Supply chain management is the word coined for the effective management of all the partners and the information disseminated between them. Take an example of Dell computers, Micheal Dell cant built his business just by selling the computers to the customers, but he need to see the complex problems of the customers and solve these problems through just in time manufacturing of the product, then how to minimize the wastage in the production then to evaluate what customers are doing and how they can make their production efficiently (NYT 2010), as the manufacturer cannot sell the product at the higher prices than the competitors are selling but through effective management you can actually reduce the cost, so concisely he need to be a master of supply chain management.
Before supply chain management there was effective inventory control system exist but due to some pit falls like; no supply chain metrics, inadequate definition of customer service, , organizational barriers, inaccurate delivery status data, simplistic inventory stocking policies, inefficient information systems, ignoring the impact of uncertainties, and an incomplete view of the supply chain (Teigen 1997). There is a need for another system that have all the competences to deal with all these problems, so the supply chain management is evolved which is not only efficient and effective but also have a good collaborative and communication strategies. Then the evolution of supply chain management activities is started and up till now six phases/era for the development of the supply chain management issues have been seen that are Creation, Integration, and Globalization (Movahedi et al., 2009), Specialization Phases One and Two, and SCM 2.0.
2.2.1 Definition of supply chain management
There are many definitions formed for supply chain management as there are many different perspectives for the understanding of the concept from supply chain management, a global perspective says that in SCM the managers do the integration of the key business process across their supply partners, to enhance customer value and satisfaction among all the stakeholders (Lambert, 2008).
Supply chain management was a quickly emerging, if still problematic, element of business-to-business e-commerce in the late 1990s and early 2000s. (Enclyclopedia of e-commerce 2009)
For the better understanding of the supply chain management, one needs to understand the term management. Management is defined as the planning, control the goal oriented activities and the execution of the plan to achieve the goal. The figure (1) will explain the whole process of the management. And as it have been that these days supply chain is become complicated so a proper management is required.
Figure 1. Management role in supply chain
Source: NEVEM-workgroup (1999)
Today's supply chains are too complicated to be controlled based on intuition. It is necessary to have access to statistical data on the performance of the supply chain.
Supply chain management (SCM) is actually the management of equipments, finances, information and manpower resources by ensuring the two way flow among the different organizations and in the organization itself. Through the effective management of these resources actually they are ensuring that the goods or service delivering efficiently and effectively to the end customers. So in supply chain management the important most factors Synchronized movement of the logistic from the supplier to the manufacturer, then the wholesaler and retailer, until the product reach to the end customer (TSENG, 2001). Through synchronized movement we mean that when the product reach to the distributer and when distributed to the retailer of for the sale, as if there is any delay in the delivery of the products then actually through the efficiency of the supply chain the customer get the product late and may b the product itself is not remain good.
For the service sector like the retail industry, customers are the main focus. So a customer focused definition of supply chain management by Hines (2004:p76) supply chain management is formed by the total system linkage in the chain that work together efficiently, it also requires the linkage between the whole supply chain, to create customer satisfaction as in the whole process the main target is not only to generate sales but also to deliver the value to the customer. And through the same if the cost of the manufacturing and delivering is lowered then this what actually generating the profits for the company, this all will be done through the effective management of the supply chain. Thus it is concluded that along with the demand and supply management the supply chain system must also be responsive to customer requirements."
2.2.1 Basic elements of supply chain management
There is a difference between the term supply chain and supply chain management, as supply chain is only defines how the process and different partners of the supply chain work. Whereas in the supply chain management it tells us how to they can work effectively and efficiently and what should be the strategy to handle them all, it is about the network of interconnected business (Harland,1996)
The question arises that what’s the need to supply chain management as the process (Stylusinc, 2008), things can be manage and the delivery of good can be done through anyway, supply chain management is not the delivery of the goods alone nor it is the inventory management. Through effective supply chain management managers are actually answering many questions (figure. 2) so the supply chain management’s mainly constitute of the strategy, the planning of the supply chain the how the supply chain enterprise will work, Asset management and procurement process of the supply chain management, then how they will handle the product life cycle and finally the logistic arrangements for the effective supply chain management.(NYT 2011)
Figure 2. Functions of Supply chain management
Source: Awesome Inc. template (2010)
According to the "process modeling pillars" (SCOR 2007) typically it have been seen that there are five basic components of the supply chain; plan, Source, Make, Deliver and Return. So in effective supply chain management in include the pan to buy the product and from where to buy it, then the sources that either it can be brought or they need to make it themselves, then other components include the sale or delivery of the product to the end customer and last that the customer return for the other purchase or evaluate the customers feedback.
So for the supply chain structuring it requires an understanding about the patterns of demand what service level is required, also keep in focus the other consideration like the distance, cost and other related factors. As one can judge that all the factors are highly variable in nature and this variability arises due t fluctuation in supply and demands conditions. Moreover the interplay of the complex considerations for the analysis of the supply chain analysis is the jest of supply chain management and have significant impact in bearing the outcomes.
According to RCG (1999) There are six key elements to a supply chain; production, supply, inventory, location, transportation of the goods and information.
Production: Strategic decisions regarding production focus on what customers want and the market demands. This first stage in developing supply chain agility takes into consideration what and how many products to produce, and what, if any, parts or components should be produced at which plants or outsourced to capable suppliers. These strategic decisions regarding production must also focus on capacity, quality and volume of goods, keeping in mind that customer demand and satisfaction must be met. Operational decisions, on the other hand, focus on scheduling workloads, maintenance of equipment and meeting immediate client/market demands. Quality control and workload balancing are issues which need to be considered when making these decisions.
Supply: An organization must determine what their facility or facilities are able to produce, both economically and efficiently, while keeping the quality high. But most companies cannot provide excellent performance with the manufacture of all components. Outsourcing is an excellent alternative to be considered for those products and components that cannot be produced effectively by an organization’s facilities. Companies must carefully select suppliers for raw materials. When choosing a supplier, focus should be on developing velocity, quality and flexibility while at the same time reducing costs or maintaining low cost levels. In short, strategic decisions should be made to determine the core capabilities of a facility and outsourcing partnerships should grow from these decisions.
Inventory: Strategic decisions focus on inventory and how much product should be in-house. A delicate balance exists between too much inventory, which can cost anywhere between 20 and 40 percent of their value, and not enough inventory to meet market demands. This is a critical issue in effective supply chain management. Operational inventory decisions revolved around optimal levels of stock at each location to ensure customer satisfaction as the market demands fluctuate. Control policies must be looked at to determine correct levels of supplies at order and reorder points. These levels are critical to the day to day operation of organizations and to keep customer satisfaction levels high.
Location: Location decisions depend on market demands and determination of customer satisfaction. Strategic decisions must focus on the placement of production plants, distribution and stocking facilities, and placing them in prime locations to the market served.
Transportation: Strategic transportation decisions are closely related to inventory decisions as well as meeting customer demands. Customer service levels must be met, and this often times determines the mode of transport used. Often times this may be an operational decision, but strategically, an organization must have transport modes in place to ensure a smooth distribution of goods.
Information: Effective supply chain management requires achieve information from the point of end-use, and linking information resources throughout the chain for speed of exchange. Fostering innovation requires good organization of information. Linking computers through networks and the internet, and streamlining the information flow, consolidates knowledge and facilitates velocity of products.
Today is the world of e-commerce and all supply chain managements is done through softwares like account management software, product configurations systems, enterprise resource planning system and softwares and even for the global communication the softwares are there to effective supply chain managements. But as always the more the facilities the tougher the competition become. So the supply chain management can take many forms, the most basic route is the coordination between the data base of the supply throughout the world through extranet, there are many known brands that work specialized software designing for SCM.
2.3 components of supply chain management
The components of supply chain describe step by step the journey of a product from manufacturers or producers to the end customers. Firstly a product need demand or order to develop after acquiring order for a product it goes into production then process of keeping it save then way to distributers for customers. Satisfaction of customer is always supreme. As explain in figure. 3 there is a process of conversion and then exchange, product is first converted from raw material to the finished good and then it is exchanged between distributors, retailers and finally end consumer.
Figure. 3 Product cycle from conversion to exchange
Supply chain involves taking orders then processing it afterwards other services cargo, price, arrangement of inventories and customer contentment but all these needs an information service network to make successful the chain of supply.
Moreover for achievement of a better supply chain the speed is very vital in each step because speed gains more customers satisfaction. Further benefits in supply chain can avail through proper decision making regarding cost, product availability and quality of the product. These decisions are taken considering long term conditions as well as short term situation.
Decisions are based on planning that is Strategic planning regarding corporate policies, structure of supply chain and whole design then decisions relating to operations means everyday activity and problems of an organization. However operational decisions are taken after strategic decisions therefore only long term examination is not enough day to day activities also need to focus on at the same time.
Therefore keeping in mind all the components of supply chain management and effectively evaluate all the components and then finally to see that which component effecting whom (figure. 4) like the main components of supply chain management is strategy formation, logistic control, procurements of the raw material, information management, supply chain planning and finally the most important is asset management however the effect of all these components will be directly on supplier then manufacturer, then product move to warehouse then the stores and finally the customers. Therefore the supply chains managers should alert enough to check that at all the stages of supply, manufacture and warehouse all the components of the supply chain management are fulfilled and no way at any stage the things are diverted from their strategy.
Figure 4. main components of supply chain management
These days supply chain management is broadly classified to the few other segments like the basics or the framework on which the supply chain managements strategy is build on, other main component of the supply chain managements, is the integration how different partners of the supply chain is integrated and how effectively and efficiently the partners collaborate with each other, these days a new important component added in the supply chain management is the software, how to use the software and what kind of software is suitable for the company’s effective supply chain management and how to obtained or designed that.
The basic purpose for the effective supply chain management is to ensure that the whole process will done effectively and efficient. For the better understanding of the management of supply chain is to understand the concept of efficiency and effectiveness
Efficiency: Efficiency in general describes the extent to which time or effort is well used for the intended task or purpose, the efficiency of the product or thing can be transformed in to the quantitative standards, as the input to output ratio was 9:4 then when effeiciency implemented then the ratio become 6:input to output ratio was 9:4 then when efficiency implemented then the ratio become 6:4
Effectiveness: Effectiveness means the capability of producing an effect, and is most frequently used in connection with the degree to which something is capable of producing a specific, desired effect. it is only measure in qaunlitative descriptions.
Thus the product form keeping all the components and all the quality standards in mind will actually deliver the value and the standards of the company. So for the maintenance of the company own standards and strategies, more companies are now involve in supply chain management, there is also seen that these days less control or managerial scrutinization is exercised over the logistic operations (ismall-business, 2007)
The idea of supply chain management was created as a result of increase in competition between the suppliers, (Xiaohong and Liu Da, 2007) as it has been seen that these days more companies involve in production and for almost all the products the markets become competitive. As it have been seen that there are many components of supply chain management but all the components work on two basic things; the degree of trust between each other(the members of supply chain) and the collaboration between the partners. As effective supply chain management not only gave the visibility to the company and its inventory but also at the same time improve the velocity of inventory.
As it have been discussed earlier that the effective supply chain management have five(5) components; Planning, sourcing, making, delivering, and returning (Oppenheimer, 2011)
The Plan: that defines the strategy of the SCM including the methods for the monitoring and control and feedback is designed in this category
The Source: this component refers to the supplier who will provide the goods and services necessary for the running of the business.
The Make: or manufacturing, refers to the execution of the process that is required to test after the development of the product, then the package the product or service.
The Delivery: after the product or service is make sourced and planned there come a important most channel, the delivery of the product to the end customer, this phase include the receiving of the orders, then develop a network for the warehouse, distributors and retailers, how to give the payment and receiving and giving the invoices.
The Return: Those include the feedback and the repetitive purchase. Or if the company have some claim cell then how to give the customers support.
Companies require an effective in terms of cost as well as efficient plan that its customer also value and that make available good quality products and services and that all is delivered through the effective supply chain management. Making the product involves not only production and packaging but also need to be test and proper stored. After production the step of delivery seems very easy however finding a trustworthy supply for delivering goods is itself a challenge moreover train the carriers for safety, invoice making, defective product provisions all comes under the head of delivery which is also a big task in the supply chain management.
2.3.1 Levels of supply chain management
Organization have different ways to make their product visible and there are numerous route for the delivery of the product from the supplier to the customer (oracle.com, 2011), that is not only depend on the type of business but also on the industry the company belong with. Therefore there are three basic levels for the effective decision of supply chain management; the operational level, the tactical level and the strategically level. As demonstrated in figure. 5 each level have its own importance for the decision making and strategy formation.
Figure 5. Levels of supply chain management
Source: Teigen (1997)
A model is the SCM Model proposed by the Global Supply Chain Forum (GSCF). Supply chain activities can be grouped into strategic, tactical, and operational levels. There is a great importance of every level for the supply chain management, like the strategic activities involve optimization through networking, that can include the size, location and number of distribution centre and warehouse and other, facilities where the production will take place. This means that at the strategic level long term decisions will be made by addressing the partnership issues between the supplier, customers and distributors by developing strong communication channel. Also the dissemination of the information will take place at this level.
The tactical level is the medium level for the decision making, most of the managerial level decision are taken place through them. Along with that at the tactical level, the information dissemination take place between the strategic level and the operational level. Then it comes the operational level that include day to day activities of the supply chain that mostly include the staff that directly contact with the customers and distributors so the effective working and planning at this level is far more important.
All the levels of strategic management have its own importance as if at the top most level the planning will be done nicely and all the information and communication id transferred properly, then at the second level short term or medium term plannings and working will be done as the flow of information will be from top to down and down to top. So these two levels are ultimately affecting the last level of the decision making and this all make the supply chain effective. As the supply chain management is not only for the market demands, customer service and transport considerations but also for the pricing constraints. So these all things are only handled effectively when all the levels of the supply chain management work in good collaboration. And the proper structure of the supply chain management is work with proper structure in supply chain.
2.4 Theories of supply chain management
A few authors such as Halldorsson, et al. (2003), Ketchen and Hult (2006) and Lavassani, et al. (2009) have tried to provide theoretical foundations for different areas related to supply chain by employing organizational theories. These organizational theories include Strategic Choice Theory (SCT), Knowledge-Based View (KBV), Materials Logistics Management (MLM), Resource-Based View (RBV), just in time (JIT), Agile Manufacturing, Systems Theory (ST), Transaction Cost Analysis (TCA), total quality management (TQM), material requirements planning (MRP), Quick Response Manufacturing (QRM), Agency Theory (AT), Time Based Competition (TBC), Network Perspective (NP), Institutional theory (InT), customer relationship management (CRM), table of constraints (TOC) etc, however literature also suggest that currently there is a gap in the literature that is available in context of supply chain management students, and there no general theory that explain the existence and boundaries of supply chain management.
Few other famous theories in relation to quality testing in logistic arrangements that can define the supply chain management are third (3rd) party logistic, quality function deployment(Akao), BPR, business process reengineering, and many more. Several models have been proposed for understanding the activities required to manage material movements across organizational and functional boundaries. SCOR is a supply chain management model promoted by the Supply Chain Council. Another model is the SCM Model proposed by the Global Supply Chain Forum (GSCF).The CSCMP has adopted The American Productivity & Quality Center (APQC) Process Classification FrameworkSM a high-level, industry-neutral enterprise process model that allows organizations to see their business processes from a cross-industry viewpoint. But there is no theory comprehensive enough to define the quality aspects for the supply chain management.
Theories are many but the jest of all the theories is hidden in a statement the logistic of the supply chain management is to deliver the right product at right time with the right quantity at the right place (or at the right moments as for minimal costing) the figure (6) below explains the four main basic areas of concerned in supply chain management
Figure 6. Basic areas of SCM
Source: NEVEM-workgroup (1989)
2.4 factors affecting supply chain management
The success of supply chain depends on strong commitment, high trust among partners and proper flow of information between the partners (Shermen 1992). According to a research one-third of the supply coalition are failed due to lack of faith between trading allies. Since sharing of knowledge require much insight information to be in open which is impossible without building trust as there is danger of competition as well as loss to the internal operations of company (Bowersox et al. 2000). Relationships in supply chain is heavily build on trust and the risk of competitors (Londe 2002) as if the information is shared with the wrong person then it will result in high risk for the company similarly if the information is not shared with the trust ones then prosperity of company is in danger (Sherman 1992) thus faith is thought to be a basis for a great partnership (Spekman 1988) because it’s the only commitment and the faith that make the company efficient and effective both (Morgan and Hunt 1994). A few studies emphasize that if there is a good foundation of belief between the allies then they can easily create barriers for the opportunists or the new entrants in the market (Ellram and Cooper 1990; Gardner and Cooper 1988)
There was a paper written on "Factors Affecting Efficient Supply Chain Operational Performance of High and Low Technology Companies in Thailand" (Tippayawong – 2010)This article is actually about the differences between two groups of companies which are dissimilar to each other in terms of technology influence on their supply chain operational acts and the potential features that makes the supply efficient. The research is based on 407 contributors of manufacturing sector of Thailand who examine themselves the usage of SCM logistics scoreboard(LSC). The main attention of LSC is on four crucial area that are corporate and inter-organization alignment, planning and execution capability, logistics performance and IT implementation and management. Basically LSC score is a comparison to recognize powers and limitations, that comparisons is between companies one have high degree of technology where other is not much advanced.
2.4.1 issues in supply chain management
Every operation has issues that is why these need to be handled and educed in order to make the operation better working similarly in supply chain there are issues too, major issues that affecting a supply chain are cost containment, supply chain visibility, risk management, increasing customer demands, globalization. As per (figure. 7) the factor supply chain visibility has a great impact that is 70% second major challenge is risk management that is 60% where as cost containment and increasingly customer demands effects 55 % and the lowest degree of issue is globalization is 43%.
Figure.7 five major factors affecting the supply chain management
Source : AMR (2011)
Before going in to the issues of the supply chain mangement it is important to understand that what are the key questions that the managers should answer before designing the strategy for the effective supply chain management, below in fgure (8) are given the different strategies, constraints, training and issues that are together define the ojbjective of the firm and then these all together form a strategy(Yu, 2006) and this strategy will design the supply chain management.
Figure 8. factors forming the strategy of the organization
Source: Yu, 2006
Supply chain management is perceived as a management of process from taking in the raw materials till giving out the finished products, in the whole process the thing that is needed over the years as the companies getting more independent, flexible and doing outsourcing is the criteria of doing job at reasonable cost (exforsys.com 2011)
2.5 fast food retail industry of UK
Construction of a better supply chain management system is not only required for progress but it is also a defensive act due to high demand in the mid of 2000 e-commerce predicted to touch $6.8trillionand such a big demand cannot be fulfilled by the existing supply chain management. This increased demand is a great opportunity but more it is a challenge because to meet the demand corporations need to advanced their internal as well external systems all over.
Evidence as per early 2000 shows that heave in e-commerce is due the existing supply chains. Companies were competent enough to fulfill the demands but the e-commerce force the companies for managed and refined supply chains. Where e-commerce brings convenience for customers it also brings pressure and hard time for corporations to satisfy customers demand on time. (Encyclopedia of commerce 2011)
2.6 Supply chain management of Fast food retail industry of UK
This era is the era of globalization, when the firm have huge impact over each other this impact created a greater competition among different business process, so the supply chain management is one of the important process for the firms, as for the global networking the corporations have to manage their supplies effectively. Specially for the service sector and retail industry of a developing country like UK where almost all the big retail brands are global and there is intense competition between all in terms of customer satisfaction and sales targets as the prices of almost all the brands are competitive with other brands the only thing they are competing these days is on business process.
A lot of changes are seen in the business in terms of procurement, production and distribution. As the organization these days become more and more focused to get different competencies where they can edge on their competitors in terms of effectiveness and efficiency as these days the main focus is not to satisfy the existing customer but also to attract the new ones. As the matter of fact alike from past there are many outsourcing companies and facilities available for the companies to outsource their less competitive areas and get more focused on the competitive ones.
As in the retail sector like UK the outsourcing of different function is very common, so the importance of supply chain management is increasing day by day to see that all the partners are working effectively and efficiently and te flow of information is smooth between the partners, and thus ensure the smoth work flow (Karthik Deepak, 2011)
For the retail industry it is very important to see that at all the levels the supply chain function will remain effective, as for the service sector the most important sector is the market component of the supply chain management s shown in figure (9) below that the supply chain is divided in three major components, the designing of the Supply chain then see the operation part of it and finally design the market components of it, like from where the customer get it and how they will use it, where the product should be placed and what are the point of sales, how and when the distributors will deliver can customer get the product from retail only or can have it through the distributors as well. So the strategies for all is important to design when it is about the fast food industry of a developed country like UK
Figure 9. division of supply chain management process
It have been seen that supply chain management is never a integrated part of the strategy in past, but since the outsourcing is so common these days and the outsourcing companies is also have their SCM strategies so a combination of both the strategies is very important. Plus the emergence of the IT infrastructure and different softwares for the supply chain management the business landscape is almost changed and even more competitive. Now the facilities are there through which the organizations can do things at much faster pace in more effective ways. It has been observed that the companies that cannot effectively manage their processes are failed to launch their products and at times their competitors get the major share because of their effective and efficient business process.
The UK retail market is one of the most competitive markets of the world, and even in the recent years the recession hit hard but the retail companies of UK, USA and Europe is hunting for expanding the business process and the opportunities to grow and expand the process. It have been seen that usually the global retailers found these opportunities and new markets outside their country’s borders and they can manage to have the global business because of their effective supply chain management tools as these days few lucrative markets include India, China and Pakistan (Farfan, 2010)
2.6.1 supply chain management as part of strategy:
The importance of supply chain is there but the question arises that is it important to make the supply chain as the integrated part of the strategy. Figure 10 below explain that how important it is for the companies to align their business strategy with their supply chain strategies. The figure below explains that business strategy is just one part of the supply chain strategy where as this is supply chain strategy that answers difficult questions like the supply chain capabilities, the type of product the type of industry, the level of customization requires with the product and what will be the expected life cycle of the product.
Figure 10. SCM as part of strategy
The first step is obtaining a customer order, followed by production, storage and distribution of products and supplies to the customer site. Customer satisfaction is paramount. Included in this supply chain process are customer orders, order processing, inventory, scheduling, transportation, storage, and customer service. A necessity in coordinating all these activities is the information service network.
Figure 11. Benefits of effective SCM strategy
It has been explained in figure 11 that how four basic steps of the SCM strategy actually benefiting the corporations to the larger extent by reducing the capital cost, obsolesces cost and excess stock cost. So along with the reduce inventory , operational cost and product availability the jest of SCM is to do all the process in a speedy manner and along with that there must have a realization for the customers need and satisfaction levels. Thus the decision associated with SCM covers both the long-term and short-term. Strategic decisions deal with corporate policies, and look at overall design and supply chain structure.
Sales and Operational planning, decisions are those dealing with every day activities and problems of an organization. These decisions must take into account the strategic decisions already in place. Therefore, an organization must structure the supply chain through long-term analysis and at the same time focus on the day-to-day activities. Then the suppliers collaboration and inventory managements are the two other main strategically importnat parts of the SC policies. Furthermore, market demands, customer service, transport considerations, and pricing constraints all must be understood in order to structure the supply chain effectively.
2.7 Company’s profile of McDonald
McDonald's Corporation (NYSE: MCD) is the world's largest chain of hamburger fast food restaurants, serving more than 58 million customers daily (Breitbart.com, 2010) the history of McDonald began from 1940, with a restaurant opened by brothers Richard HYPERLINK "http://en.wikipedia.org/wiki/Richard_and_Maurice_McDonald"and Maurice McDonaldin San Bernardino, in California. Their introduction of the "Speedee Service System" in 1948 established the principles of the modern fast-food restaurant. these days McDonald's restaurants are found in 119 countries (data from the McDoand site in 2008) and territories around the world and serve 58 million customers each day.
Figure 12 Position of Mc Donald in US market
SOURCE: Ad Age (Jan. 1, 2007)
According to Fast Food Nation by Eric Schlosser (2001), nearly one in eight workers in the U.S. have at some time been employed by McDonald's
2.7.1 History of McDonalds
The story of Mc Donald began in 1940. The first McDonald's restaurants opened in the United States, Canada, Costa Rica, Panama, Japan, the Netherlands, Germany, Australia, France, El Salvador and Sweden, in order of openings.
The present corporation dates its founding to the opening of a franchised restaurant by Ray Kroc, in Des Plaines, Illinois, on April 15, 1955, the ninth McDonald's restaurant overall. Kroc later purchased the McDonald brothers' equity in the company and led its worldwide expansion, and the company became listed on the public stock markets in 1965.
The McDonald brothers and Kroc feuded over control of the business, as documented in both Kroc's autobiography and in the McDonald brothers' autobiography. The site of the McDonald brothers' original restaurant is now a monument
With the expansion of McDonald's into many international markets, the company has become a symbol of globalization and the spread of the American way of life. Its prominence has also made it a frequent topic of public debates about obesity, corporate ethics and consumer responsibility.
2.7.2 Business model of Mc Donald
The McDonald's Corporation's business model is slightly different from that of most other fast-food chains. In addition to ordinary franchise fees and marketing fees, which are calculated as a percentage of sales, McDonald's may also collect rent, which may also be calculated on the basis of sales.
The UK business model is different, in that fewer than 30% of restaurants are franchised, with the majority under the ownership of the company. McDonald's trains its franchisees and others at Hamburger University in Oak Brook, Illinois.
In other countries, McDonald's restaurants are operated by joint ventures of McDonald's Corporation and other, local entities or governments
McDonald's Corporation earns revenue as an investor in properties, a franchiser of restaurants, and an operator of restaurants. Approximately 15% of McDonald's restaurants are owned and operated by McDonald's Corporation directly. The remainder are operated by others through a variety of franchise agreements and joint ventures
Figure 13. McDonald financial data
2.7.3 Supply chain management in McDonald
Mc Donald have a supply chain management and the dynamics of the SCM is hidden in the value chain, as shown in figure (-) that the company have the suppliers, collaborators, market place and finally some individual customers to care about, that’s is effective supply chain that always take lesson and experimenst from the environment and surroundings.
Figure 12. Value chain Dynamic Model
Source: Chemark Consulting 2005-06
2.8 Company’s profile of Burger king
The second largest burger brand after McDoanld and both are direct competitors of eachother. Burger King, often abbreviated as BK, is a global chain of hamburger fast food restaurants headquartered in unincorporated Miami-Dade County, Florida, United States. The company began in 1953 as Insta-Burger King, a Jacksonville, Florida-based restaurant chain. After Insta-Burger King ran into financial difficulties in 1955, its two Miami-based franchisees, David Edgerton and James McLamore, purchased the company and renamed it Burger King.
At the end of fiscal year 2010, Burger King reported it had more than 12,200 outlets in 73 countries; of these, 66 percent are in the United States and 90 percent are privately owned and operated. BK has historically used several variations of franchising to expand its operations. The manner in which the company licenses its franchisees varies depending on the region, with some regional franchises, known as master franchises, responsible for selling franchise sub-licenses on the company's behalf. Burger King's relationship with its franchises has not always been harmonious. From the advertisement point of view 1970s were the "Golden Age" of Burger King advertising, but beginning in the early 1980s, the company's advertising began to lose focus; a series of less successful ad campaigns created by a procession of advertising agencies continued for the next two decades
2.8.1 History of burger king
It have been concluded that since many decades burger king is following McDonalds as The predecessor to what is now the international fast food restaurant chain Burger King was founded in 1953 in Jacksonville, Florida, as Insta-Burger King. Inspired by the McDonald brothers' original store location in San Bernardino, California, the founders and owners, Keith J. Kramer and his wife's uncle Matthew Burns, began searching for a concept to open a new restaurant around(Sculle, Keith and Pappas (1999).. After purchasing the rights to two pieces of equipment called "Insta" machines, the two opened their first stores around a cooking device known as the Insta-Broiler. The Insta-Broiler oven proved so successful at cooking burgers, they required all of their franchises to carry the device (Andrew, 2006)
Figure 13 market share of BK in Spanish fast food markets
2.8.2 Business model of burger king
the company operates approximately 40 subsidiaries globally that oversee franchise operations, acquisitions and financial obligations such as pensions. One example of a subsidiary is Burger King Brands, Inc. which is responsible for the management of Burger King's intellectual properties. A wholly owned subsidiary established in 1990, Burger King Brands owns and manages all trademarks, copyrights and domain names used by the restaurants in the United States and Canada. It also responsible for providing marketing and related services to the parent company.
To assist in its international expansion, Burger King has established several subsidiaries to develop strategic partnerships and alliances to expand into new territories. In Europe, Burger King's subsidiary Burger King Europe GmbH is responsible for the licensing and development of BK franchises in that market, Africa and Western Asia. In Asia, the BK AsiaPac, Pte. Ltd. business unit handles franchising for East Asia, the Asian subcontinent and all Oceanic territories except Australia. (Australia is the only country in which Burger King does not operate under its own name. When the company set about establishing operations down under in 1971, it found that its business name was already trademarked by a takeaway food shop in Adelaide)
The problem is By 2001 and after nearly 18 years of stagnant growth, the state of its franchises was beginning to affect the value of the company. One of the franchises most heavily impacted by the lack of growth was the nearly 400-store AmeriKing. By 2001, the company, which until this point had been struggling under a nearly $300 million (USD) debt load and been shedding stores across the US, was forced to enter Chapter 11 (bankruptcy)
2.8.3 Supply chain management in burger king
Restaurant Services, Inc. (RSI), has selected Amphire (ebusiness solution provider) to optimize purchasing processes and communications within the supply chain between BURGER KING suppliers, distributors and restaurant operators.
Amphire will be dedicated to supporting the entire supply chain. The adoption of Amphire will enable BURGER KING suppliers, distributors and restaurant operators to transact from a single source - a web-based order management system - rather than using multiple solutions and standards. The move highlights a foodservice industry trend toward moving supply chain purchasing and communications online.( BOISE, Idaho, 2002)
RSI, based in Coral Gables, Florida, is an independent member owned purchasing cooperative that been the exclusive purchasing agent for the U.S. Burger King System since 1991, and leverages more than $3 billion in purchasing for the Burger King System annually.
This chapter have defined not all the aspects of supply chain management but also how some factors and theories affecting supply chain process.
After that company profile of Mc Donald and Burger King is presented to explain about their origion and what are the business models they are working with and a short description about their SCM is present.