McDonald’s is a company that has implemented a Just in Time inventory strategy. As we discussed in class, this is the transformation from “Push” techniques to “Pull” techniques on a line process. We see this “Pull” technique specifically in the assembling of customer food orders at McDonald’s. Similar to the cup example we performed in class, McDonald’s has a supply of hamburgers ready for assembly that are pulled through the line AFTER a customer has placed their order. The supplier (hamburger cook) will make more patties when he sees stock getting too low. The process of assembling the hamburger as the customer has ordered flows through workstations until it is ready for delivery. The workstations may include toasting the bun, applying toppings and condiments, and packaging. In this case, the customer demand is what triggers the supply chain to be put into action, and all the actors within this supply chain will then snowball this effect through until the end. This subjects McDonald’s inventory to a “Just-in-Time” strategy as it works to fill depleted inventories only as they are demanded by the customers.
You may be asking, how did McDonald’s decide this was the best strategy for them? To answer this I want to refer back to our very first blog post in which we analyzed the operational strategies of McDonald’s. What stood out to me, was the duality of McDonald’s low-cost and consistent-quality strategies which were tailored to their specific customer base. Supply chain managers must then tailor the operations of the supply chain to meet these competitive capabilities, as we see here with the JIT inventory strategy.
Let’s first look at their low-cost priority. This JIT strategy is a great tactic used by food retailers as a way to eliminate waste. Say for example, McDonald’s used a “Push” strategy: They would prepare 50 Big Macs by estimating their customers’ demands. There are two recurring issues of waste in this strategy. First, 50 customers may not order Big Macs; they may order 50 regular cheeseburgers. In this scenario, 50 new patties must be used to prepare these regular cheeseburgers, when the 50 patties used on the Big Macs could have been allocated to these orders, saving the company time and money. The second issue we encounter is that food is perishable, so with a “Push” strategy we must not only predict demand, but we must be able to accurately predict demand within a specific time period. As you’ve already seen with the above example, this will only make our waste of time and supplies larger, unless we are able to accurately predict demand every day at every location (aka impossible). By implementing a “Pull” method, then, you can see how McDonald’s is able to save money in these areas, allowing them to keep their prices to customers low.
This is a great segment into analyzing how this inventory strategy gives way to their consistent-quality priority. From one standpoint, JIT inventory gives the customer consistent quality of service. With a defined line process from start to finish, customers can expect that their orders will take a specific time to be prepared (fairly consistent each time). The supplier plays the role of making sure food is ready for assembly, so the only process that must be done after an order is placed, is the pure assembly. Further, the customer can expect consistent quality of the food being produced. The patty will be heated up when they place their order, toppings will be applied when they place their order, and the bun will be toasted when they place their order. A product should never be cold or soggy with this JIT inventory strategy. Therefore, we can see that this inventory strategy gives McDonald’s their competitive capability of consistent quality.
However, as we know, nothing is ever perfect. I would love to hear your input on the cons of this strategy? Or maybe there is a business that you believe is able to achieve their competitive capabilities through the implementation of ‘Lean Management’ and ‘JIT Inventory’?