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Supply Chain Management of fast food industry

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T. Y. B. M. S. – A

Group members:

Name Roll No.

Noreen Lester 3429

Lissa Mascarenhas 3432

Nova Maria Devasia 3440

Pratik Shetty 3451

Gillian Toscano 3457

Eric Sequeira 3460

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Introduction

Introduction to supply chain management:

It is the process of planning implementing & controlling the operations of the supply chain as efficiently as possible. Supply chain management spans all movement & storage of raw material, work in progress inventory, & finished goods from point of origin to point of consumption.

A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers. Supply chains exist in both service and manufacturing organizations, although the complexity of the chain may vary greatly from industry to industry and firm to firm.

Problems in supply chain management:

1. Distribution network configuration2. Distribution strategy3. Information4. Inventory management5. Cash flow

Supply chain decisions:

We classify the decisions for supply chain management into two broad categories - strategic and operational. As the term implies, strategic decisions are made typically over a longer time horizon. These are closely linked to the corporate strategy (they sometimes are the corporate strategy), and guide supply chain policies from a design perspective. On the other hand, operational decisions are short term, and focus on activities over a day-to-day basis. The effort in these types of decisions is to effectively and efficiently manage the product flow in the "strategically" planned supply chain.

There are four major decision areas in supply chain management:

1) Location2) Production 3) Inventory 4) Transportation (distribution) and there are both strategic and operational

elements in each of these decision areas.

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Introduction to fast food:

Fast food is the term given to food that can be prepared and served very quickly. While any meal with low preparation time can be considered to be fast food, typically the term refers to food sold in a restaurants or store with preheated or precooked ingredients, and served to the customer in a packaged form for take-out/take-away.

Outlets may be stands or kiosks, which may provide no shelter or seating, or fast food restaurants (also known as quick service restaurants). Franchise operations which are part of restaurant chains have standardized foodstuffs shipped to each restaurant from central locations.

The capital requirements involved in opening up a non-franchised fast food restaurant are relatively low. Restaurants with much higher sit-in ratios, where customers tend to sit and have their orders brought to them in a seemingly more upscale atmosphere may be known in some areas as fast casual restaurants.

Fast food outlets are take-away or take-out providers, often with a "drive-through" service which allows customers to order and pick up food from their cars; but most also have a seating area in which customers can eat the food on the premises.

Nearly from its inception, fast food has been designed to be eaten "on the go", often does not require traditional cutlery, and is eaten as a finger food. Common menu items at fast food outlets include fish and chips, sandwiches, pitas, hamburgers, fried chicken, French fries, chicken nuggets, tacos, pizza, hot dogs, and ice cream, although many fast food restaurants offer "slower" foods like chili, mashed potatoes, and salads.

Criticism:

Fast food chains have come under criticism over concerns ranging from claimed negative health effects, alleged animal cruelty, cases of worker exploitation, and claims of cultural degradation via shifts in people's eating patterns away from traditional foods.

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Fast food corner:

McDonalds India Supply Chain:

We have a large number of direct suppliers-companies that make or deliver final products for our restaurants. As well as an even larger number of indirect suppliers-companies and farms that grow or process the ingredients that are eventually delivered to our direct suppliers.

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How we bring value to the table:

They have a local network for supply chain & distribution as well as local sourcing. They are committed to local sourcing from suppliers and farmers. The success of McDonalds India was achieved by sourcing all its required products of the highest quality from within the country.

Geographically diverse sourcing -

French fries imported.

Even before it set up its first restaurant in the country it infused Rs 400 Crore to set up its delivery mechanism. Investment in supply chain was Rs 300 Crore. There are 40 suppliers in the chain.

Cold Chain was one of the unique concepts of McDonalds supply chain in India. Through its cold chain, McDonalds has been able to both cut down on its operational wastage, as well as maintain the freshness and nutritional value of raw and processed food products. This has involved procurement, warehousing, transportation and retailing of perishable food products, all under controlled temperatures.

Procurement:

Dynamix Dairy Industries (Supplier of cheese):

Dynamix Dairy Industries is located in Baramati in Pune. It manufactures cheese slices for McDonald’s at 10 metric tons per month.

Trikaya Agriculture (Supplier of Iceberg Lettuce):

Trikaya Farms in Talegaon, Maharashtra. Trikaya Agriculture, a major supplier of iceberg lettuce to McDonald's India, is one such enterprise that is an intrinsic part of the cold chain. Initially lettuce could only be grown during the winter months but with McDonald's expertise in agriculture, is now able to grow this crop all the year round.

Vista Processed Foods Pvt. Ltd. (Supplier of chicken and vegetable products):

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They produce a range of frozen chicken and vegetable foods. They have a world class infrastructure at their plant at Taloja, Maharashtra. They also have separate processing lines for chicken and vegetable foods.

Amrit Food (Supplier of milk and milk products):

Their factory is at Uttar Pradesh. They supply milk and milk products for frozen desserts.

Warehousing:

The post harvest facilities include a cold chain consisting of a pre-cooling room to remove field heat, a large cold room where the temperature and the relative humidity is maintained between 1º C and 4º C. Vegetables are moved into the pre-cooling room within half an hour of harvesting. The pre-cooling room ensures rapid vacuum cooling to 2º C within 90 minutes.

They have hi-tech refrigeration plants for frozen food at temperatures as low as - 35° C. This is vital to ensure that the frozen food retains it freshness for a long time and the 'cold chain' is maintained. The frozen product is immediately moved to cold storage rooms.

Transportation:

They have a refrigerated transportation system allowing a small agri-business in Maharashtra to provide fresh, high-quality products to McDonald's urban restaurant locations thousands of kilometers away.

“The truck drivers had to be explicitly and specifically conveyed not to switch off the truck’s ignition to save on fuel & electricity as the refrigeration system also automatically shuts off. We installed trapping devices to log temperature charts through the entire journey”.

Packing:

The pack house, pre-cooling and cold room are located at the farms itself, ensuring no delay between harvesting, pre-cooling, packaging and cold storage.

Distribution:

Radhakrishna Foodland (Distribution Centre’s for Delhi and Mumbai):

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The Radhakrishna Foodland specializes in handling large volumes, providing the entire range of services including procurement, quality inspection, storage, inventory management, deliveries, data collection, recording and reporting. Value-added services like shredding of lettuce, re-packing of promotional items are done at the centres.

McDonald's local supply networks through Radhakrishna Foodland, which operates distribution centre’s (DCs) for McDonald's restaurants in Mumbai and Delhi. The DCs have focused all their resources to meet McDonald's expectation of 'Cold, Clean, and On-Time Delivery' and plays a very vital role in maintaining the integrity of the products throughout the entire 'cold chain'. Ranging from liquid products coming from Punjab to lettuce from Pune, the DC receives items from different parts of the country.

The company has both cold and dry storage facilities with capability to store products up to -22º C as well as delivery trucks to transport products at temperatures ranging from room temperature to frozen state.

Information:

They transitioned from a manual process to one that uses a software database system. It is also used for our Supplier Workforce Accountability program. It was required that our suppliers for the top categories such as poultry, packaging, toys, potatoes and buns etc. would provide online data for the top markets.

As the ingredients move from farms to processing plants to the restaurant, McDonald's Quality Inspection Programme (QIP) carries out quality checks at over 20 different points in the Cold Chain system.

Restaurant:

Rishikesh Restaurant:

We visited Rishikesh Restaurant for our research work. It is a small veg. restaurant located in Vasai. It is very popular as it is located near the railway station. It is very crowded as they provide good service and the quality of food is also good. There we interviewed Mr. Deepak Shah who is the manager of Rishikesh. We came to know about the process of supply chain management in that restaurant.

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Procurement:

The orders for required vegetables are placed to the supplier at the market place who gives good quality vegetables at reasonable prices. The quantity is decided on the basis of previous demand and any special occasions. The vegetables are loaded in tempos and delivered to the restaurant. The tempos are hired by the restaurant on rent basis. Cold drinks and ice-creams are ordered when required and are delivered in trucks by companies which produce them. Other materials like oil, salt, sugar etc. are purchased from wholesale shops where they are obtained at cheaper prices.

Inventory Management:

The stock of raw materials includes;

Vegetables like carrots, cabbages, potatoes, etc.

Oil

Salt

Sugar

Rice

Spices

The inventory is regularly checked. Some amount of inventory is always maintained to prevent any shortage. An inventory of 100 kg rice for a week is maintained. New orders are placed as soon as the available stock is about to get exhausted so there is no need for any last minute purchase.

Storage:

The vegetables and cold drinks are inspected and then kept in storage. There is a deep freeze for vegetables. Cold drinks are kept in the refrigerator. Other materials are also properly stored in cupboards. The storage place is properly ventilated and regularly maintained to prevent any damage to the food products. There is regular inspection of the warehouse to check if there are any problems in the warehouse. If there are any chopped vegetables or food products left at the end of the day, they are trashed as they are of perishable nature.

Packaging:

The food for home delivery is packed properly and sealed in plastic containers. These containers are tightly sealed so that there is no leakage. Proper hygiene and cleanliness is maintained while packing. These containers are

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purchased from wholesale dealers in large quantities as it is cheaper. Care is taken so that the food isn’t damaged while packaging.

Transportation:

The orders for home delivery are sent through cycles and bikes. The packed food items are properly stored in containers on these vehicles. These containers are specially made to keep the food warm and prevent any damage.

Distribution:

The customers place their orders in the restaurant. The ordered food is heated and served to the customers on tables in the restaurants. Hygiene and cleanliness is maintained while serving the food to the customers. The waiters serve the food to the customers. Food for home – delivery is 25% to 30% of their total sale. Home delivery is made on cycles and bikes owned by the restaurant.

Cafe:

Café Andora:

Food is an integral part of our lives, acts as fuel to keep us running all day. Street food in particular is something that is available anywhere and everywhere, and as the name fast food suggests, you get it really fast!

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It was amazing to see that logistics and supply chain management could help convert a street food counter into a café! Hence we selected Andora’s a café just next to St. Andrew’s college.

Andora’s or popularly known as Andy’s is located in Bandra (west), just next to St. Andrews College. Another significant thing about this café is that it is owned and run by the same family. We spoke to Mark who is the manager of the café and the owner’s son.

We learnt about various facts that they use in day to day life regarding supply chain and it was amazing to know these facts through people with minimal education and who never studied supply chain management or logistics.

Procurement:

Andora’s procures raw material from various suppliers. Their supplies include raw chicken, vegetables, dry fruits and other ingredients to make products like burgers, Chinese food, croissants, crockets, chicken lollipops, sandwiches, etc….

They have different suppliers for specific ingredients like:

Chicken is supplied from Pali hill, Bandra (West). Vegetables, dry fruits, spices and other ingredients come from different

suppliers in hill road, Bandra (West).

Even in hill road they have different suppliers for individual needs of their products. Bread is prepared separately by Andora’s.

Inventory:

Inventory is stored only for a day or two if required due to its perishability.

Following is the stock of inventory stored at Andora’s:

Bread is prepared and stored according to the sales of the previous day. For eg. If 150 bread rolls are sold on 1st June then around 140 or 135 bread rolls will be prepared on 2nd of June.

5-10 Kg’s of chicken is stored per day and may be increased on occasions like party orders or during festivals based on demand forecasting.

In beverages, tea, coffee, cappuccino powder is stored along with 10 liters of cola and sprite which is supplied directly from the factory based at Andheri.

(Note that Andora’s does not follow the process of warehousing as it deals with goods that are perishable in nature.)

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Transportation:

Transportations have two functions product movement and product storage, which apply here as well.

The process of transportation starts from the supplies of raw ingredients from suppliers this is done through mini trucks and cycles as it is a local business.

Once the raw materials reach the café they are cooked and served through a small window which connects the kitchen to the café, hence reducing time. Then the finished product is placed in trays in the transparent display shelf and can be retrieved on order.

Now, based on the orders, food is heated and sent to the tables for direct consumption.

If food is to be delivered home, then they are packed and are delivered on cycles in Bandra (W).

Packing and storage:

Factors concerning packing are health, hygiene and the quantity of the food being packed

Following are the instruments used for packing and storage in Andora’s

Cardboard box Butter paper Sauce bags

Distribution:80% of the food is consumed in the café while 20% is consumed via home

delivery. Distribution of the product is not a problem as it’s more of a self service café.

Canteen / Cafeteria:

Office Canteen:

A cafeteria is a type of food service location in which there is little or no waiting staff table service, whether within an institution such as a large office building or school; a school dining location is also referred to as a dining hall or canteen (in UK English).

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Instead of table service, there are stations where customers order food and wait while it is prepared, and the dishes must be served hot. Alternatively, the patron is given a number and the item is brought to their table. Free second servings are often allowed under this system.

Procurement:

In the canteen the procurement of vegetables are done twice a week. Meat is procured once a week and stored for the rest of the week and boiled and shredded and stored in the refrigerator for frequent use based on demand.

The processing of the raw materials is done according to the demand. The raw materials like onions, etc. are shredded and kept so as to meet the order according to the demand and quickly complete it. Once this is done they have to just prepare the order.

Inventory:

The raw materials being perishable they must be handled and stored accordingly. Hence they are refrigerated. In order to reduce wastages and for long term utility basic raw materials like food grains are stored in gunny sacks. Spices are powdered to avoid wastages. Meat is procured in stock because its handling cost tends to increase overall cost. Hence by keeping inventory they save time in ordering everyday and meeting demand and also reduce wastages.

Transportations:

The canteen has a private dealer who supplies the required raw materials twice a week and meat every once a week. The cost of transporting is incurred by the supplier. The cost is directly paid to the supplier.

Packing:

Packing of the food is done to keep the food in a hygienic and clean condition so as to prevent from getting spoiled. There is limited packaging done. The food is served hot when ordered hence packing comes only in case of sandwiches, rolls etc. which is made beforehand and kept.

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Distribution:

Distribution in the canteen is counter based. The order is completed by placing the food item demanded by the customer on the counter. The distribution is limited only to the counter and then self service is done.

Customer Service:

The canteen does customer service by providing quality food. Maintain a clean environment and quick processing of the order.

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Comparison between canteen, restaurant, fast food corner and café food:

Particulars Canteen RestaurantFast food

cornerCafé

Sophistication Not much GoodHighly

sophisticatedGood

Hygiene Poor Good Very hygienic Good

Health Unhealthy Unhealthy Unhealthy Unhealthy

Quality Average Average Good Good

Quantity Poor Average Good Good

Price Low Mediocre High Average