Thursday, 18 November 2010

Operations Management (McDonalds Case Study)


Operations management can be defined as the planning, scheduling , and control of the activities that transform inputs into finished goods and services. In other words, it is ‘a field of study that focuses on the effective planning , scheduling, use, and control of a manufacturing or service organisation through the study of concepts from design engineering, industrial engineering, and management information systems, quality management, production management, accounting, and other functions as the affect the operation.’ (APICS Dictionary, 1995)

Operations management concerns making the most efficient use of whatever resources an organisation has so as to provide the finished goods or services that its customer need in a timely and cost effective manner. (Barnett ,1996).

Operations management is related with the strategy of the organisation. In this coursework, we will demonstrate the relationship between the operations management and the strategy of the organisation with the help of a corporate entity.

The corporate entity chosen is McDonald's Corporation.


McDonald's Corporation is the world's largest chain of fast-food restaurants. The business began in 1940, with a restaurant opened by siblings Dick and Mac McDonald in San Bernardino, California. Their introduction of the "Speedee Service System" in 1948 established the principles of the modern fast-food restaurant. Today McDonald's restaurants are found in 120 countries and territories around the world and serve nearly 54 million customers each day.

( Source:'s)

In all its restaurants around the globe, there are a number of operations that has a relationship with the overall strategy of the organisation. Let us know discuss the key operations decisions and its relationship with the strategy.

Operations Management: An Active Learning Approach By John Bicheno


Organisations exists to provide products and services which can be purchased by other organisations or an individual. Therefore planning of products and services is one of the most important operation of any organisation. It involves designing products with both economy and quality in mind, which a customer will find attractive, be able to understand and quickly able to use with minimum risk and which delights him or her by its performance or flavour or durability etc. (Bicheno, 2002; p51)

In McDonald’s Restaurants, product planning is a key operation. It has to keep on adding new products to its menu so as to meet the needs of the customers as their needs and preferences are constantly changing. For instance, the increasing preference of consumers towards healthy food made the restaurant add healthier food items to its menu. Similarly it has to add new products for different seasons, for examples hot coffee in winter and milkshakes in summer.


The second operation decision important for organisations is capacity planning. Capacity planning and control is the task of setting the effective capacity of the operation so that it can respond to the demands placed upon it. This normally means determining how the operation should respond to fluctuations in demand. Operations managers usually distinguish between short, medium and long-term capacity decisions. For short- and medium-term capacity planning, the capacity level of the operation is adjusted within the fixed physical limits that are set by long-term capacity decisions. This is also referred to as aggregate planning and control because it is necessary to aggregate the various types of output from an operation into one figure. (source:

In McDonalds Restaurant, the operations managers have to set its capacity of making food items in such a way that it responds quickly to the demands of those items in peak hours which is very important for a fast food restaurant like McDonalds. It also have to make sure that it has enough stock of ingredients to prepare food items which is very important because if one ingredients fall short then the whole process of making food may halt. For instance if the buns required for making hamburgers falls short then the restaurant may not be able to sell any hamburgers even if it has enough quantities of other ingredients.


Location planning is one of the important operations that every organisation carries out and it is essentially one of the critical success factors for any organisation. Success or failure of any organisation may well depend on the location where it is situated. Therefore it is very important for businesses to choose an ideal location. Businesses may choose location on the basis of various factors such as proximity to the source of raw material, cost-effectiveness, proximity to customers or suppliers, competition in the area, transportation availability and cost, availability of resources, and availability of right labour.

McDonalds Restaurants also have to plan their location in such a way so that maximum customers visit their restaurants. Therefore McDonalds prefer locations such that it can have large customer base, transport access and availability of parking space. Moreover it also prefers location that are suitable for raw material delivery, that is availability of ample space for deliveries of raw material.


After developing the product the businesses have to develop processes for making and supporting the product. Organisations have to identify appropriate processes which will be needed to achieve required level of output of the planned goods and services at right quality standards. Organisation considers both the traditional methods in which the organisation has handled and processed its products and services and the possible alternatives which currently present themselves. That is, it considers the advancement of technology, computing power, and evolving managerial expertise. (Bicheno, 2002; p99)

In McDonalds restaurant also, the operations manager develop and establishes the process of cooking food items so that food is prepared using that method which helps them to maintain the speed and the quality of the food. Moreover it also designs processes so that the health, safety and hygiene issues are taken into consideration. Also the managers keep on introducing latest equipments with the advancement of technology so as to bring pace, perfection and quality in the product.


Layout is the arrangement of facility to provide working, service and reception, storage and administrative areas. The layout is designed by traditional techniques using templates, scale plans, string diagrams, and travel charting as they have been proved as low-cost methods of achieving either optimal or near optimal layout plans. Poor layouts can greatly reduce the overall capacity and overall productivity. Therefore care must be taken by organisation when designing layout. (Bicheno, 2002; p121)

In McDonalds Restaurant also layout designing is a very important operation. A proper layout of the equipments in the kitchen is very essential to ensure preparation of quality food in less time. It also designs its layout keeping in mind the health and safety issues. It also designs layout in such a way that needs of supervision is minimised. Another factor that is considered is the cost of production which also depends on the layout.


Job design consists of formal specifications and informal expectations of an employee’s work related activities. The job design should try to meet the needs of both the job holder and the organisation. Thus each job must be reasonable compromise of technical, economic, and behavioural feasibility.

Technical feasibility : The person holding the job must be capable of performing the required tasks with the resources available to them.

Economic feasibility: The cost of providing a salary to the employees, providing equipment and maintaining the organisational environment must remain within the organisation’s capabilities.

Behavioural feasibility: The feeling that people derive from a job affects their motivation to perform it.

(Greasley, 1999; p75)

Job designing is also an important operation in McDonalds restaurant. Each employee is designed a particular set of jobs. For example, some crew members cook food items in kitchen, some crew member work on the counter, while others look after the customers in the lobby. Also there are employees who manage all the crew member and look after overall wellbeing of the restaurant. While designing these jobs the technical, economical and behavioural feasibility is taken into consideration.


In the simplest terms, supply chain management (SCM) lets an organization get the right goods and services to the place they're needed at the right time, in the proper quantity and at an acceptable cost. Efficiently managing this process involves overseeing relationships with suppliers and customers, controlling inventory, forecasting demand and getting constant feedback on what's happening at every link in the chain. (Kay, 2001; p1)

In McDonalds Corporation , the restaurants also have certain suppliers who supply them the with the raw materials like buns, beef, patties, ketchup, sauce, mayonnaise, disposable cups, food packaging materials etc. Therefore it has to manage its relationship in a effective manner so as to get the raw materials at the right time, in proper quantity, and at acceptable cost.


Inventory management is another important operation of any organisation. It involves choosing the best method of inventory control. While choosing the method of inventory control, the organisations must keep in mind the expected demands of the products. The basis on which the organisations choose their methods of inventory control may differ but the common idea is to ensure that the mix of inventory types is able to satisfy customer needs and deliver the required profitability and cash flows.

In McDonalds the inventory is managed on the basis of First-In-First-Out basis. This is because most of the inventory consists of perishable items. Therefore delivery of inventory happens thrice or more times a week depending on the business of the restaurant. Moreover inventory is stored in freezer with proper packaging so as to ensure freshness of the food items. All this activities comes under inventory management of the organisation.


Quality management consists of maintaining the quality of the goods and services so as to meet the minimum requirements laid by the industry. Moreover it is important so as to keep up the reputation of the organisation. To manage and maintain the quality of the products and services the organisation may adopt a number of practices like quality checks procedure etc.

Quality in McDonald restaurant is very important because of two reasons. Firstly because of the legal requirements of the quality of food served. Secondly ,to keep up the good reputation which McDonalds restaurants have earned over the years. Quality of food can be very difficult to maintain and therefore McDonalds restaurant carry on a number of practices to make sure that quality food is served. Some of these practices are the visits by the food inspector from the head office, supervisor checks etc.


Maintenance means preservation of the things in the organisation. In simple words, maintenance is way of protecting your production workers, office workers, drivers, and all the other users of your organization’s assets. (

In McDonalds, there are several equipments that are used for the preparation of food. Therefore it is very important to maintain and service those equipments so as to maintain the quality of the product, safety of the employees and to avoid further costs of repairing machines. Another important things that needs maintenance are hygiene, costs, quality etc.


Therefore we conclude that operations management is very important for any organisations as they have a relationship with the overall strategy of the organisation. Operations management contributes to the strategy and therefore helps the organisation to gain competitive advantage. For instance, process planning can help the organisation reduce cost and gain cost advantages and therefore gain competitive advantage. Therefore the organisations must effectively manage the operations of the business as it has a massive effect on the strategy of the organisation.