Abstract
Using the example of the global McDonald’s network, the risks in the supply chain that a fast food restaurant may experience are considered. Key risks identified include natural disasters, problems at the borders, such as during COVID-19, and the human factor. The main risks that the company may face in the future are related to the events in Eastern Europe and the long-term consequences of the pandemic. In addition, McDonald’s is experiencing the risks inherent in the food processing industry, including scrutiny of product quality by the public. As part of the Supply Chain Risk Leadership Council, McDonald’s is working with other major companies to manage risk to ensure uninterrupted supply. The main difficulties can be overcome by establishing a management system. Competent management will allow the company to maintain a high level of product quality and contain price increases.
Background
Supply Chain Risk Leadership Council aims to create a cross-industry council of world-class manufacturing and service companies. Companies are called upon to work together to develop and share best practices for supply chain risk management. The organization aims to work together to create best practices for supply chain risk management, processes, capabilities, and metrics adopted by their respective organizations. Best practices are intended to initiate alignment across industries and related organizations actively. One of the companies included in the consulate is the global network of McDonald’s.
Supply Chain Risks for McDonald’s
Natural disasters, adverse weather, rising food prices, broken contracts, and cyber security issues are the main supply chain risks that the food industry is suffering from. McDonald’s is no exception: one of the company’s recent challenges has been successfully overcoming disruptions caused by COVID-19 (Davim et al., 2021). Food safety issues are also an actual topic for any food company. However, dealing with tainted and modified food in the supply chain should be a top priority as a major incident can have long-term negative consequences for a brand. Since McDonald’s is a huge global chain, the quality of the products must be high.
Supply Chain Disruptions Experienced by the Organization
Supply chain disruptions are not just a nuisance; they can significantly affect the financial performance and reputation of the business. In some cases, they can even lead to significant organizational changes. After slowing down ports and closing vendors that raised food safety concerns worldwide and resulted in supply shortages that directly impacted sales, the fast-food giant was recently forced to appoint a new CEO. Many factors influenced the decision to change leadership, but poor supply chain management certainly played a role. In a case like McDonald’s, it is very important to have multiple backup sources of supply. When a product is the main item on the menu, it is also important to share the supply among several suppliers, which reduces the burden on each source and the impact of a potential slowdown on the business.
The global pandemic has raised the meat supply chain vulnerabilities that are challenging the food system. McDonald’s successfully solved this problem by finding alternative supply routes and keeping product prices down. In 2021, milkshakes were removed from the McDonald’s menu in England, Scotland, and Wales. A shortage of truck drivers caused it due to post-Brexit EU immigration rules. A shortage of qualified heavy-duty drivers exacerbated by Brexit has left wholesalers unable to deliver raw materials to fast food outlets.
The Role of Business Continuity Planning
Companies can avoid menu disruptions by ensuring that additional sources of supply for key products are available and that these suppliers are ready to replace the main supplier in the event of a disruption. Historically, McDonald’s responds to supply challenges by devoting high levels of capital spending on new locations, marketing, new products, or remodels (Mukherjee et al., 2022). The best way to prepare is to use online resources regularly. Investing in supplier relationships is also beneficial, as suppliers are more likely to provide a suitable replacement for a company in a crisis if they have built a long-term relationship with them and earned their trust through open and honest communication.
The company needs to consider the location of the supplier and how it will affect the wider supply chain if a regional weather disruption causes problems. Before signing a contract, it is important to know where manufacturers are located and how many sub-suppliers they use (Manners-Bell, 2020). Understanding their crisis response plan, security policy, chain of command structure, and inventory practices will help better understand the company’s risk when doing business with them. Planning a regular audit process and understanding vendor weaknesses will strengthen sourcing strategies.
The Industry
The fast-food restaurant supply chain has become a big problem in today’s decades and always has been because it is directly related to consumers’ health. The fast-food supply chain is not only about delivering food at the right time but also delivering food in the right quantity, at the right price, and of high quality. The process consists of several stages; it is difficult for a fast food restaurant to monitor the entire chain constantly. From the consumer’s point of view, the burden of producing quality food often falls on the end seller or fast food restaurant. However, all suppliers participating in the supply chain network must adhere to the same quality assurance standards to ensure that quality requirements are met.
Consumers want detailed information about how their food is handled, from the farm to the moment they buy from fast-food restaurants. This may seem unrealistic, but consumers trust a brand more if its production, distribution, or supply chain methods are clear. The growing demand adds another layer of complexity and sometimes additional costs. For a fast-food retailer interested in taking full control of the entire chain, one possible solution might be to work with suppliers themselves so they can produce their ingredients. Another possible solution would be to have systems to provide greater transparency of the supply chain process from upstream to downstream. Creating a standardized process, especially for fast food franchises, becomes difficult. Franchise businesses try to operate under uniform quality standards; what happens in a fast-food establishment often depends on the management in that physical location. Standardization of service delivery across a fast-food chain can be difficult to implement.
Supply Chain Risks in the Industry
The most dangerous risk that a fast food restaurant can experience is dependence on fresh food suppliers. Although fast-food restaurants will be the least affected by the crisis at all levels of the restaurant business, it can take a serious toll on them. Problems in the supply chain can be brought by drought, crop failure, climate change, which negatively affects some crops. The rest of the risks for fast food restaurants are similar to other businesses. Supplies can be disrupted due to natural disasters, problems at the borders, such as during COVID-19. The human factor can also become a risk, for example, sabotage of work on farms.
Perspectives on Future Disruptions that May Disrupt Supply Chain
Issues that could arise with the McDonald’s supply chain include the effects of the COVID-19 pandemic and events taking place in Europe. While borders are gradually opening up, supply chains have already been disrupted, and it may take some time to recover. The problem the world community is now facing is the ongoing events in Ukraine. Supply chains to the east will be disrupted due to transport problems. The company must do everything possible to ensure timely deliveries to the firm’s restaurants in Europe. To achieve this goal, it may be necessary to involve reserve suppliers.
Summary
As a global fast-food chain, McDonald’s faces supply chain risks both general to the business as a whole and specific to the food industry. Natural disasters, adverse weather, rising food prices, broken contracts, and cyber security issues are problems for any business. The most dangerous risk that a fast food restaurant can experience is dependence on fresh food suppliers. Overall, McDonald’s has successfully managed to navigate the crisis caused by the COVID-19 pandemic successfully. The company’s strategy has proven its effectiveness, so there is reason to believe that McDonald’s will cope with supply disruption risks in Eastern Europe. The key management strategies against supply chain disruptions are establishing transparent interactions with local suppliers and controlling franchised restaurants.
References
Davim, J.P., Sakthivel, A.R., & Kandasamy, J. (Eds.). (2021). Managing Supply Chain Risk and Disruptions: Post COVID-19. Springer International Publishing.
Manners-Bell, J. (2020). Supply Chain Risk Management: How to Design and Manage Resilient Supply Chains. Kogan Page.
Mukherjee, K., Chandler, B., & Gentry, R. (2022). McDonald’s USA: A Restaurant Icon’s Potential to Thrive in a Global Pandemic. SAGE Business Cases Originals. Web.