McDonald’s Operations Management: 10

Critical Decisions, Productivity

UPDATED ONUPDATED ON NOVEMBER 5, 2023 BY LAWRENCE
GREGORY

McDonald’s in Times Square, New York City. McDonald’s operations

management strategy covers the 10 critical decision areas to ensure high
productivity throughout the fast-food restaurant chain. (Photo: Public
Domain)
McDonald’s operations management (OM) supports the company’s
position as the largest fast-food restaurant chain in the world. The
business implements solutions pertaining to the 10 decision areas of
operations management, such as supply chain management for the
movement of ingredients. In these 10 strategic decisions, McDonald’s
aims for maximum operating efficiency and productivity to facilitate
business strategies that rely on low production costs. For instance, in
process and capacity design, which is a part of operations management,
the food service company optimizes production processes to minimize
costs and enable competitive selling prices. In this regard, operations
management effectiveness impacts how the goals of McDonald’s mission
statement and vision statement are achieved. Operations strategy and
related strategic planning determine the restaurant corporation’s overall
business performance.
With the 10 decisions of operations management, McDonald’s optimizes
the business to counteract competition. The company competes
with Wendy’s, KFC, Dunkin’, Burger King, Subway, and Arby’s. McCafé
operations also compete with Starbucks and Tim Hortons, as well as
some PepsiCo beverages and Unilever’s Bru coffee, which can
be purchased online in various countries. The Five Forces analysis of
McDonald’s Corporation shows that these competing firms impose a
strong competitive force, which influences the company’s operations
strategy and measures for optimal productivity.

McDonald’s Operations Management: 10

Critical Decision Areas
1. In the design of goods and services, the objective is to develop the
best product, given the resources and limitations of the fast-food
company. In this case, McDonald’s aims for high efficiency of service
operations, and the standardization of goods. High efficiency and
productivity in food preparation minimizes production costs. On the other
hand, standardization of goods contributes to menu and product
consistency and customer satisfaction at store locations. In this strategic
decision area of operations management, managers are concerned with
satisfying the general public, which is the target market based
on McDonald’s generic strategy for competitive advantage and strategies
for intensive growth. The company aims to attract everyone to its fast-
food restaurants. Also, in making product design decisions, operations
managers account for the product element of McDonald’s marketing mix
or 4P. Thus, the strategies and tactics in the fast-food company’s
marketing mix relate to this strategic decision area of operations
management.

2. Quality management involves matching McDonald’s food, drinks, and

service to the quality expectations and preferences of target consumers.
The operations strategy applies policies and measures to ensure that such
matching is achieved at company-owned, franchised, and licensed
locations. Product standardization comes with quality consistency, which
contributes to the business strengths identified in the SWOT analysis of
McDonald’s Corporation. Such quality consistency helps the fast-food
business satisfy consumers’ expectations. However, McDonald’s
operations management faces the challenge of maintaining satisfactory
quality despite cost minimization, which is essential for competitive selling
prices.

3. Process and capacity design is a decision area that pushes

operations management to optimize production processes, such as the
production of intermediate ingredients used to make burgers and fried
chicken. McDonald’s operations strategy maximizes the benefits of
economies of scale in production processes, in order to support
competitive pricing. For example, the company employs custom
equipment for large-scale and high-speed food preparation. In this way,
operations management achieves high efficiency in production processes
and the minimization of costs at corporate facilities, hubs, and
restaurants. Also, the production line method maximizes productivity and
capacity utilization at McDonald’s restaurants.

4. For its location strategy, McDonald’s has various facilities that

support its operations. The operations management objective in this
strategic decision area is to establish and maintain locations that
optimally account for access to target consumers, access to resources,
the supply chain, costs, productivity, and economic variables. For
example, McDonald’s production facility locations satisfy restaurants’
supply requirements. Also, company-owned, franchised, and licensed
locations are established for maximum market reach. In this decision
area, McDonald’s operations management involves restaurants, kiosks,
and the company’s websites and mobile apps as venues. Other locations
considered are those of third-party distributors or retailers of McCafé
products, such as Walmart, Costco, Amazon, and Target. Through these
locations or venues, the global fast-food restaurant chain reaches
customers in traditional and online ways. Also, McDonald’s business
structure (company structure) determines the locations of facilities and
resources, including human resources.

5. Layout design and strategy aim for high efficiency in moving

resources and information throughout McDonald’s business organization.
For the movement of information at the fast-food company’s offices and
other locations, information technology offers high efficiency with minimal
drawbacks. On the other hand, at restaurants and kiosks, McDonald’s
operations strategy involves layouts that maximize space utilization and
productivity, rather than comfort and spaciousness. For example, kitchens
are designed to match steps in food preparation. Also, many small tables
are arranged to accommodate large numbers of diners at the restaurants.

6. In human resources and job design, operations management has

the objective of developing and maintaining an adequate workforce for
McDonald’s business development. The multinational corporation supports
the staffing needs of its restaurants. For example, the company has
standardized training programs for skills needed in food production and
preparation. This support is in addition to the human resource policies and
measures that McDonald’s franchisees and licensees implement on their
own. For this decision area of operations management, individual and
organizational learning are also emphasized throughout the fast-food
restaurant chain. McDonald’s organizational culture or corporate
culture influences human resource management programs to facilitate
such learning.

7. Supply chain management aims to maintain high effectiveness and

operating efficiency throughout McDonald’s supply chain. The food service
company’s operations management uses information technology to inform
suppliers and enable them to match their operations to the company’s
supply needs. McDonald’s has a mixture of regional suppliers for highly
standardized ingredients, and local suppliers for perishables. In this
context, suppliers’ productivity affects the restaurant company’s
productivity. With this consideration, McDonald’s corporate social
responsibility (CSR), ESG, and stakeholder management strategy and
other business strategies impose policies and rules for suppliers, to
minimize disruptions in the supply chain.

8. In inventory management, McDonald’s operations management

objective is to ensure adequate inventory for smooth business operations
with minimal disruptions in resource availability. This decision area of
operations management functions as an interface between the supply
chain and the rest of the food service organization. Materials from
suppliers pass through inventory management, or are stored for later use,
depending on the requirements of the corporation and its restaurants.
Inventory management effectiveness influences productivity at store
locations. In this regard, McDonald’s minimizes inventory costs while
supporting restaurant operations.

9. Scheduling at McDonald’s follows industry best practices, with

considerations for supply chain capabilities, market conditions, and
regulations. The strategic objective in this decision area of operations
management is to apply schedules so that resources and assets are
utilized to their full potential, while the fast-food chain satisfies its target
customers. Regular schedules are used for McDonald’s corporate offices
and restaurant locations. Also, seasonal schedules may be applied to
support operations during spikes in market demand for fast food.
Operational effectiveness is achieved by matching the schedules to the
requirements of McDonald’s and its partners.

10. In maintenance, strategic decisions focus on maintaining stable

operations, which relate to the stability of operations at the company’s
corporate offices and stores. To maintain high productivity, McDonald’s
operations management monitors the needs of its restaurants, and uses
the resulting data to inform maintenance teams. Third-party service
providers are also used in some situations, such as for the repair of
cooking equipment and machinery. At McDonald’s hubs for material
distribution, maintenance is implemented in terms of matching
operational capacity and human resources to the current needs of the
business organization. In this context, operations management also uses
real-time monitoring and control to ensure that decisions and actions
correspond to the current conditions of the food-service company.
Considering the international scope of the business, the global, regional,
and local trends characterized in the PESTEL/PESTLE analysis of
McDonald’s Corporation influence the maintenance requirements and the
tools available to maintain stable operations and high productivity.
Productivity at McDonald’s
With regard to the 10 strategic decisions of operations management,
McDonald’s works toward maximum productivity in all its business areas.
The following productivity metrics are some of the criteria applicable to
McDonald’s operations management:

1. Order fulfillment rate (productivity at McDonald’s restaurants)

2. Stockout rate (productivity of inventory management, hubs,
warehouses, and distribution facilities)
3. Timely delivery rate (productivity of deliveries, including third-party
delivery services)

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