CASE STUDY Online Purchasing at McDonald\'s n 2002, when McDonald\'s offered to

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CASE STUDY Online Purchasing at McDonald's n 2002, when McDonald's offered to put an extra tarants to give us information. They look at us as a strip of bacon on any hamburger for 35 cents, it encountered drastic forecasting problems. The pr The franchisees do not have to agree to use the soft motion turned out to be so popular that the company ware. Thus, while there are about 13,000 restaurants had to increase its order for pork bellies, which sent a in the United States, only 12,100 use the online sys- bullwhip effect across the economy, resulting in shortages and increased costs. The source of the prob from hamburger and French fry production to ware- lem? Thousands of franchisees, each of them operat- housing and transportation. The company began ing somewhat independently, using largely man vamping its supply chain in 1996 with software and orderin corporate headquarters on a timely basis. big brother: 'you are going to do bad things to me." tem. Second, the entire supply chain is outsourced, g systems that did not feed information to technology from Manugistics, Oracle, and Sun. Sev- cral years were spent primarily collecting and organiz- The company responded by developing an online ing data. McDonald's worked closely with its two ordering system to help it plan its purchases and ship major distribution contractors, Martin-Brower and ments. The system was first implemented in European Perseco. The technology works well for everyday proj- stores in 2003, leading to a 30 percent reduction in ects but hits snags with limited-supply items like raw waste, a 30 percent reduction in store inventory, Happy Meal toys, where the promotions run for 28 and a decrease in store transfers (i.e., shipments of days, yet the toys must be produced 12 months in bacon between stores because of shortages) from 8 percent to 4 percent. In addition, order times for each store were cut in half, saving 60 minutes per advance. There is no chance to correct for poor fore- casts once the promotion has started. I savings per store were $5,585, which QUESTIONS equates to $11.5 million for the 2,072 restaurants in France and Germany McDonald's is leading a shift to "demand chain 1. Getting franchisees to adopt the online ordering planning by fast-food restaurants. In 2003, the Na- tional Restaurant Assoociation estimated that onlv 12 system is a major challenge. What techniques would you use to encourage adoption? percent of restaurants ordered food supplies elec tronically, and only 10 percent ordered nonfood supplies electronically. With more than 31,000 res- 2. Draw a supply chain map showing the various parties in McDonald's supply chain: food growers, manufacturers, distributors, corporate headquar- ters, and restaurants. Describe the type of infor mation that needs to be exchanged between the partners in each pair of partners. What is each organization looking for in its information systems? taurants serving more than 46 million customers per day in 119 countries, McDonald's has thousands of trucks on the road delivering franchisees. With its Happy Meals promotions, Mc Donald's is one of the largest toy distributors in the food and supplies to its world. Each store receives supplies one to three times 3. Describe differences in how McDonald's should per week. handle information and planning for (1) regular food items, (2) nonfood items like wrappers or napkins, and (3) promotional or one-time items like Happy Meal toys. McDonald's has several major challenges in inte- grating its supply chain. First, the majority of its res- taurants are owned by franchisees, limiting the company's ability to control the adoption and imple mentation of new technologies. According to Robert Bauer, information technology director for McDon- Se: K. Hickey, "McDonald's Tall ald's global supply chain, "It's difficult to get the res. ?1-4. Oeder, afk Wond, Jarmary , 2004,

Explanation / Answer

Q1) Below are the techniques that can be used to encourage adoption of online ordering system by the franchisees -

1. Conducting workshops or meetings to educate the franchisees on the new technologies, their importance, the advantages that these technologies will bring to the franchisees as well s the firm.

2. Providing the required trainings to handle the new system.

3. Ensure the franchisees understand how the implementation of new technologies like online ordering system will help the franchisee and firm in the lon-term.

4. Detail out the issues that might be faced without an effective system in place as it would lead to lack of stock when required by the customer.

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