complexity (e.g., Lee et al., 1997; Devaraj et al., 2001; Das et al., 2006), which will negatively influence attainment of schedule (Bozarth et al., 2009). Meanwhile, it is important to note that firms can reduce the “bullwhip effect” by working together and sharing forecast information with the suppliers (Lee et al., 1997.   Thus, it is proposed that:

H3a: Supplier integration is positively related to schedule attainment in McDonalds.

The importance of suppliers is increasing in the current globally competitive business environment, as they yield subsequent influence on the productivity of the manufacturrer (e.g., cost, quality, technology, speed, and responsiveness) of manufacturers (Ragatz et al., 2002). Supplier integration, which is used to define the supply in the production environment as long-term collaborators can lead to manufacturers’ operational performance (Koufteros et al., 2005). Numerous empirical studies have found that integration of supplier with the production positively influences the productivity of the company and operational performance (e.g., Shin et al., 2000; Frohlich and Westbrook, 2001; Frohlich, 2002; Sanders and Premus, 2005; Devaraj et al., 2007). As an instance, Frohlich and Westbrook (2001) conducted an investigation of supplier and customer integration and made the identification that five different SCI strategies, featured to be the numerous “arc[s] of integration”, with a high degree of “arc” induce high level of performance for both supplier and customer integration. Then finding is that companies with the highest degree of arc for supplier and customer obtain the highest level of operational performance. In a different study, Frohlich (2002) also found that manufacturers relying on high-level integration outperformed those manufacturers relying on low-level integration in operational performance, in terms of delivery time, transaction costs, and inventory turnover. From transaction cost theory perspective, supplier integration can reduce transaction costs (Zhao et al., 2008; Flynn et al., 2010). Opportunistic behaviors are greatly reduced under shared visions and cooperative goals in supplier integration (Wong et al., 2005). Furthermore, supplier integration can reduce transaction costs through the reduction of uncertainties. For example, environment uncertainties are greatly reduced by investing in specific assets such as information systems and dedicated people, which facilitate information sharing and joint working (e.g., Frizelle and Efstathiou, 2003; Das et al., 2006). Supplier integration also plays an important role in reducing production costs. On one hand, higher-level supplier integration is usually related with fewer suppliers, which can lead to economies of scale for suppliers; this in turn reduces material and product costs. On the other hand, with trust and cooperation with suppliers, manufacturers are willing to invest in fixed assets and R&D activities to improve their and the suppliers’ product and process quality, which reduces production costs. Furthermore, supplier integration is helpful for manufacturers to reduce inventory and improve delivery speed, quality, and customer service via sharing information and working together with suppliers (Handfield, 1993; Frohlich, 2002). Thus, it can be proposed that:

H3b: Supplier integration is positively related to competitive performance.

Empirically, studied conducted to understand the direct relationship between supplier integration and customer satisfactions seem to be rare. Anyways, research has found that some of the studies indicates a direct relation between supplier integration and customers’ satisfaction. For instance, study by Swink et al. (2007) revealed that strategic supplier integration is positively related to customers’ satisfaction, but enhanced by the manufacturer’s competitive capabilities. Frohlich and Westbrook (2001) and Vickery et al. (2003) also discovered that when firms experiences high level of SCI; they are better positioned to achieve high customer services. Manufacturers are more likely to be satisfied with the materials or services delivered by suppliers as a result of higher level of supplier integration. On that note, it can be deduced that:

H3c: Supplier integration is positively related to customer satisfaction in McDonalds.

Impact of internal integration on the performance of a company

The emphasis laid by internal integration of firms is on the coordination established amongst internal functions and firm-wide standards and norms (Germain and Iyer, 2006). Numerous studies have elaborated on the potentials of internal integration improving the efficiency of production process, management of demand, and management of materials (e.g., Stevens, 1989). Internal integration is also very helpful in attainment of production planning and scheduling. Through a form of cross-functional coordination and conjoined performance in the production system, production planning and scheduling, and demand planning are designed to meet schedule requirements (e.g., Stratman and Roth, 2002; Rosenzweig et al., 2003). There is an efficient communication of information such as customers’ order, inventory level, and purchasing and production scheduling information, and it helps firm to properly divide its available resources for production at suitable schedule costs. Also, good communication which is facilitated as a form of organizational functioning can easily deliver quick demand information, and as such reducing the “bullwhip effect” (Lee et al., 1997), as well as modifications in the production schedule which will reduce the information and material flow significantly. Based on that note, it is proposed that:

H4a: Internal integration is positively related to schedule attainment in McDonald.

A number of empirical researches have highlighted the importance of integration as a process of improving the competitive performance of companies (e.g., Frohlich, 2002; Narasimhan and Kim, 2002; O’Leary-Kelly and Flores, 2002; Rosenzweig et al. 2003; Gimenez and Ventura, 2005; Koufterous et al., 2005; Germain and Iyer, 2006; Swink et al., 2007). As an example, Rosenzweig et al. (2003) found a positive direct relationship that is established between internal and external integration and competitive capabilities of the firm that undertakes such integration. By adopting data collected from 244 U.S.A. manufacturing firms, Koufteros et al. (2005) also discovered that internal integration positively influences product quality and information in firms. It was also found by Swink et al. (2007) that integrating technology in the internal product-process will improve the capabilities of the manufacturing firm in terms of service delivery, quality, process and flexibility of new product.

Internal integration also offers room for creating knowledge and effectively transferring it in the system (e.g., Kogut and Zander, 1992; Rosenzweig et al., 2003). This is because internal integration allows experts from different functions of the organization to work as a team with the objective of meeting customers’ requirement, especially in the development of new product and improvement of the product quality. On a more worthy note, internal integration involves the application of enterprise software systems, such as SAP, planning and scheduling of the production process, and integration of other software platforms in the system (e.g., Stratman and Roth, 2002; Sanders and Premus, 2005; Germain and Iyer, 2006). Some of the current researches on information system have shown that enterprise resource planning or other forms of integrated software platforms have better operational performance than companies that don’t adopt such software (e.g., Ahmad and Schroeder, 2001; Hendricks et al., 2007), and it supports the positive influences yielded by internal integration on operational performance. To further the explanation, the cooperation and coordination of different functions serve as the right solution for solving conflicts, reducing inventories, enhancing flexibility in relation to customers’ response, and improving the speed of the delivery. Under that umbrella, it can be proposed that:

H4b: Internal integration is positively related to competitive performance in McDonalds.

Internal integration also has the power of improving customer satisfaction in many aspects of the business functions. Such aspect include that through internal integration, it becomes very easy to understand the requirements of customers as a whole through information provided in the company and transferred through marketing and sales departments to other departments in the organization. On the same note, integrated customer order fulfilment processes, in which all activities, functions, and departments involved in fulfilling the customers’ order are integrated, and it can shorten the production schedule, reduce the cost of development, and subsequently increase the speed of delivery to the market, which will then yield a subsequent improvement in customers’ satisfaction. For instance, when a firm desires to introduce a new product into the market, the marketing department need t first state the needs of the customers, and it is used to determine the product that will be introduced to the customers, and experts from the research and development department will then proceed with interacting with the marketing and manufacturing department in order to develop the design for the product design in order to ensure that it meets the demands of the customers.

Empirical researches in the past have also shade light on the benefits of internal integration on the satisfaction of customers (Stank et al., 2001; Vickery et al., 2003; Swink et al., 2007). Using data from 57 first-tier automotive suppliers to the Big Three automobile manufacturers in North America, Vickery et al. (2003) discovered that there is a direct relationship between SCI and customers services. Swink et al. (2007) also made the discovery that internal product-process technology integration has the capability of improving the manufacturer’s capabilities which will then improve the customer satisfaction. As such, it can be proposed that:

H4c: Internal integration is positively related to customer satisfaction in McDonalds.

Impact of customer integration on company performance

Strategic integration with customers highlights frequent customer interactions, during which firms discover customer preference and improve demand forecasts (Swink et al., 2007). When manufacturers work together with their customers, their production schedules can be more accurate and it can reduce frequent schedule modifications. Bullwhip effects can be also reduced through effective information sharing and cooperation between manufacturers and customers. Furthermore, the communication of order information and capacity makes it easier for manufacturers to adjust their production scheduling and capacity in advance (Lee et al., 1997). Thus, it can be proposed that:

H5a: Customer integration is positively related to schedule attainment in McDonalds.

Previous empirical research has shown that customer integration can lead to competitive benefits (e.g., Clark and Hammond, 1997; Frohlich, 2002; Kulp et al., 2004; Koufteros et al., 2005; Germain and Iyer, 2006; Swink et al., 2007). Clark and Hammond (1997) indicated that both retailers and manufacturers experienced dramatic performance improvements after they implemented continuous replenishment processes in the U.S.A. grocery industry. Kulp et al. (2004) revealed that the act of manufacturers sharing either inventory levels or customer requirement information with retailers is positively associated with manufacturers’ performance. In a survey of new product development in 244 manufacturing firms in U.S.A., Koufterous et al. (2005) demonstrated that customer integration influences competitive capabilities in terms of product innovation and quality performance directly. Germain and Iyer (2006) found that downstream integration with customers positively influenced logistical performance. Swink et al., (2007) also confirmed that strategic customer integration is positively associated with manufacturing competitive capabilities.

Close interactions between customers and manufacturers offer opportunities for them to develop mutual forbearance and improve information accuracy. More accurate information about customer demand and customer preferences, as well as frequent updating of information, can speed up product design, improve production planning, and reduce inventory obsolescence. Customer integration also generates remarkable opportunities to leverage the intelligence embedded in the collaborative processes, enabling businesses to reduce costs, create more value for customers, and quickly detect critical demand changes to design and execute optimal responses. Thus, it can be proposed that:

H5b: Customer integration is positively related to competitive performance in McDonalds.

Customer integration helps manufacturers enhance the understanding of customer preferences (Swink et al., 2007), which can make manufacturers more responsive to their customers’ needs. Close customer integration makes it easier for manufacturers to meet customers’ requirements effectively and efficiently. By surveying customer needs, involving customers in product design, and receiving feedback on product quality and performance, manufacturers provide high-quality and low-price products to customers with great responsiveness, which in turn leads to customer satisfaction (Stank et al., 2001; Koufteros et al., 2005). Empirical studies also show support for a positive relationship between customer integration and customer satisfaction (Swink et al., 2007). Thus, it can be proposed that:

H5c: Customer integration is positively related to customer satisfaction in McDonalds.

Designing a supply chain in Fast Food Industry

Figure 2.3: supply chain design in fast food industry

Based on the discussions in this paper, it can easily be seen that the supply chain for a fast food industry can be designed easily. The design will be based on attributing all the components of a supply chain system into the industry, and drafting the right approach to managing the supply chain in order to ensure that customers’ needs are meet and then increase the company’s performance through increase in repurchase intentions from the customers.

Basically, the task of meeting customers’ demands begins with the supplier manufacturing the raw materials and going into supply contract with the manufacturer. Once the contract has been established, the supply will schedule raw material supplies based on the agreement established with the manufacturers, and it will also be able to design the logistic system efficiently in order to ensure on-time delivery. From the review of literature above, on-time delivery has been identified as the key to meeting customers’ demands. This is because the recent business environment is becoming very competitive and as companies continue to internationalize as well as adopt international supply chain systems; this significant increase in business competition becomes vital for sustainability. This is based on the fact that it has earlier been stated that the longer a manufacturer is able to stay in the market in the absence of its producers, the higher the profitability. This is because, when only one product is in the market or is more available than other products, the customers will be forced into impulse purchases and the manufacturer can also adopt market monopoly as well as economies of large scale production as a result of the profitability created by the high presence it maintains in the market. Therefore, it can be argued that efficiency in the logistic system is something that has to be integrated between the manufacturer and the consumers. This is to ensure that in cases whereby the manufacturer is not able to meet the demands of on-time delivery as a result of the suppliers’ ineffective logistics system, it can actually adopt its own logistic system and use it to leverage the potentials of failure created by the supplier’s ineffective and inefficient logistics design.

Once the materials have been flown to the manufacturer, the next stage involves transforming it into finished good, and efficiency is also a must in the sense that the quality of products demanded needs to be maintained exactly as the customers’ actual demand. Maintaining the quality of the product is considered vital in any business setting. This is because it increases the level of satisfaction obtainable from using such products as well as increases the brand image. Integration has also been discussed earlier as vital in the product-process. This is because, it helps the manufacturer to highlight potentials for success and factors that can induce failure, then redesign its business setting to manager these effects and create a more sustainable business environment.

The end product of every business activity is designed towards ensuring that such business is able to eventually make its products and services available to its final consumers. There is another group of supplier in this link, and they are popularly known as the middlemen. They comprises of both retailers and wholesalers. In the fast food industry, retailers and whole sales play significant role in making the finished goods available to final consumers, especially within the packaged food industry. This is because, they maintain the link between manufacturers and the final consumers especially in cases where the manufacturer doesn’t have direct access to the final consumers. Therefore, it is also important that the manufacturer integrates its business process with the wholesalers and retailers, in order to ensure that it is more positioned to understand the needs of customers and design its products and services towards meeting the needs of these customers.

Thus, from the above analysis of the supply chain of fast food industry, it can easily be seen that there are risk factors in all elements of the business. This begins with the possibility of the supplier not delivering the material on-time, then goes down to the manufacturer not meeting the standards and needs of the customers. This is also extended to the possibility of the middlemen not being able to make the products available to the final consumers. Another discovers is that SCI has been identified as key to handling these SCRs issue. This is because, if the final consumer is able to integrate its production processes in relation to supplier and consumer integration, the company will be better positioned to ensure sustainable business operations. As such, it can be argued in this paper that a supply network which is able to adopt high level of SCI in relation to consumers and suppliers is better positioned to handle the pressures from the external and internal business environment and maintain business sustainability.

Supply chain management in McDonalds: A global outlook

In accordance with a report presented by the company on its website, which is title “sustainable supply chain,” a detailed analysis of the supply chain management approaches and features where presented in the report. McDonalds (2013) made know that the main focus of the company towards establishing a sustainable supply chain network is centred on the 3Es of: ethics, environment and economics.

The supply chain of McDonalds is very complies and comprises of webs of direct and indirect suppliers (McDonalds, 2013). As such, the company manages its complex systems by working together with the direct suppliers that share the same value and vision of sustainability in supply chain with the company (McDonalds, 2013). In order to maintain this value, the company made known its clear standards for quality, safety, efficiency and sustainability to these suppliers, and also expect them to extend such standards to the indirect suppliers. The company also established close partnership with the direct partners in order to identify with them, understand their problems and provide the right network for resolving these problems in order to further establish sustainability in the industry as well as solve the challenged that might result from the process of defining and establishing such sustainability in its supply chain (McDonalds, 2013). On a general sense, McDonalds and its suppliers have their eyes firms attached collectively on three areas of sustainability in the supply chain, which include the aspects of ethics, environment, and economics. 

Focus is also necessary in sustainability as it helps to define what is expected of every member in the system towards enhancing the efficiency of the company’s supply network and ensuring sustainability in the end run. The company went ahead to define its focus in sustainability as:

Sustainable land management commitment (McDonalds, 2013) – the company has taken numerous positive steps with its suppliers in the past two decades towards the improvement of the sustainability of its supply chain (McDonalds, 2013). In 2009, McDonalds established a more comprehensive and practice commitment towards ensuring that its time, agricultural resources, raw materials for the production process and packaging of processed food are obtained from legal and sustainably managed land sources. This level of commitment is guided by a long-term vision and supported with an annual evaluation process that determines whatever has been achieved in the end point (McDonalds, 2013).

Under such conditions, the company pledges its commitment towards working with suppliers how have a proven record of adopting set practices towards ensuring that agricultural resources and raw materials used for the production of its foods and packaging originates form reliable and legal sources, with the ultimate goals of third-party certificates (McDonalds, 2013). It certificates are necessary for preserving the brand image of the company and establishing a competitive ground from which other features in the company will be predetermined.

Animal welfare (McDonalds, 2013) – McDonald noted that it values the health and welfare of animals. It is a part of the company’s heritage and one of its core values is to always operate its business in an ethical way (McDonalds, 2013). The company reported its commitment toward ensuring that animals in its supply chain are properly card for throughout their lives and McDonald has been proactively involves in animal welfare programs since the 1990s through an establishment of long-term relationship with one of the world’s renowned animals welfare expert in the form of Dr Template Grandin (McDonalds, 2013) and formed its first animal welfare council that also included experts in the poultry, swine and beef segments. Still on the view of enhanced animal welfare, it was noted that its local supply chain and quality teams have always been proactively engaged in the identification of issues that affect local markets and the development of solutions for these market issues (McDonalds, 2013).

Supplier workplace accountability (McDonalds, 2013) – still on the view of supply chain focus, it was noted by the company that it cares about the people who make the raw materials for production of its foods available, as well as the people who undertake the process of producing these foods, and the customers who consume the produced foods.

One way that the company does this through its Supplier Workplace Accountability (SWA) report, which is designed to promote a unified set of global workplace standards for its workforce that touches or supplies the foods, and the program is designed to ensure that these workforce are well taken care of and provided with the right environment that doesn’t put their health in any form of danger.

The foundation for the SWA program is obtainable from the company’s supply chain conduct, which sets the clear guideline on how activities in the supply process will be undertaken as well as the company’s expectations on its suppliers, agencies, facilities, and subcontractors towards creating a sustainable supply network (McDonalds, 2013).

Based on the above focus, it can be seen that the main ideology behind the company’s supply chain practices is about increasing the level of ethical practices in its activities and monitoring the influence of environmental factors in order to create an environment for sustainable growth through established sustainability in its workforce. These focuses are the main foundation from which the company’s supply chain vision is developed (McDonalds, 2013).

The company noted that its vision is to establish a supply chain that is capable of yielding profitability through high quality products, safe products without interruption of the supply while also being able to leverage on the leadership positions maintain by the company in order to create a net benefit its ethical, environmental and economic outcomes (McDonalds, 2013). These outcomes are as elaborated below.

Ethical visions – it is the vision of McDonald to make purchases from suppliers that strictly follow the practices that will ensure health and safety of their employees as well as the welfare and humane treatment of animals as discussed above.

Environmental vision – this vision in the environmental sense is centred on adopting approaches that influences the sourcing of materials for the design of its products, distribution and use in order to minimize the life-cycle impacts on the environment (McDonalds, 2013).

Economics vision – the economic vision is centred on understanding the best way to deliver affordable food, engage in reputable trade practices, limit the spread of agricultural related diseases, and positive impact on the communities in which the suppliers maintain presence in (McDonalds, 2013).

The visions are discussed above are very important aspect of the company’s business process and it is viewed by McDonalds in a holistic way, in which the company makes use of these visions to main decisions making process that related to improved food safety, quality and cost, as well as the ethical, environmental and economic responsibilities that the company will need to fulfil in order to effectively meet the numerous demands of its stakeholders.

Approach to sustainable supply chain management in McDonalds

In order to ensure that the company is well positioned to meets its set vision, which encompasses numerous aspects of different local and regional supply chain across the glove that are tied with the company in an every definitional strategic framework and policies, McDonald approach an approach that is built on holistic vision and steady progress.

In 2007, McDonalds created an additional global governance structure which is known as the Sustainable Supply Steering Committee (SSSC) with the responsibility of overseeing issues related to sustainability in the company’s supply chain (McDonalds, 2013). The SSSC goes about its business by undertaking the responsibility of guiding McDonalds towards its visions of maintaining sustainable supply chain through the identification of global priorities and enhancing the progress of its local efforts and priorities.

Understanding where McDonalds foods comes from: a supply review

Figure 4.1: McDonalds supply network

Source as adapted from: (McDonalds, 2013).

From the above figure, it can be seen that the supply network of McDonalds comprises of three different segments. At the inner core of these segments is the restaurant, which represents the place in which the customers come to source the company’s products or have such products delivered to them on order. Basically, the activities in this section of the market come in two forms as either a push or pull strategy. In the push concept, the finished goods are pushed to the customers per order (home delivery) while the pull strategy involves the company pulling the customers to its restaurants through numerous advertisement and marketing activities.

Based on earlier discussions, it was noted that McDonalds maintain close relationship with a number of its suppliers and such relationships are designed towards ensuring sustainability in its supply network. These suppliers are what are referred to the company as direct suppliers. The form of relationship maintained between the company and these suppliers are usually bounded with contracts (McDonalds, 2013), that determine what is expected of the suppliers and potential penalties for violation of such expectations. These suppliers are actually the people who source the agricultural resources and raw materials needed for the production of the company’s foods and as such their performance will have a direct influence on the performance of the company. The implication is that is these suppliers are capable of performing wonderfully – in the form of meeting supply agreements and on time delivery of the necessary raw materials needed for production, the company will be better positioned to meet the changes in customer demands and as such further strengthen the customers’ valuation of their brand and services offered. On the same note, a low performance will be detrimental in the sense that the company will not be able to meet the changes in customers demand as a result of lack of the necessary raw materials needed to meet such demands.

The indirect supplier as illustrated above represents the outermost part of the supply network and they have no direct link or relationship with the company. Instead, they establish direct relationship with the direct suppliers, but they are the medium through which the direct suppliers make the necessary raw materials as demanded by McDonalds readily available for production purposes in the company. As such, the company needs to monitor this segment of supplies in order to ensure that the raw materials supplied by these suppliers are also in line with set standards. Based on earlier discussions, it was noted that the company meets such desires through a well-integrated supply standards that is passed down to the direct suppliers, which these direct suppliers also passes down to the indirect suppliers (McDonalds, 2013). This is because, if they direct suppliers are not capable of meeting the set standards, they will be dissolved from the supply business, and as such they will pass the same order to the indirect suppliers in order to ensure that they are not dissolved from the business. The end point is that the company maintains business standards and creates a sustainable supply network that is capable of delivering raw materials on-time and with the best quality, which will also influence their productivity and potentials to meet customers’ demands positively. The end point is that McDonalds becomes well positioned to enhance customers’ satisfaction and as such increase the loyalty towards their brand.

Diversity in McDonald’s Supply network

Considering the fact that McDonalds maintains global presence, it can easily be thought that there is a need for the company to operate a diversified supply network in order to better meet the needs of its individual markets. This is because there are differences in the form of cuisine available and acceptable in difference markets as a result of differences in culture.

McDonalds made know that inclusion and diversity are part of who they are (McDonalds, 2013). The company acknowledge that although it is a global brand, it clearly recognizes the need of enhancing the current growth in entrepreneurship, and such approach involves helping boost growth of emerging companies across the globe. In 2011, McDonald’s U.S. restaurants purchased nearly $6.7 billion in goods and services from minority- and women-owned companies. This represents just over 67% of our total U.S. System spend for food, packaging, uniforms, operating supplies and premiums. Today, we do business with 76 Tier 1 (direct) minority- and women-owned suppliers. During 2011, McDonald’s USA growth enabled stronger sales to diverse companies such as:

1.          Fair Oak Farms, an African-American supplier of sausage and bacon

2.          F Gavina & Sons Inc, a Woman-owned supplier of coffee

3.          Versatile Card Technologies, an Asian-American supplier of gift cards

Summary

The above review of literature has been able to yield significant impact on the validity of this paper. This is based on the fact that it shades light on how the findings from this paper might be influences by previous studies. The findings are expected to illustrate the SCM of McDonalds, elaborate how the company has been able to adopt SCI, and highlight the potential SCRs facing the company.

The literature review has revealed that SCI is very vital for the sustainability of the business. The reason behind such assumption is based on the findings from previous researches which illustrates that integration of the supply chain in relation to customer and supplier integration will better position the company towards increased growth and sustainability. This is because, the company will be better positioned to understand the needs of the customers and enhance the flow of information. Additionally, the suppliers will ensure sustainability as a result of on- time supply of the materials needed for production and distribution of finished goods to the final consumers.

However, in the process of integrating the supply chain, numerous risks has been identified in the form of variation in consumer demand and unreliability of the supply network, which can eventually yielded both image and financial losses to the company adopting SCI. In any case, findings from researches above have shown that this weaknesses should not be considered a reason for not adopting SCI, as it has been identified that adoption of SCI has numerous direct positive influences on the performance of the company, and it comes in the form of sustainable supply and high customer satisfaction; which all results in subsequent increase on demand, market share, productivity and profitability of the company adopting such integration in its supply chain.

CHAPTER 3

METHODOLOGY

3.1.      Chapter introduction

Considering the fact that a lot of theories have been highlighted in the literature reviews which are in line with understanding the influence supply chain management and the creation of value in supply chain as it is related to the food industry, this section will look to illustrate how other aspects of the research paper will be fulfilled. The illustration will be based on understanding the methodology that will be adopted in the primary research section. Basically, the primary research will be qualitative in nature and as such data for the study will be gathered through primary information from the company as to how it manages supply chain. The research will be conducted in McDonald’s Bukit Bintang outlet in Kuala Lumpur Malaysia.

3.2.      Research purpose

The purpose of the primary research is to understand the management of supply chain in the fast food industry, with special reference to McDonald. Understanding the supply chain management strategies adopted in companies have been described as vital in the business setting because it will help to determine the best approaches that will be adopted in the company in order to enhance supply of raw materials for production and distribution of finished goods. The supply network adopted by companies is very important because it has a direct influence on the success or failure of the business. As far as the production process is concerned, production is said to be incomplete else the finished goods have reached its final consumers. This is because it is only by selling the finished goods that the company will be able to obtain the money used in production as such close the production for such particular goods.

Supply chain management is particularly important in the fast food industry because it is the there is an increasing demand for foods across the world as a result of increase in population. Coupled with this increase in demand is also the increase the level of globalization and internationalization of firms across the world. McDonald represents the helm of success in terms of business growth through internationalization and the approach the company adopts is franchising. In order to ensure that standards is the same in terms of products and service quality across its outlets, it is important that the company properly manages its supply chain in order to ensure that it is properly aligned with the corporate objectives and values.

As such, the purpose of this research is to understand how McDonald manages it supply chain and the formula used to integrate the supply chain in the networking of the company’s operation with the objectives of meeting set standards. 

3.3.      Research philosophy

The main philosophy of this research will be built around enhancing the quality of the study. The study will be conducted in such a way that all elements as described in the paper are in line with the philosophy. Quality is important because this is an industry specific research and has special focus on McDonald. This is basically the main reason why quality is the philosophy of the paper as it will ensure that finding are actually applicable in the real world.

As described in the in the introduction of the research paper, the finding from this research are expected to contribute significantly to both the practitioner and academicians as like, as such, there is a need for the paper to be high in quality as this is the only means in which the actual finding can be able to meet the set contributions it is designed to yield in the fields described above.

3.4 RESEARCH APPROACH

Figure 3.1: Research approach to be adopted 

The illustration from the figure above is that the approach for this research will involve understanding how factors such as quality of services and prices influence the supply network management. The research will be based on gathering information from customers about the company’s supply network, in which the analysis will focus on the quality of their delivery services. On that account, the focus will be to understand how the supply network of McDonald’s influences customers’ decision to choose the company against other and increases their brand loyalty.  

RESEARCH STRATEGY

This research will be intercept based and face-to-face study. This implies that the questionnaire will be distributed directly to the intended audience by the interviewer, and the interviewer will take extra time to sit down and guide the responder through the whole questions, as well as obtained their deep thought about the whole variables loaded into the paper.  This is the best strategy because this is a region specific study, so extra measures should be taken to ensure that responders are familiar with the concept and delivery system of McDonald’s Bukit Bintang. Thus, the approach is unique and significant in the sense that it allows interviewers to have a one-on-one experience with responders and as such improve their analysis of response because they will have a clear understanding of response pattern from interaction with responders.

TIME HORIZONS

The data gathering took 3 weeks (21days excluding weekends). An average of 3 hours a day was spent gathering data. Before issuing questionnaire to responders, their familiarities with the factors (supply and delivery network) were taken into consideration. This is to ensure that the responder meets the require criterion in the responder’s profile. The extensive time frame for data gathering was to ensure that sufficient data were gathered for analysis. This is because, the higher the gathered data, the more it will be considered to be a true representative of the overall population.

RESEARCH METHODS

The methods adopted for data collection and analysis is as described below.

SAMPLE AND DATA COLLECTION

This study was conducted in McDonald’s Bukit Bintang. Convenient sampling method was adopted, and the population was defined as people that were present in the outlet during the period of the study. The survey was designed with such conception, and contained a Likert scale rating that ranged from 1 (totally disagree) to 5 (totally disagree). See appendix (1) for the questionnaire used in this study. A questionnaire survey was deemed the most appropriate way to obtain needed data, and self-administered questionnaires were distributed to responders. A total of 150 questionnaires were distributed to responders who meet the responder’s profile.

3.7.2 INSTRUMENTATION

Service quality is the first independent variable, and it is a construct which has been put through numerous tests by researchers and validated in numerous corporations within the Fast Food and Hospitality industries (Parasuraman et al., 1988; Faouk and Ryan, 1991; Cronin and Taylor, 1992; Knutson et al., 1990; Stevans et al., 1995). The five generic dimensions of service quality have already been described as reliability, assurance, responsiveness, tangibility and empathy.

The second independent variable is quality of foods and beverages offered at the McDonald’s Bukit Bintang. This construct has also been studied in past researches such as Jain and Etgar ( 1977), Letarte et al. (1997), and Rozin and Vollmecke (2001).

The third independent variable is price foods and beverages sold in these restaurants. Additionally, this is a common construct of research in marketing and management field as it has been directly linked with purchase and repurchases intention. Thus, it has a direct influence on a firm’s revenue generation and profitability.

The fourth and final variable is service recovery mechanisms. It was stated earlier in this study by following the footsteps of past researches that quality service recovery mechanisms positively influence customers’ satisfaction as the affected customers will feel valued by the firm adopting such approach. This is because, service recovery is mainly a correction measure used to tackle complaints from customers about the quality of products or services offered by a particular firm.

The Behavioural Intention Battery developed by Zeithalm et al. (1996) was adopted as the tool for measuring how these independent variables influence the dependent variable (quality delivery system and customer satisfaction). This approach has also been used recently by other researchers (Alexandris et al., 2002; Athanassopoulos et al., 2001; Baker and Crompton, 2000; Bloemer et al., 1999; Shaw-Ching et al., 2001) in their measurement of how stated dependent variable is influenced independent variables. Zeithalm, et al. (1996) listed five dimensions that influence purchase intention as: loyalty towards a brand; switch intention; willingness to incur more cost for the same product; external response to a particular problem or situation; and internal response to a particular problem or situation.

3.7.3 RESPONDERS’ PROFILE

The main criterion for responders is that they will be at least 18 years of age, and resides as well as be familiar with McDonald’s outlet in Bukit Bintang. The responders’ profile from the gathered data is as illustrated in table (1) below.

CHAPTER 4

DATA GATHERING AND ANALYSIS

1.1      Introduction

Following the discussions and designed methodology in the previous chapters, the focus of this chapter is to understand how the supply chain management approaches that are undertaken in McDonalds towards creating sustainability in the supply chain network. Such an understanding will be centred on a global view, then narrowed down to what is obtainable in Malaysia in order to have a more defined outlook on the concept being studied about. The idea of narrowing down the analysis to the Malaysian concept is because while McDonalds has been known for its “think global” approach to management, it is also important that the company also adopts an “act local” philosophy and the implication becomes that while the company might be supply products to its brands across the globe, the approach adopted might be different from one location to another and influenced greatly by changes in market demand as well as other factors.

Test of reliability

In any given statistical analysis that is related to primary research, the first and most important elements are to determine how reliable the gathered data is. This is because primary researches are normally designed to influence applications in the real world setting through setting new theories or testing existing ones, and as such it is very important to understand whether the data are reliable as high reliability will ensure positive outcome in the real world setting, which low reliability will have negative influence in the real world setting. The normal standards for measuring the quality of any given data is that the reliability will be at least .50 or above, in the case where the higher the value the higher the reliability.

Table 4.1: reliability test

Case Processing Summary
		N	%
Cases	Valid	150	100.0
	Excludeda	0	.0
	Total	150	100.0
a. Listwise deletion based on all variables in the procedure.

Reliability Statistics
Cronbach's Alpha	N of Items
.593	18

From the case processing above, it can be seen that the reliability is 0.593, which is higher than the normal standard for reliability and this is of positive influence on this paper as the indication is that the data gathered and analysed are reliable. On that account, it can be stated that this paper has achieved the first aspect of the data gathering process in the sense that the gathered data are reliable and the implication now becomes that the paper can proceed with further analyses with absolute confidence.

Demographic analysis

Having declared the data gathered for this research reliable, the next step will involve to conduct an analysis of the variables loaded into the questionnaire and such analysis will start by understanding the demographics of people who answered the questionnaire as such can have a high influence on their response pattern. For instance, female responders might view supply chain management different from the way that male responders view it.

Gender of responders

Table 4.1: Gender of responders

From the table above, it can easily be seen that male responders are higher than female responders; the implication in terms of figure is that male responders are 82 in number while female responders are 68 in number. It is not clear whether such differences will have any influence on the response pattern, but any noticed influence will be further analysed below.

Employment status

Figure 4.2: Employment status of responders

From the above analysis, it can be seen that most of the responders are employed and this is significant to the value of this paper. This is because the fact that they are employed will put them in better position to patronize McDonald’s and this will mean a subsequent increase in the value of the paper as these responders will be better positioned through their patronization of McDonald’s to understand the variables loaded in the questionnaire and present a better answer as compared with when these responders are not actually employed and their purchasing power with the brand is limited.

Age of responders

Figure 4.3: Age of respondents

The age of responders have a significant role to play in the research process because it can be used as a measure of the responders understanding of the whole research process and the higher they understand the research, the better the research outcome because their response will be very influential. From the above analysis, the ages of responders fall in high value from 18-39, and then followed by 40-59 and then 60 and above. The implication is that most of the people who patronize McDonald’s Bukit Bintnang are actually young and fall within the ages of 18-39 as the research was conducted in the outlet.

Frequency of patronization

Figure 4.4: How frequent responders eat in McDonald’s

The frequency of patronization plays a significant role in the research process because it is argued that the higher the responders purchase from the company, the better they are positioned to understand their supply and delivery network and make necessary judgments as well as criticism on that account. From the above analysis, it can be seen that majority of the responders patronize McDonald’s at least once per month, followed by those who patronized at least 1-3 times per week, and finally the heavy eater who patronize the company at least 4-7 times per week. The fact that all these responders patronize the company at least once per month is very significant in the sense that it means that the respondents are better positioned to understand the concept being discussed and issue the most significant of responses.

Descriptive analysis

With the previous analysis presenting a clear understanding of the demographic variables contained in the questionnaire, this section will focus on analysis the data loaded into the questionnaire descriptively, in which all the variables will be reviewed individually to understand how they influence supply chain management in McDonalds’s.

Table 4.2

I enjoy eating outside
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	totally disagree	26	17.3	17.3	17.3
	neutral	19	12.7	12.7	30.0
	agree	47	31.3	31.3	61.3
	totally agree	58	38.7	38.7	100.0
	Total	150	100.0	100.0

The basic understanding loaded into this table is to understand how consumers feel about eating outside and this is based on the notion that the higher they feel a sense of joy from such, the greater they have chance of ordering from McDonald’s and as such be in a better position to understand and analyse the company’s supply chain. The finding reveals that 70% of the responders enjoy eating outside; making it significant in the sense that it will influence the potential of these respondents to order from McDonald’s and understand the company’s supply chain as well as present an analysis of how the company’s supply chain influences their perceived value for its brands.

Table 4.3:

Eating outside is much better and less stressful compared to cooking inside
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	totally disagree	1	.7	.7	.7
	disagree	5	3.3	3.3	4.0
	neutral	11	7.3	7.3	11.3
	agree	51	34.0	34.0	45.3
	totally agree	82	54.7	54.7	100.0
	Total	150	100.0	100.0

Considering the fact that most of the responders enjoy eating outside, it becomes significant to understand the reason why they east outside as such an understanding can help measure their potential of sustainably eating outside (repeat purchase). From the finding, 88.7% of the responders think that easing outside is better and less stressful than cooking foods at home. The implication now becomes that these responders will likely continue to eat outside and it means a lot to sustainability of McDonald’s as a brand and other eating outlets.

Table 4.4:

I have eaten an McDonald’s Restaurant before
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	disagree	1	.7	.7	.7
	neutral	15	10.0	10.0	10.7
	agree	17	11.3	11.3	22.0
	totally agree	117	78.0	78.0	100.0
	Total	150	100.0	100.0

Basically, it can be seen at this point that the questions contained in the questionnaire has been strategically arranged in order to get the best out of the response process. This is because this questions looks to understand whether the responders have been patronizing McDonald’s following the understanding that they enjoy eating outside and think that such practice is less stressful from cooking at homes. From the analysis, it can be seen that 89.3% of the responders agrees to have eaten in McDonald’s and what does to the research is that it adds more value on the finding to be discovered later in the analysis.

Table 4.5:

I have ordered McDonald’s home delivery before
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	totally disagree	2	1.3	1.3	1.3
	Disagree	6	4.0	4.0	5.3
	Neutral	12	8.0	8.0	13.3
	Agree	17	11.3	11.3	24.7
	totally agree	113	75.3	75.3	100.0
	Total	150	100.0	100.0

While it is important to understand whether the responders have every eaten in McDonald’s as shown above, another importance comes in the form of understanding whether they have order foods from the restaurant as such an understanding will help to highlight what they think about their home delivery system, which is part of the supply chain management being reviewed in this paper. From the table 4.5 above, it can be seen that 86.6% of the responders agree to having ordered food from the McDonald’s and this puts the responders in a better position to present an analysis on what they think about the company’s delivery system.

Table 4.6:

The quality of foods at McDonald’s Restaurants are great
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	totally disagree	7	4.7	4.7	4.7
	disagree	6	4.0	4.0	8.7
	neutral	19	12.7	12.7	21.3
	agree	44	29.3	29.3	50.7
	totally agree	74	49.3	49.3	100.0
	Total	150	100.0	100.0

While it is clear that the responders have ordered food from McDonald’s in both their outlets and for home delivery, it is not clear as to what the respondents think about their food and this is the role the above table is meant to play, and the analysis shows that 80.4% of the responders think that the foods available at McDonald’s are high in quality and this can significantly be used as a measure of their reason to order from the company.

Table 4.7:

The speed of services McDonald’s are fast.
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	totally disagree	7	4.7	4.7	4.7
	Disagree	4	2.7	2.7	7.3
	Neutral	13	8.7	8.7	16.0
	Agree	34	22.7	22.7	38.7
	totally agree	92	61.3	61.3	100.0
	Total	150	100.0	100.0

Now the concept changes precisely into understanding the supply chain management in the company, in terms of the speed of service delivery, and the above analysis shows that majority of the responders agree to the fact that the speed of services in McDonald’s is very fact and this can be linked to their loyalty with the brand as the brand is capable of offering them high quality at fast speed and doesn’t waste their time that they might use for other purposes. It is very important to understand that the main reason why the customers eat outside is because it is faster and less stressful than cooking at home as described earlier, and this means that speed of service delivery is very important in their decision making process.

Tale 4.8:

The speed of home delivery at McDonald’s is fast
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	totally disagree	2	1.3	1.3	1.3
	disagree	2	1.3	1.3	2.7
	neutral	10	6.7	6.7	9.3
	agree	44	29.3	29.3	38.7
	totally agree	92	61.3	61.3	100.0
	Total	150	100.0	100.0

The above table looks to understand the quality and speed of homely delivery services in McDonald’s. Based on the earlier discussion, it was noted that majority of the responders have ordered food from the company and speed of delivery is very important to them. From the above analysis, the total number of respondents that agree to the statement that speed of home delivery is fast accounts for 90.6% and this is very significant. As such, it can be stated that it is the main reason why the customers are loyal to the brand.

Table 4.9

I like McDonald’s because of the delivery speed
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	totally disagree	9	6.0	6.0	6.0
	disagree	1	.7	.7	6.7
	neutral	8	5.3	5.3	12.0
	agree	29	19.3	19.3	31.3
	totally agree	103	68.7	68.7	100.0
	Total	150	100.0	100.0

Earlier discussion have shown that the speed of delivery in both the restaurant and home delivery is very fast, and this section seeks to understanding how such discovery influences customers decision to make purchase for the brand. The above analysis shows that 88% of the responders like McDonald’s because of their delivery speed and this means that the speed of delivery is very significant for success in the company.

Table 4.9

The waitress are every attentive in picking my orders
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	totally disagree	2	1.3	1.3	1.3
	disagree	2	1.3	1.3	2.7
	neutral	7	4.7	4.7	7.3
	agree	39	26.0	26.0	33.3
	totally agree	100	66.7	66.7	100.0
	Total	150	100.0	100.0

This section tries to understand the speed of the waitress as it can be used as a direct measure of the overall delivery speed in the company. This is because the waitress are responsible for picking customer orders, processing the orders and making these order available, as such it can be stated that their speed is very important and can be used as a direct measure of the overall performance of the company. Significantly, 92.7% of the responders concur that the waitress are very speedy in service delivery and this is a significant discovery because it now means that efficiency and effectiveness is something that is easily obtained in McDonald’s supply network as a result of the speedy delivery which the waitresses offer customers. The earlier understanding is that customers go to restaurants mainly because they want to have access to quick delivery in order to continue with their business process, which makes the fact that McDonald’s provides such an opportunity really significant as the company can now be sure that their customers will be happy with the service delivery and it will be subsequent increase in brand loyalty.

Table 4.10

Tables are always cleaned up at the restaurant after use
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Neutral	19	12.7	12.7	12.7
	Agree	25	16.7	16.7	29.3
	totally agree	106	70.7	70.7	100.0
	Total	150	100.0	100.0

As part of meeting customers’ needs and exceeding their expectation is also the need for the company to adopt a very hygienic business environment. On that ground, the question was asked to understand what the respondents’ thing about the restaurants environment. On a core aspect of the question view, McDonald’s has been known for long as a global leader in maintaining hygienic business environment, which is also part of the concept the company adopts in its think global strategy. The fact that none of the respondents disagrees with the statement clearly demonstrates that the company has been successful in achieving its objective of maintaining hygienic eating environment. This is significant for service delivery as well because the faster the table are cleaned after use by a given customer, the better it will help to create space for other customers to make use of the table.

Table 4.11:

I prefer McDonald’s home delivery to other restaurants
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Disagree	8	5.3	5.3	5.3
	Neutral	13	8.7	8.7	14.0
	Agree	25	16.7	16.7	30.7
	totally agree	104	69.3	69.3	100.0
	Total	150	100.0	100.0

The above table takes a competitive sweep to understand the potentials for repurchase intention as a result of the delivery system adopted by the company. The indication that can be seen from the above analysis is that 86% of the responders agree that they prefer the service delivery of McDonald’s as compared with that of other companies. This offers a competitive edge based on the understanding that the chances of customers to repurchase form the company is increased and as such profitability is ensured as compared with the companies that these customers have compared their service delivery with.

Table 4.12:

I think service speed in McDonald’s is faster than other restaurants
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	totally disagree	4	2.7	2.7	2.7
	Disagree	1	.7	.7	3.3
	Neutral	4	2.7	2.7	6.0
	Agree	41	27.3	27.3	33.3
	totally agree	100	66.7	66.7	100.0
	Total	150	100.0	100.0

While the focus of table 4.11 is on understanding the home delivery speed as compared with other companies, this table focuses on understanding the delivery speed in their restaurant. The indication from the above analysis is that 94% of the respondents agree that the service delivery speed obtainable in McDonald’s is much better than what is obtainable in other restaurants. This is another indication that can be used in support of the idea that customers really value speedy delivery in the restaurant business and it is based on the understanding that their comparison of the speed in delivery of restaurants means that they clearly watch out for the best delivery systems in order to ensure that their time dinning out is reduced significantly and as such use these times for other purposes.

Table 4.13:

McDonald’s deliveries are done in a hygienic way
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Neutral	4	2.7	2.7	2.7
	Agree	59	39.3	39.3	42.0
	totally agree	87	58.0	58.0	100.0
	Total	150	100.0	100.0

It can easily be recalled that the table 4.10 was focused on understanding the hygienic setting of McDonald’s restaurants, and the analysis revealed that none of the customers disagrees with the fact that tables are properly cleaned up after used. This is also the background from which this table was developed, and it is meant to understand the hygienic setting of the company’s delivery home delivery in other to reveal whether what is obtainable in their restaurants is also obtainable in their home delivery network. The finding is not just significant, but similar in the sense that none of the responders disagrees with the statement that McDonald’s home deliveries are done in a hygienic way. This is also significant for the delivery system in the sense that it increases the potential for customers to reorder from the company and it will subsequently increase its profitability and business performance.

Table 4.14:

The price difference is not significant to be when comparing eating in McDonald’s restaurants and ordering McDonald’s home delivery.
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	totally disagree	16	10.7	10.7	10.7
	disagree	14	9.3	9.3	20.0
	neutral	16	10.7	10.7	30.7
	agree	45	30.0	30.0	60.7
	totally agree	59	39.3	39.3	100.0
	Total	150	100.0	100.0

The final question as contained in the questionnaire looks to understand whether price influences customers choice of either eating in the restaurant or ordering home delivery as far as McDonald’s is concerned and the focus as contained in the paper looks to measures the differences in terms of influence that price has on customers choice of any of the above mentioned delivery platform. Well the outcome is positive in the sense that 69.3% of the responders agree that price doesn’t influence their choice of whether to order home delivery or to eat in the restaurants. However, the significance in terms of discovery made in this paper is that this is the lowest figure obtained in all the questions in relation to the questions contained in this survey. The implication is that there is a high chance of price being determining factors in some of the responders and this statement can be supported by the fact that 20% of the responders acknowledged price as having significant influence on their decision to either eat in the restaurant or choose home delivery.

The above analysis has been successful in presenting the review of what was obtained from the research process, and the findings are not that different from expectations in the sense that they are pretty much aligned with what was obtained from the review of literature. A summary of the analysis will then come with the note that supply chain management is integral for success in the centrifugal food industry and this can be demonstrated with the finding from this paper in which it has been discovered that the success of McDonald’s over the years has been as a result of the company’s adoption of quality supply chain management that starts with sourcing the best of resources and maintaining efficiency as well as effectiveness in the supply of raw materials for production to a subsequent delivery of quality products and services that keeps customers satisfied and loyal to the brand.

                                                                    CHAPTER 5

DISCUSSIONS OF FINDINGS

Right from the very first beginning of this paper, it was made known that the purpose will be centred on understanding the influence of supply chain management in company success amongst centrifugal industry and the focus will be on McDonald’s. This is also the ground from which the whole research process was developed and it was basically geared towards understanding the approaches adopted by the company in both the delivery segment and supply segment, where these segments are differentiated by the understanding that delivery segment involves the delivery of finished goods to the respective customers, while the supply segment involves the supply of raw materials to the company that will be used in the production of the foods.

As such, the understanding was divided into two in the organization of study contained in chapter 1. The first involves conducting a review of literature in order to understand based on existing evidence the concept of supply chain management in centrifugal industry and the current practices adopted by McDonald’s in the food industry. The evidence comes in the form that existing theories are of the notion that supply chain management is important for maintaining competitive advantage.

In terms of maintaining competitive advantage, the link with supply chain management is based on the understanding that it would allow for customers’ needs to be effectively met with if the company adopts a quality supply chain management scheme. For every customer, there is a need for the company to meet their demands if these companies are to gain their trust on a long run. This is because the company will by meeting their demands illustrate to these customers that they are committed towards serving them and the end product will be that these customers will value the company’s commitment and as such become loyal to the company in comparison with their competitors.

The only way that these companies will be able to meet these needs is through effective supply chain management. This is because the company need to make available the resources needed for production and also present the finished goods to the customers in order for the production process to be considered complete. When the resources are effectively delivered to the company, they will be able to produce on demand and as such will be better positioned to meet the needs of the customers. Upon production, the company will also be able to meet their own need by effectively distributing the finished products, which will enhance their performance through customers’ orders. As such, it can be seen that if the resources are readily available, the company is better positioned to meet the needs of the customers and if the resources are not, there will be difficulties with meeting such needs. On that account, the theories suggest that customer loyalty is a product of effective supply management system.

On the side of McDonald’s which is the company being reviewed, it was found that effective supply chain management is an integral part of the company’s business offering and it is being powered by their “think global and act local” strategy which is definitive understanding of how the company conducts its business process. Effective supply chain management is also built upon sustainability as the company is committed towards ensuring that their practices today doesn’t jeopardize the potential of future generations to meet their own needs. Their supply chain management practice sis built upon three elements in the form of: environment, ethics and accountability. The environmental aspect is based on the notion that their activities will be free of any harm and as such the company regulates its suppliers to ensure that they are not producing the resources in a way that impacts on the environment negatively. The ethical aspect involves conducting the business operation in such a way that the view of the general public are put into consideration and the business process is based on the understanding that they are there to serve the stakeholders. The accountability aspect is based on ensuring that their main suppliers always take extra care towards protecting their employees and indirect suppliers. This is done through an annual accountability report that presents what the suppliers have been doing and how they have been doing as such. Basically, this strategy adopted by the company is geared towards ensuring that harmony is established between its direct suppliers and indirect suppliers. The reason for the company’s efforts towards creating such a uniform approach to supply network management is based on ensuring sustainability in its supplier’s network. The fact is that McDonald’s sources its raw materials used for production from both the direct and indirect suppliers. The company has direct suppliers that it employees to supply the needed raw materials for production, and these direct suppliers sources for these raw materials through their own suppliers which are the indirect suppliers of McDonald’s. The end point becomes that the success of McDonald’s is not just dependent on the performance of their direct suppliers alone, but also on the performance of the indirect suppliers, and these two suppliers have a direct influence on the overall performance of the company, which makes it necessary for the supplier network to be properly managed in order to ensure that they are well coordinated and efficiency is ensured through this coordination.

On the primary research aspect, this understanding was loaded into the questionnaire in order to reveal what the market think about the theories and determine the practices adopted by McDonald’s toward ensuring that sustainability is ensured it its supply chain network as it related to delivering the processed foods to the customers. The findings from the questionnaire have numerous implications in the sense that it was found that sustainable supply chain management has a direct influence on the performance of a company, but sustainability as a business strategy is only possible through the application of numerous practices in the business process.

In the case of McDonald’s, the company adopts a number of practices in order to support their strategy and an integral part of these practices involves ensuring all necessary strategy to ensure that the company operates its business in the most hygienic and speed way in terms of service and product delivery. This is based on the revelation from the data analysis in which it was shown that most of the respondents agree with such statement and even confirmed that it is the factor behind their increased loyalty to the brand. The responders agreed that the company delivers its products at a very fast speed compared with other restaurants and also in a hygienic way. When asked about the home delivery service, the respondents also agreed that the company delivers order to the customers’ home in time and in a very hygienic way.

Comparing the theories and the finding, it can be seen that the company has been successful in establishing sustainability in terms of profitability through a subsequent sustainable supply chain management. As such, this is in line with what the theories presented in the review of literature in which it was stated that sustainable profit can be created through sustainable supply chain management because by meeting the demands of the customers, the customers will become loyal to the brand and the end product will be that these customers will eventually repurchase from them and it will increase their revenue.

CONCLUSION

The purpose of this paper as stated earlier was to understand the concept of supply chain management in the centrifugal food industry with direct focus on McDonald’s one of the world’s most renowned restaurant company and the pioneer of numerous business strategies such as the “think global and act local” approach to business that is currently being adopted by a number of companies. This purpose was loaded into the research process that includes both a literature review and primary research. The purpose of the research was achieved from both the literature review and the primary research, and it is based on the fact that both of these studies confirmed that sustainable supply chain management will led to a subsequent increase in customer loyalty and this will be beneficial to the company in the sense that the increase in loyalty will produce an increase in repurchase and also influence performance positively.

The fact that the purpose of the paper has been achieved makes the whole research process very relevant and it is based on the understanding that it has been successful in impacting positively on both the research and practitioner aspect. On the research aspect, the paper has been successful to prove exiting theories as being right in the sense that it supports the idea that sustainable supply chain management will result in a subsequent increase in the profitability of the company as a result of the increase in repurchase. On the practical aspect of it, the business owners in the centrifugal food industry will now know that sustainable profit is possible if they can be able to adopt and effective and efficient supply network.

In conclusion, it will be stated that supply chain management is an important aspect of the business process in all industries as is also applicable in the food industry, and this is the main force behind McDonald’s increased business growth and profitability. On that account, it will be stated that profitability in the food industry is directly influence by the supply network.

Appendix 1

Questionnaire used in this study

PART 1

DEMOGRAPHIC DATA

Name (s)
Gender	Male		Female
Employment status	Employed		Unemployed
Age	18 to 39	40 to 59		50 and above
How many timed you eat in a McDonald’s restaurant?	4-7 times per week	1-3 times per week		At least once per month	At least once per year	Never

PART 2

PLEASE ANSWER THESE 20 QUESTIONS                                                                       

#	Question	Answer
		1	2	3	4	5
1	I enjoy eating outside
2	Eating outside is much better and less stressful compared to cooking inside
3	I have eaten an McDonald’s Restaurant before
4	I have ordered McDonald’s home delivery before
5	The quality of foods at McDonald’s Restaurants are great
6	The speed of services McDonald’s are fast.
7	The speed of home delivery at McDonald’s is fast
8	I like McDonald’s because of the delivery speed
9	The waitress are every attentive in picking my orders
10	Tables are always cleaned up at the restaurant after use
12	I prefer McDonald’s home delivery to other restaurants
13	I think service speed in McDonald’s is faster than other restaurants
14	McDonald’s deliveries are done in a hygienic way
15	The price difference is not significant to be when comparing eating in McDonald’s restaurants and ordering McDonald’s home delivery.

        

References