DISTRIBUTION MANAGEMENT AT McDOLAND’s INDIA

TABLE OF CONTENTS

1> Introduction

McDonald's is a fast food chain with restaurants all over the world. It serves burgers and
other fast food customized to local tastes. Its philosophy has been 'one world, one burger;'
which meant that the burger must be consistent in terms of cost and quality. To meet such
high standards, it was essential to have an excellent supply chain management system. In
India, McDonald's had a very well orchestrated supply chain, called the 'Cold Chain'. The
case study looks at McDonald's supply chain management system in India and discusses
in detail its outsourcing mechanism. In order to get more information about McDonald’s,
please visit the site http://www.mcdonaldsindia.com.
2> Distribution Strategy at McDonald’s India

McDonald's had been working critically on its supply chain part. Considering, an
international brand trying to make inroads into the Indian consciousness, its Indian
supplier partners were developed in such a manner that made them stay with the company
from the beginning. For this purpose, it has developed local Indian businesses, which can
supply them the highest quality products required for their Indian operations.

In the supply chain management, the distribution centers hold special place for bringing
food right to the outlet counters. For McDonald's India, the distribution centres came in
the following order: Noida and Kalamboli (Mumbai) in 1996, Bangalore in 2004, and the
latest one in Kolkata (2007).

McDonald's entered its first distribution partnership agreement with Radha Krishna
Foodland, a part of the Radha Krishna Group engaged in food-related service businesses.
Better facilities and infrastructures were created along with new systems by them to
satisfy McDonald's high demands, which finally culminated into an agreement with
McDonald's India, for Radha Krishna Foodland to serve as distribution centres for their
restaurants in Delhi and Mumbai. As distribution centres, the company was responsible
for procurement, the quality inspection program, storage, inventory management,
deliveries to the restaurants and data collection, recording and reporting. Value-added
services like shredding of lettuce, re-packing of promotional items continued since then
at the centres playing a vital role in maintaining the integrity of the products throughout
the entire 'cold chain'. The operations and accounting is totally transparent and is subject
to regular audits.

McDonald's worked aggressively to attain the right suppliers and systems that ensured
that 90 per cent of yield was indigenous before the doors were opened to consumers. The
only products that they used to import were oil and fries, for which they had made
arrangements to manufacture the oil in India. They ensured that the products developed
locally abide by global McDonald's standards.
3> Key Players in Distribution for McDonald’s India

3.1> Trikaya Agriculture

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. Exposure to better
agricultural management practices and sharing of advanced agricultural technology
by McDonald’s had made Trikaya Agriculture extremely conscious of delivering its
products with utmost care and quality.
Initially lettuce could only be grown during the winter months but with McDonald’s
expertise in the area of agriculture, Trikaya Farms in Talegaon, Maharashtra, are now
able to grow this crop all the year round.

McDonald’s had provided assistance in the selection of high quality seeds, exposed
the farms to advanced drip-irrigation technology, and helped develop a refrigerated
transportation system allowing a small agri-business in Maharashtra to provide fresh,
high-quality lettuce to McDonald’s urban restaurant locations thousands of kilometers
away.

Post harvest facilities at Trikaya include a cold chain consisting of a pre-cooling room
to remove field heat, a large cold room and a refrigerated van for transportation where
the temperature and the relative humidity of the crop is maintained between 1º C and
4º C and 95% respectively. 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. 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.

McDonald’s expertise in packaging, handling and long-distance transportation had

helped Trikaya to do trial shipments to the Gulf successfully. In addition to export,
McDonald’s assistance has enabled Trikaya Agriculture to supply this crop to a
number of star-rated hotels, clubs, flight kitchens and offshore catering companies all
over India.

3.2> Vista Processed Foods

Vista Processed Foods Pvt. Ltd., McDonald’s suppliers for the chicken and vegetable
range of products, is another important player in this cold chain. Technical and
financial support extended by OSI Industries Inc., USA and McDonald’s India
Private Limited had enabled Vista to set up world-class infrastructure and support
services.
This included hi-tech refrigeration plants for manufacture of frozen food at
temperatures as low as – 35° C. This was vital to ensure that the frozen food retained
its freshness for a long time and the ‘cold chain’ is maintained. The frozen product
was immediately moved to cold storage rooms.

With continued assistance from its international partners, Vista had installed hi-tech
equipments for both the chicken and vegetable processing lines, which reflected the
latest food processing technology (de-boning, blending, forming, coating, frying and
freezing). For the vegetable range, the latest vegetable mixers and blenders were in
operation. Also, keeping cultural sensitivities in mind, both processing lines were
absolutely segregated and utmost care was taken to ensure that the vegetable products
did not mix with the non-vegetarian products.

Vista is able to provide a very wide range of frozen and nutritious chicken and
vegetable product. Ongoing R&D, both locally and in the parent companies, work
toward innovation in taste, nutritional value and convenience. Today, production of
better quality frozen foods that are both nutritious and fresh has made Vista Processed
Foods Pvt. Ltd. A name to reckon within the industry.

3.3> Dynamix Dairy

McDonald’s suppliers of cheese, Dynamix Dairy, too, recognizing the need for
quality milk to make quality cheese, had set up a dedicated quality program for milk
procurement. They made significant investments in setting up bulk coolers at all milk
collection centres in the Baramati area, where they are based.

Efforts had been made to see that the bulk cooling centres were located in a way that
farmers do not have to travel more than an hour from their farms to reach the
collection centre. This has drastically reduced the time from milking to refrigeration,
 which is critical, especially since the lack of proper refrigeration can greatly impact
the quality of milk. On receipt, the milk is immediately stored in the bulk coolers at
the collection centres, to prevent growth of bacteria in the milk and preserve its
freshness – thus, maintaining the ‘cold chain’.

3.4> Cremica Industries

Cremica Industries was started in 1980 as small ice-cream unit in Ludhiana. However
after its initial success Cremica added buns and biscuits to its product line and in
1996 McDonald's selected Cremica to be its supplier for buns, liquid condiments,
batter and breading in collaboration with its international partners. Cremica Industries
worked with another McDonald's supplier from Europe to develop technology and
expertise that allowed the company to expand it business from baking to providing
breading and batters to McDonald's India and other companies as well.

3.5> Amrit Foods

Amrit Foods, a division of Amrit Banaspati, has been associated with McDonald's
India as a supplier of Dairy Mixes, Soft Serve Mix and Milk Shake Mix for over a
decade now

4> Distribution Process at McDonalds

Suppliers are proclaimed to be the backbone of any good business as they are the
individual units that build supply chain. On them depends the health of the overall
business cycle.

Benefit in McDonald’s favor was its expertise in the areas of agriculture, which allowed
it, along with its suppliers, to work with farmers in Ooty, Pune, Dehradun and other
regions to cultivate high quality iceberg lettuce. There was substantial effort on sharing
advanced agricultural technology and expertise with farmers/suppliers like utilization of
drip irrigation systems (for less water consumption), better seeds and agricultural
management practices for greater yields.

McDonald's incorporated state-of-the-art food processing technology along with its

international suppliers to pioneering Indian entrepreneurs. They had imparted technical
training to all their suppliers on operation the imported machineries, educated them on
the McDonald's philosophy of Quality, Service, Cleanliness and Value (QSCV) in order
to provide standardized food to our customers.

4.1> Cold Chain

The 'cold chain', on which the McDonald’s India had spent more than six years for setting
up the same in India, had brought about a veritable revolution, immensely benefiting the
farmers at one end and enabling customers at retail counters. McDonald's finding the
factor of cold room being vital ensured that even before vegetables from farms entered
the refrigerated zones, they were locked in a pre-cooling room to remove field heat.
Vegetables were placed in the pre-cooling room within half an hour of harvesting where
rapid cooling decreased the field temperature of vegetables to 2ºC within 90 minutes.
Then a large cold room (a refrigerated van) was used for transportation to the distribution
centers. In the van, the temperature and relative humidity of crop was maintained at
1-4ºC and 95 per cent, respectively and the flavors and freshness are locked at -35°C.

At the suppliers' level, care was taken to guard against any possible contamination or
interruption in the cold chain that can break the link and have a detrimental effect on the
quality of our product.

The iceberg lettuce from Ooty, mutton patties from Hyderabad and sesame seed buns
from Punjab were all delivered to Radhakrishna Foodland Private Limited (RFPL)
distribution centre (cold storage) in its refrigerated vans. RFPL stored the products in
controlled conditions in Mumbai and New Delhi and supplied them to McDonald's
outlets on a daily basis.
By transporting the semi-finished products at a particular temperature, the cold chain
ensured freshness and adequate moisture content of the food. The specially designed
trucks maintained the temperature in the storage chamber throughout the journey. Drivers
were instructed specifically not to switch off the chilling system to save electricity, even
in the event of traffic jam.

Below mentioned is the data about Refrigerated vans for McDonald's distribution

Type Route Quantity

National inbound Suppliers to Distribution Center 20 vehicles
Outbound North Distribution Center to restaurant 13 vehicles
Outbound West Distribution Center to restaurant 11 vehicles
Outbound South Distribution Center to restaurant 1 Vehicle

5> Conclusion

All these suppliers shared McDonald's commitment and dedication for satisfying
customers by supplying them the highest quality products. They worked cohesively to
ensure that the final product reached the customer consistently each time and every time.
At their level, every care is taken to guard against any interruptions in the cold chain
which can break the link and have a detrimental effect on the quality of the product. And
more products reaching the market fresher and quicker not only benefit the economy but
also help the farmer earn more.