McDonalds: Inventory Management Practice and its Advantages

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McDonalds: Inventory Management Practice and its Advantages

McDonalds: Inventory Management Practice and its Advantages

Mcdonald’s is one of the most popular fast food chains with a worldwide presence. It can be found in 119 countries and has about 31,000 restaurants. It employs about 1. 5 million people. It is one of the largest fast food chains, serving 47 million customers daily (2). Most restaurants offer both counter service and drive-through service with indoor seating (and sometimes outdoor seating too! ).

Mcdonald’s has become an emblem of globalization. Its main line of business is hamburgers. It primarily sells cheeseburgers, hamburgers, French fries, chicken products, ice-creams, and soft drinks.

Mcdonald’s follows a Just in Time (JIT) system of inventory management. JIT, as the name suggests, is the system of supplying products to customers as soon as they have ordered it, with minimal delay between placing the order and getting it in hand. Mcdonald’s doesn’t begin to cook or assemble or preheat their stuff until they receive a customer order.

This was not the case earlier. They had a different approach to inventory management wherein they used to pre-cook a batch of hamburgers and sit under heat lamps. They used to keep them under the lamps for as long as possible and eventually discard whatever they couldn’t sell. Hence customers couldn’t enjoy freshly made food. The only way it could happen was by the customer giving a special order.

Hence Mcdonald’s moved to the JIT system of inventory management. This shift was possible because of the new burger-making technology that enabled them to make burgers faster and keep the time between placing an order and receiving it as minuscule as possible. This results in the finished product sitting in the inventory for as little as possible.

This enables proper inventory management and reduces wastage while giving maximum satisfaction to the customer. The customer is made to wait for a very short period and this is a huge factor while going for such a system of inventory management. Thus, the customer is happy. But it has also led to a huge decrease in costs for Mcdonald’s and this is what has made the JIT system such a success.

Higher customer satisfaction and reduced costs

JIT helps reduce the lead times and hence safety stock. JIT provides an attractive and cost-cutting mechanism but it is very important to weigh the risks and analyze the associated consequences that might happen. A very fast burger-making technology makes JIT a viable option for McDonald’s but this might not be the case in other organizations and they might face problems in handling bulk orders through the JIT system.

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