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The burger conglomerate’s special relationship with its suppliers has a unique history. As McDonald’s Chairman Fred Turner expanded the chain in the 1970s, he came across a supply hurdle. The traditional food processing biggies of the industry were either unwilling or unable to supply the food goods that McDonald’s demanded. So, as journalist John F. Love points out in his book - McDonald’s:Behind the Arches – “It developed entirely new food processing methods” by relying on small suppliers. Over the years, the system’s suppliers have grown into some of the world’s largest food processors. Keystone Foods is now a $1billion company and the largest producer of hamburgers in the world; Jack Simplot has become the french fry king of the globe and Schreiber Foods supplies over 65% of the cheese consumed by McDonald’s annually. All these guys did was to shake hands with McDonald’s pioneer Ray Croc in the 1960s & ‘70s and the rest is history.
Decades later, when McDonald’s decided to hit the Indian market, it took them six years (and an investment of Rs.4 billion) to put their supply chain in place. The abundant caution seems to have paid off as today, it’s the only QSR brand in the country that has never been disrupted due to inadequate flow of products or lack of suppliers. The slowdown may be forcing some fast food chains in India to shut down loss-making stores, but McDonald’s is certainly not among them. As was the case globally, the key suppliers for McDonald’s even in India were relatively little know players till about a decade ago. Dynamix Dairies in Baramati (Maharashtra), for example is the key supplier of cheese to McDoanld’s restaurants and began as a largely cooperative movement in 1995. Schreiber, McD’s global cheese supplier gave the initial technological help and Dynamix today has become one of India’s largest dairy companies, with a more than 2.8 million lbs./day fluid line processing facility. Schreiber now also holds a 51% stake in the company. “We help our supply chain partners to grow along with us and even introduce them to our global partners for technological assistance and new processing methods,” explains Upadhye.
Besides, global supply partners like McCain (for frozen French fries) and Vista Processed Foods (for lettuce) have also entered India over the past few years. “McDonald’s helped us to come and set up our plant in India,” avers Jaideep Mukherji, Country Manager, McCain Foods India, which also supplies to Yum! Brands and Nirula’s. The reason why these suppliers have even caught the fancy of rival food chains is because of their quality and reliability. So how do they maintain the exclusivity of McDonald’s success recipe, we asked Vista, which is also a vendor for other 5-Star hotels. “Whatever we are manufacturing for McDonald’s, its exclusively for them and we don’t share it with anyone,” reverts Bhupinder Singh, CEO, Vista Processed Foods. When we visited the McDonald’s sprawling distribution center – run by Radhakrishnan Foodland (another vendor!) – located in Greater Noida, cartons of buns, cheese and eggs were lined up in sub-zero temperature (to lock nutrition), each labelled ‘Made for exclusive use of McDonald’s.’ In fact, McDonald’s is the only QSR chain that has a standing record of having the same logistics partner – Radhakrishnan Foodland Pvt Ltd - for more than a decade.
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Source : IIPM Editorial, 2009
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
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