McDonalds

Unit 4
Final Project

Purchasing Process
Introduction
MacDonald’s is a first food chain which started its operations in the year 1940 by Maurice and Richard McDonald in the USA. The business was first started as a hamburger stand but later resorted to selling chicken products, cheeseburgers, breakfast items, French fries, desserts, soft drinks, wraps, and milkshakes. In response to consumer preferences over their unhealthy products, they have started selling fish, salads, and fruits. With the joining of Kroc Ray as a franchise agent, the business was wholly bought and continued with its operations from their Illinois headquarter. The company is known to be the largest restaurant chain across the globe, and it currently serves more than 70 million customers on a daily basis. Their operations were situated in more than 110 countries worldwide as of 2016, with approximately 40,000 outlets. Their main revenues come from franchisees fees, rent, and royalties, coupled with their sales from their different restaurants across the globe. Being the second largest private employer, they currently have more than 2 million workers who work from their operated stores and franchisees.
Purchasing Process
McDonald’s operates in the foodservice industry, and are known to have the best procurement and purchasing process when compared to their competitors. This is the main reason for their growth from a hamburger stand to a worldwide foodservice corporation that operates in more than 110 nations across the globe.

However, 80% of their restaurants are operated by independent franchisees, and all of them follow a branding and marketing strategy which is based on uniformity. Chen et al. (2016) confirm that their consistency in purchasing their products has led to the success they currently enjoy, and this relies mostly on their purchasing sales processes.
The company has a purchasing department which completes a purchase requisition form, and once approved they usually contact their best suppliers who are sent a purchase order from the managers. The suppliers respond with notifications on the availability of the products, and once the two parties agree on the terms of payment, they are given their products accompanied with an invoice to pay for the products on a stated date. It is vital to note that when orders are made for different product or service purchases, the company controller can decide not to approve, and this often happens when there are changes from the management segment. When the organization decided to sell healthy meals, for example, most products that were not in line with their new objective were not bought, to fulfill the needs and requirements of all their customers due to the changes in their preferences. In addition, the company also decides whether to use cash or credit cards in their operations, and such considerations are based on the agreements with their suppliers, and the money or products/services required.
In addition, their processes are founded on a single philosophy which can only be described under three different steps. The first one entails their employees, the second one encompasses their operators, and the last one considers their suppliers, and they both support each other in their quest to succeed the tough competition in the industry. The suppliers and the different stores are committed to delivering value for their system as a whole. They, however, work with leading suppliers in the process of sourcing for their products, while using those that are regarded as leaders in their operations.
With their global sustainability framework which was established in their year 2014, the company has managed to source for their priority products which include palm oil, fish, coffee, packaging, and beef without problems (Calvo-Porral et al., 2016). They constantly work with non-governmental organizations, industry groups, and local suppliers to ensure that they serve their increasing clientele base across the globe. They have several guiding principles which ensure that they only purchase products that are environmentally friendly, economically viable, socially responsible, and those that meet the needs and requirements of all their customers.
According to Gorham et al. (2016) the reason for the sustainable supply chain implementation was to allow the organization to source for products that are healthy, and those that consistently provide value in all their stores. They always ensure high standards in their operations and inculcate trust with their suppliers at all levels of purchasing. They currently have strong bonds with farmers who supply them with different raw materials for their products, and this has enabled them to ensure an increased competitive advantage in the long-run.
In the year 2000, McDonald’s partnered with Accel-KKR, Inc. and this led to the establishment of eMac Digital which has a mandate of ensuring business opportunities that ensure efficiency in deliveries, cost maximization, and new distribution channels. Through the partnership, the organization has managed to reduce their costs of transactions, while ensuring better communication capabilities among all the stakeholders. In addition, the partnership led to the creation of an electronic procurement platform which manages their information, sales orders, purchasing, among other functions.
Further, they have had better relationships with their suppliers, and this has seen past suppliers from 1950 supply the materials they require for their operations (Mathur, 2017). A company like Keystone Foods has been supplying McDonald’s with beef and chicken for almost 40 years. They have also been changing with the times, and with the introduction of different online platforms, the organization has partnered with pioneers in this field to ensure better customer experiences. Also, with the newly established department of planning and forecasting, the organization has managed to separate their purchasing functions with other administrative work, hence providing products on a timely basis. With their contingency network, the organization has managed to plan all their operations in detail to avoid under-stocking and over-stocking in their warehouses.
The suppliers in the organization are regarded as being integral to their operations and success. The relationships built between the suppliers and the organization relies on trust without any formal contracts, and all the contractors who commit their funds and resources to product development and technology are always rewarded. The company’s processes, objectives, inputs, and outputs are shown in the table below.
Processes Objectives Inputs, and the Suppliers Outputs
Local producers are contacted when required but need to meet hygiene standards.
Suppliers are monitored to ensure that their social, animal welfare, environmental and agrochemical policies are standardized.
The company only contacts suppliers who operate humanely, by the set guidelines and regulations.
The organization works with suppliers to help them achieve the quality standards required.
They have an electronic platform that ensures cost effectiveness in their operations.
Before any purchases, the organization considers the suppliers’ costs and production processes.
Communicate immediately there is a gap in their products.
The company writes requisition forms which are approved by the controller.
Purchase orders are sent to the respective suppliers for products and services.
Invoices are then paid promptly immediately they are received. Have long-term company-supplier relationships.
Settle invoices promptly.
Communicate developments and changes that affect the organization directly.
Ensure that their beef originates from hygienic, comfortable, safe and clean environments.
Refuse beef that originates from hormonal growth promoters.
Ensure that all premises used in the production processes undergo approvals from relevant authorities.
Support measures from the government to ensure awareness of all their products and their origin.
Have excellent customer experiences.
Offer quality products and services.
Be the number one health provider on their menu.
McKey Food Service
Pork Products
Bacon
Hamburger Patties
Golden West Foods
Ketchup
Milkshake syrups
Distribution of multi-temperature
Sun Valley Poultry
Chicken Products
McCain
Hash Browns
French Fries
Icelandic Freezing Plants
Fish Products
Unigate Dairies
Milk Products
Ashby Dairies
Milk Products
Scottish Pride Dairies
Milk Products
Central Edible Oils
Vegetable Shortening
Banders
Cold Drink Cups
Napkins
Smith Anderson
Paper Bags
Lin Pac
Foam Packaging
PolarcupStraws
Lids
Cold Drink Cups
FibracanHot Drink Cups
Career Apparel
Crew Uniforms
HKI Kitchen Equipment
Equipment
Howard Long International
Salad
Kitchen Range Foods
Donuts
Fruit Pies
Gala Coffee
Coffee
Dairy Produce Packers
Cheese Slices
McCormick
Sauces
Coca-Cola
Soft Drinks
Hamburgers
Chicken Products
Cheeseburgers
Breakfast Items
French fries
Desserts
Soft drinks
Wraps
Milkshakes.
Fish
Salads
Fruits
Salads

Nature of Internal Controls
Local producers are contacted when required but need to meet hygiene standards.
In this procedure, there exists a manual control.
The risk that the existing control mitigates is the infection of supplies from the outside.
The persons involved in this control are the inventory manager and the quality assurance officer who certifies the supplies as meeting the hygiene standards.
The missing control is the system control which would detect the quality of the supplies at the warehouse before the supplies gets into the store. This control would also deactivate the access of the particular supplier and the information sent to the quality assurance officer for further action.
Suppliers are monitored to ensure that their social, animal welfare, environmental and agrochemical policies are standardized.
In this procedure, there exists a manual control.
The risk that the existing control mitigates is the tainting of the company’s reputation for being affiliated to substandard suppliers.
The person involved in this control is the quality assurance officer from the company.
The system control is missing. It would help in mitigating the risk of substandard suppliers by storing all information collected in the field in a database that checks the frequency of the standards violation by the suppliers in terms of social, animal welfare, environmental, and agrochemical policies.
The company only contacts suppliers who operate humanely, by the set guidelines and regulations.
The control that exists is the human control.
It mitigates the risk of contacting suppliers who do not meet the required regulations and guidelines during the operation of the business.
The person involved in this control is the inventory manager.
The missing control is the system control. The system control would automatically select the suppliers who meet the required regulations and guidelines and automatically send them an invitation email to supply their products immediately they run out in the inventory system.
The organization works with suppliers to help them achieve the quality standards required.
The control in this process is the human control.
This control mitigates the risk of having suppliers unaware of the quality standards that they should meet.
The person involved in this control is the quality assurance officer.
The missing control is the system control that would help in distribution of company content on the expected quality standards every time there is an change in the quality standards.
They have an electronic platform that ensures cost effectiveness in their operations.
The control that exists here is the application-level control.
The control is an input, processing, and output control that works by assessing the cost of every unit produced in the company. It compares the cost incurred during acquiring inputs as well as processing and compares it to the returns resulting from the output.
The missing control is the human control that would help mitigate the risk of having suppliers supply cheaper goods that do not meet the standards.
Before any purchases, the organization considers the suppliers’ costs and production processes.
The control involved in this process is the human control.
It mitigates the risk of missing the opportunity to buy cheaper goods of the same quality from different suppliers.
The person involved in this control is the inventory manager.
The missing control is the application-level control that would have a database of all the prices in the market and invite the cheapest supplier for a particular good to supply the company.
Communicate immediately there is a gap in their products.
The control in this process is a human control.
The control mitigates the risk of consuming poor quality supplies thus foregoing more superior supplies in the market.
The persons involved in this control is the inventory manager and the quality assurance officer.
The missing control is an application-level control that would help compare the quality goods supplied with those available in the market in terms of quantity, prices, and usability. With this control, the supplier would be notified of every element that makes their goods inferior to the others in the market.
The company writes requisition forms which are approved by the controller.
The control that exists in this process is human.
It helps in mitigating the risks of having staff members collaborate with the suppliers to supplier substandard goods at higher prices and at the expenses of the company for personal gain.
The person involved in this control is the credit controller.
The missing control in this process is the application-level control. This control would help in mitigating the risk by having online requisition forms that ease the approval process since the controller would only have to sign in to their online account and send them to the supplier.
Purchase orders are sent to the respective suppliers for products and services.
The control in this process is human.
The risk mitigated by this control is to ensure that the suppliers receive the purchase orders on time to prevent delay of supplies.
The persons involved in this process are the courier staff.
The control missing in this process is the application-level control. This control would help mitigate the risk of late supplies by having the suppliers receive the purchase orders online. This would help reduce the overhead costs.
Invoices are then paid promptly immediately they are received.
The control in this process is human.
This control mitigates the risk of having accumulated debts payable to suppliers.
The persons involved in this control are the finance manager and the inventory manager.
The missing control in this process is the system control. This control would help in automatically making payments to the suppliers as soon as their supplier are received in the inventory control at the warehouse.
Documentation Guidelines of Existing General IT Controls:
The five general IT controls important to the organization include:
Program change management control (business continuity planning).
This control works by ensuring that the changes in a product are introduced to the company and controlled in a coordinated manner.
Computer operation controls (computer facility controls).
This control works by ensuring that the systems continue to work as initially planned.
System and data backup controls (access to computer file).
This control works by ensuring that all data is stored and can be retrieved for use as required.
Logical access controls over data (business continuity planning).
This control works by identifying, authenticating, authorizing, and accounting for of business transactions using computer information system.
System development life cycle controls (file security controls).
This control works by ensuring that the systems are developed in a way that the data therein cannot be compromised either due to bugs during development or due to untested system environments.
Conclusion
McDonald’s has an organized team of workers who ensure quality, hygiene, service delivery and operations excellence at all levels. All their services follow a systematic format, hence their success in the industry. Along with their operations, the organization has split their waiting time between their service and queuing time. This enables them to have little idle time, and all their shelves are restocked daily. They, however, have been working towards ensuring cost-effective materials and labor, because these are the two vital concepts that determine their profit margins. Their success is usually attributed to low costs, continuous processing of orders, minimal idle time, controlled raw materials flow, moving queues that are fast, high service delivery, minimal congestion, standard work and consistency in all their branches.
Further, the organization often has long-term relationships with their suppliers, and this helps them to understand the changes they need to make every time their strategies are renewed. Also, they often settle their invoices promptly and ensure that all their inputs are sourced from suppliers who follow the set guidelines and regulations in their operations. Communication is however key in their processes, and they often ensure that all their changes are communicated promptly while ensuring that their company owned and franchisees stores are clean and safe. All the processes that are followed ensure better end products, and in recent times they have been applauded for being the best chain in selling salads, fruits, fish, milk shakes, wraps, soft drinks, desserts, French fries, breakfast items, cheeseburgers, chicken burgers, and Hamburgers. The different inputs from the suppliers include drinks, coffee, pork products, chicken products, milkshake syrups, French fries, napkins, straws, sauces, cheese slices, cups, milk products, beef, and paper bags.
References
Calvo-Porral, C., Calvo-Porral, C., Levy-Mangin, J. P., & Levy-Mangin, J. P. (2016). Specialty food retailing: The role of purchase frequency and determinants of customer satisfaction and loyalty. British Food Journal, 118(11), 2798-2814.
Chen, Y. S., Dooley, K., & Rungtusanatham, M. J. (2016). Using text analysis and process modeling to examine buyer-supplier relationship dissolution: The Ford-Firestone breakup. Journal of Purchasing and Supply Management, 22(4), 325-337.
Gorham, L. M., Gibson, C., & Irlbeck, E. (2016). Making a case for McDonald’s: a qualitative case study examining the McDonald’s” Our Food, Your Questions” campaign. Journal of Applied Communications, 100(4), 17-33.
Mathur, S. (2017). Glocalization in Fast Food Chains Glocalization in Fast Food Chains: A Case Study of McDonald’s. In Strategic Marketing Management and Tactics in the Service Industry (pp. 330-347). IGI Global.
Appendices
Appendix I: System Flowchart