All companies are responsible for some type of inventory management. The inventory turnover rate and amount of inventory simply varies by the company and its’ industry. Also, most companies have different ways of keeping track of their inventory and how often they do so.
In this tough economy, McDonald’s is one of the only restaurants that have strived in profitability and success. The company has been doing many things right in the past few years, including handling their inventory. This article compares McDonald’s inventory to Wendy’s, their biggest competitor.
Inventory in the food industry is much different than inventory in a clothing store, for example. McDonald’s, along with any other restaurant, cannot have food sticking around in the store for too long. This is due to the fact that the food can spoil and the last thing any restaurant owner wants is for a customer to become sick from their food. Also, McDonald’s does not want to waste money. Any ingredients in the store that are not being used before their expiration date are a lost cost to the business. These two factors make it very important for McDonald’s to correctly calculate how much inventory they should keep in the store at all times.
Between the years of 1999 and 2000, “McDonald’s had an inventory turnover rate of 96.15”. This is compared to Wendy’s inventory turnover rate of 40.073. This means that the average item at McDonald’s stayed in inventory for approximately four days before being sold. For Wendy’s, it took about ten days for a product to leave the shelves.
In this situation, McDonald’s inventory turnover rate was obviously better than Wendy’s. This means that it took less time for McDonald’s to turn a profit compared to their competitor. Also, it means that customers were getting fresher food than those who opted to visit Wendy’s.
With such a great inventory turnover rate, there is little that McDonald’s can do to improve in this department. However, in the years to come, it would not surprise me if the fast food giant set a new high standard.
Over the summer, I had a chance to interview with McDonald’s supply chain department for an internship. In this interview, I gained a vast amount of information about McDonald’s supply chain. McDonald’s focuses on three main concepts in maintaining the supply chain that helps 14,000 restaurants in the United States run smoothly: ethics, environment and economies. This goes hand-in-hand with another philosophy McDonald’s has, called the three-legged stool method. This method is unique to McDonald’s business, incorporating achievement, trust and “personal”.
When it comes to McDonald’s supply chain, the main focus is bringing food from cow to plate. This is a short way of saying that the company wants to know every detail about how their ingredients are brought into the restaurants. McDonald’s has such a great relationship with their suppliers that they trust them enough to have no written contracts with them. Of the 14,000 United States restaurants there are, no contracts have been written up to ensure that every restaurant has beef, for example, each day. This is pretty impressive. McDonald’s also tries not to completely knock out a supplier’s entire crop and make it so they cannot work with them again. The company always tries to gain a lasting relationship with all of their suppliers; this is a great thing for the farmers and is also a positive for farmers to keep these long lasting relationships. The relationships between McDonald’s and their suppliers are the center to the three-legged stool method.
Another interesting aspect of McDonald’s supply chain is how they decided what menu items are available. For example, over the summer, McDonald’s offered Blueberry Banana Nut Oatmeal as a breakfast choice; however, the oatmeal has been in the works for a long time. Before it could hit the nationwide menu, though, McDonald’s needed to find enough suppliers to grow the blueberries that they would use in restaurants. Since McDonald’s is such a large market, finding some of the fresh ingredients can become a problem. For example, if McDonald’s wanted to create a Pineapple Salad, they would not be able to because the pineapple supply in the world is not large enough to supply all of McDonald’s restaurants.