Mcdonalds India Supply Chain

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By: Amit Singh Bisht | Posted: Jan 20, 2009

McDonalds India Supply Chain:

Supply Chain is one of the critical factors for the smooth functioning of any business. And when we are talking about fast food business with McDonald's as the subject of the study it can expected a Supply Chain model of one of the highest precisions. It is this unmatched Supply Chain Structure, which not just ensures on time delivery of raw materials and supplies to McDonalds but also enables it to cut down on its cost and maximize profitability along with maintaining highest quality standards of its products. The level of commitment of McDonalds can be gauged from the fact that even before it set up its first restaurant in the country it infused Rs 400 Crore to set up its delivery mechanism. McDonald's initiative to set up an efficient supply chain and deploy state-of-art technology changed the entire Indian fast food industry and raised the standards of performance to international levels.

As already mentioned, McDonalds had been working on its supply chain even before it opened its first joint in the country. McDonalds, an international brand which was trying to make inroads into the country, developed its Indian partners in such a manner that they stayed with the company from the beginning. The success of McDonalds India was achieved by sourcing all its required products from within the country. To ensure this, McDonalds developed local businesses, which can supply it highest quality products. Today, McDonalds India works with 38 different suppliers on a long term basis and several other stand alone restaurants for its various other requirements. McDonald's distribution centres in India 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. The association goes back to July 1993, when it studied the nuances of McDonald's operations and requirements for the Indian market. As distribution centres, the company was responsible for procurement, the quality inspection programme, 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'.

Cold Chain was one of the unique concepts of McDonalds supply chain in India, on which it had spent more than six years to get the system into place. This system brought about a veritable revolution, immensely benefiting the farmers at one end and enabling customers at retail counters get the highest quality food products, absolutely fresh and at great value. Through its unique cold chain, McDonalds has been able to both cut down on its operational wastage, as well as maintain the freshness and nutritional value of raw and processed food products. This has involved procurement, warehousing, transportation and retailing of perishable food products, all under controlled temperatures. The following list of suppliers, who build up the major supply chain of McDonalds, reveal how this ‘Cold Chain' works and contributes towards the efficiency of McDonalds.

Dynamix Dairy Industries (Supplier of Cheese):

Dynamix has brought immense benefits to farmers in Baramati, Maharashtra by setting up a network of milk collection centres equipped with bulk coolers. Easy accessibility has enabled farmers augment their income by finding a new market for surplus milk. The factory has:

• Fully automatic international standard processing facility.
• Capability to convert milk into cheese, butter/ghee, skimmed milk powder, lactose, casein & whey protein and humanized baby food.
• Stringent quality control measures and continuous Research & Development

From farm two degrees Celsius in 90 minutes is the first step to quality. For example, the Rs 262-crore Dynamix Dairy Industries, located in Baramati in Pune district of Maharashtra, manufactures cheese slices for McDonald's at 10 metric tonnes per month. Dynamix has helped set up 15 bulk cooling centres throughout the district from which it purchases milk. Each cooling centre, which is equipped with modern measuring and testing equipment and a large cooling tank, is not more than a few kilometers away from local dairy farms. A farmer can deliver milk even twice a day on his bicycle and get a printed receipt on the spot, which also lists the quality of the milk supplied by him as per fat content, colour and solids content. If the milk is sub-standard or adulterated, it is rejected on the spot. A batch of milk can vary from one litre to 10 litres, or more. Each batch is mixed in one large stainless steel cooler and chilled immediately to two degrees Celsius to stop bacterial growth and preserve freshness. From this point onwards, until just before the burger is actually served in a McDonald's restaurant hundreds of kilometers away, the temperature is never allowed to increase. When the refrigerated milk arrives at the Dynamix plant at Baramati, the milk in every single tanker is thoroughly tested and rejected if found sub-standard, adulterated or contaminated. The sophisticated testing lab can check fat content with an accuracy of 0.1 per cent. It can even detect minute traces of pesticides or antibiotics administered to cows. This instant feedback and the rejection of the entire tanker-load forces farmers to follow the best practices in terms of animal husbandry, use proper feeds, cut down on the indiscriminate use of pesticides and animal medicines and completely stop even the slightest attempts at adulteration.

Trikaya Agriculture (Supplier of Iceberg Lettuce):

Implementation of advanced agricultural practices has enabled Trikaya to successfully grow specialty crops like iceberg lettuce, special herbs and many oriental vegetables. Farm infrastructure features:

• A specialized nursery with a team of agricultural experts.
• Drip and sprinkler irrigation in raised farm beds with fertilizer mixing plant.
• Pre-cooling room and a large cold room for post harvest handling.
• Refrigerated truck for transportation.

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 has 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, is now able to grow this crop all the year round. McDonald's has 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. With this cold chain infrastructure in place, Trikaya Agriculture has also a plan to export this high value product to other international markets, especially to McDonald's Middle East and Asia Pacific operations. McDonald's expertise in packaging, handling and long-distance transportation has 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.

Vista Processed Foods Pvt. Ltd. (Supplier of Chicken and Vegetable range of products including Fruit Pies)

A joint venture with OSI Industries Inc., USA, McDonald's India Pvt. Ltd. and Vista Processed Foods Pvt. Ltd., produces a range of frozen chicken and vegetable foods. A world class infrastructure at their plant at Taloja, Maharashtra, has:

• Separate processing lines for chicken and vegetable foods.
• Capability to produce frozen foods at temperature as low as -35 Degree Cel. to retain total freshness.
• International standards, procedures and support services.

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 have enabled Vista to set up world-class infrastructure and support services. This includes hi-tech refrigeration plants for manufacture of frozen food at temperatures as low as - 35° C. This is vital to ensure that the frozen food retains it freshness for a long time and the 'cold chain' is maintained. The frozen product is immediately moved to cold storage rooms. With continued assistance from its international partners, Vista has installed hi-tech equipment for both the chicken and vegetable processing lines, which reflect the latest food processing technology (de-boning, blending, forming, coating, frying and freezing). For the vegetable range, the latest vegetable mixers and blenders are in operation. Also, keeping cultural sensitivities in mind, both processing lines are absolutely segregated and utmost care is taken to ensure that the vegetable products do not mix with the non-vegetarian products. Now, at Vista, a very wide range of frozen and nutritious chicken and vegetable products is available. Ongoing R&D, both locally and in the parent companies, work towards innovation in taste, nutritional value and convenience. These products, besides being supplied to McDonald's, are also offered to institutions like star-rated hotels, hospitals, project sites, caterers, corporate canteens, schools and colleges, restaurants, food service establishments and coffee shops. 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.

Radhakrishna Foodland (Distribution Centres for Delhi and Mumbai)

An integral part of the Radhakrishna Group, Foodland specializes in handling large volumes, providing the entire range of services including procurement, quality inspection, storage, inventory management, deliveries, data collection, recording and reporting. Salient strengths are:

• A one-stop shop for all distribution management services.
• Dry and cold storage facility to store and transport perishable products at temperatures upto -22 Degree Cel.
• Effective process control for minimum distribution cost.

McDonald's local supply networks through Radhakrishna Foodland, which operates distribution centres (DCs) for McDonald's restaurants in Mumbai and Delhi. The DCs have focused all their resources to meet McDonald's expectation of 'Cold, Clean, and On-Time Delivery' and plays a very vital role in maintaining the integrity of the products throughout the entire 'cold chain'. Ranging from liquid products coming from Punjab to lettuce from Pune, the DC receives items from different parts of the country. These items are stored in rooms with different temperature zones and are finally dispatched to the McDonald's restaurants on the basis of their requirements. The company has both cold and dry storage facilities with capability to store products up to -22º C as well as delivery trucks to transport products at temperatures ranging from room temperature to frozen state.

Amrit Food (Supplier of long life UHT Milk and Milk Products for Frozen Desserts)

Amrit Food, an ISO 9000 company, manufactures widely popular brands – Gagan Milk and Nandan Ghee at its factory at Ghaziabad, Uttar Pradesh.

The factory has:

• State-of-the-art fully automatic machinery requiring no human contact with product, for total hygiene.
• Installed capacity of 6000 ltrs/hr for producing homogenized UHT (Ultra High Temperature) processed milk and milk products.
• Strict quality control supported by a fully equipped quality control laboratory.

All suppliers adhere to Indian government regulations on food, health and hygiene while continuously maintaining McDonald's recognized standards. As the ingredients move from farms to processing plants to the restaurant, McDonald's Quality Inspection Programme (QIP) carries out quality checks at over 20 different points in the Cold Chain system. Setting up of the Cold Chain has also enabled it to cut down on operational wastage

Hazard Analysis Critical Control Point (HACCP) is a systematic approach to food safety that emphasizes prevention within its suppliers' facility and restaurants rather than detection through inspection of illness or presence of microbiological data. Based on HACCP guidelines, control points and critical control points for all McDonald's major food processing plants and restaurants in India have been identified. The limits have been established for those followed by monitoring, recording and correcting any deviations. The HACCP verification is done at least twice in a year and certified.

The relationship between McDonald's and its Indian suppliers is mutually beneficial. As McDonald's expands in India, the supplier gets the opportunity to expand his business, have access to the latest in food technology, exposure to advanced agricultural practices and the ability to grow or to export. There are many cases of local suppliers operating out of small towns who have benefited from their association with McDonald's India.

About the Author

AMIT SINGH BISHT 
B.E., MBA IBS HYDERABAD (PURSUING)
bishtsinghamit@gmail.com
09705858331