Production and Operation Managemne, Case of Mcdonald

This paper aims at examining the use of teams in production and operations management. Boone and Kurtz (2011) reported that ’’the purpose of production and operations management is to oversee the application of people and machinery in converting materials into finished goods and services’’ (p. 356). Dr. Deming has developed fourteen principles for production and operations management, originally presented in Out of the Crisis, that serve as management guidelines. Organizations that follow that guideline should have more efficient workplace, higher profits, and increased productivity. According to Zupanc ( 2007) ,Dr. Deming’s principles are: Create constancy of purpose, Adopt the new philosophy, cease inspection and require evidence,End the practice of awarding business on the basis of price tag, Improve constantly and forever the system and of production and service , Institute training on the job , Institute leadership , Drive out fear , Break down barriers between departments , Eliminate slogans, exhortations, and targets for the work force , Eliminate work standards (quotas) on the factory floor , Remove barriers to pride of workmanship , Institute a vigorous program of education and self-improvement, Everyone must undergo transformation continuously and indefinitely. (Total Quality Management, para. 5). This paper will focus on Dr. Deming 9th principle. He has advised his client to:’’ break down barriers between departments and staff area’’. In other words, he is encouraging organizations to use team work in production and operations management. It is very important for a company to use team work. Most organizations divide themselves to several departments so that work would end faster upon splitting up and distributing to several departments. This takes the organization to better management in quality and also other profit with better planning. Thesis Statement: In discussing the use of team work in production and operation management, we shall start by describing a major global corporation ( McDonald) , next we shall describe its production or operations management, then we will describe and evaluate the company’s use of teams in production and operations management, and finally we will analyze and evaluate the company’s ability to adjust to a major economic, environmental, or natural crisis (such as the real estate crash, financial crisis, nuclear meltdown, hurricane, flood, oil spill, etc. and communicate effectively with their employees and customers about issues caused by the crisis 1. Describe a major global corporation: (1) a leading manufacturer or (2) a major retail or restaurant business. Describe the type of business, market share, financials, size, and global presence. McDonald's is the world's # 1 fast-food company by sales, with more than 32,500 restaurants serving burgers and fries in 117 countries. (McDonald Corporation , 2009). Svoboda (2007) argued that, in 1991, McDonald owned $13 billion of the $93 billion fast food industry. The popular chain is well-known for its Big Macs, Quarter Pounders, and Chicken McNuggets. Most of the outlets are free-standing units offering dine-in and drive-through service, but McDonald's also has many eateries located in airports, retail areas, and other high-traffic locations. About 80% of the restaurants are run by franchisees or affiliates (p. 1). The sales increased by 5% in 2010, Operating income grew by 9% and the company is continuing to gain market share around the world. In addition, McDonald has returned $5. 1 billion to shareholders through share repurchases and dividends paid, and has provided a 27% return to investors for the year, ranking it third among the companies comprising the Dow Jones Industrial Average (McDonald, 2011). 2. Describe the company’s production or operations management. Operations management can be defined as the planning, scheduling, and control of the activities that transform inputs into finished goods and services (Sloan School of management, 2009). Production and operation managers oversee the work of people and machinery to convert inputs into finished goods and services. Boone and Kurtz (2011) argued that operation managers execute four majors task, first they plan the overall production process, next they determine the best layout for the firm facilities, then they implement the production plan, and finally they control the manufacturing process to maintain the highest possible quality( p . 365). The following paragraphs will have a look at how McDonald executes those four major operation management tasks. PRODUCT PLANNING: Production planning begins by choosing what goods or services to offer to customers. The main operation In McDonald’s Restaurants is product planning. In order to meet the needs of the customers, that are constantly changing, McDonald has to keep on adding new products to its menu. For instance, the increasing preference of consumers towards healthy food made the restaurant add healthier food items to its menu. Similarly it has to add new products for different seasons, for examples hot coffee in winter and milkshakes in summer. LAYOUT DESIGN: Boone and Kurtz (2011) believed that an efficient facility layout can reduce material handling, decrease cost, and improve product flow through facility layout (p. 366). In McDonalds Restaurant layout designing is a very important operation. A proper layout of the equipment in the kitchen is very essential to ensure preparation of quality food in less time. It also designs its layout keeping in mind the health and safety issues. McDonald layoutis design in such a way that needs of supervision is minimised. McDonalds also sets its premises in proper manner to handle any number of customers easily. The building design is standard worldwide but it may be havesome difference in size or in exterior according to the location. It enables them tosave time, satisfy their customers, comfortable environment for both employees and customers. McDonalds uses the same interior pattern as it’s used internationally. Itmay vary according to the premises size (Gondal, 2008, p. 8). IMPLEMENTING THE PRODUCTION PLAN: After planning the production process and determining the best layout. Organization starts implementing the production plan. According to Boone and Kurtz (2011), this activity involves; selecting the best suppliers, and controlling inventor (p. 367). Selecting best suppliers: When an organization has decided what input to purchase, it must choose the best vendors for it needs. Their choice of a vendor will be based on the quality, the price, the delivery, and the services offered. The McDonald’s supply chain is a complex web of direct and indirect suppliers. It manages this complex system by working with direct suppliers who share their values and their vision for sustainable supply. McDonald holds them to clear standards for quality, safety, efficiency and sustainability (McDonald, 2010). It expects them to extend those requirements to their suppliers. McDonald also partner with them to identify, understand and address industry-wide sustainability challenges and achieve continuous improvement. Svoboda (2007) argued that, McDonald often holds seminars and conference for suppliers to discuss their need (p. 3). Overall, McDonald’s and its suppliers are collectively focused on three responsibility areas: ethical, environmental and economic. Controlling Inventory According to Boone and Kurtz (2011) , production and operations managers’ responsibility for inventory control require them to balance the need to keep stocks on hand to meet the demand against the costs of carrying inventory ( p . 369 ). At McDonalds the inventory is managed on the basis of First-In-First-Out basis. This is because most of the inventory consists of perishable items. Therefore delivery of inventory happens twice or more times a week depending on the business of the restaurant. Moreover inventory is stored in freezer with proper packaging so as to ensure freshness of the food items. All this activities comes under inventory management of the organisation. According to Kennon (2007), between 1999 and 2000, McDonald's had an inventory turn rate of 96. 1549, incredible for even a high-turn industry such as fast food. This means that every 3. 79 days, McDonald's goes through its entire inventory. By tying up as little capital as possible in inventory, McDonald's can use the cash on hand to open more stores, increase its advertising budget, or buy back shares. It eases the strain on cash flow considerably, allowing management much more flexibility in planning for the long term (McDonald vs. Wendy’s, para. ) Just in time system seek to eliminate anything that does not add value in operations activities by providing the right part at the right place at just the right time (Boone and Kurtz, 2011, p. 370). McDonald's is also uses JIT system in the sense that it doesn’t begin to cook its orders until a customer has placed a specific order. CONTROLLING THE PRODUCTION PROCESS: The final task of production and operation management is controlling the production process to maintain the highest possible quality. McDonalds put an emphasis on themaintenance of the product quality, the human resources used within the organization, its location and layout designs. They train their employees of all departments regarding their job, so they can handletheir customer and work as well which helps to maintain their status quotas (Gondal, 2008, p. 10). McDonalds is among the companies which are partially involved in the production of goods and services, so a proper maintenance system within the organization strengthens the goodwill and reputation. In McDonalds restaurant , the operations manager develop and establishes the process of cooking food items so that food is prepared using that method which helps them to maintain the speed and the quality of the food. Moreover it also designs processes so that the health, safety and hygiene issues are taken into consideration. Also the managers keep on introducing latest equipment’s with the advancement of technology so as to bring pace, perfection and quality in the product. Overall operations management is very important for any organisations; it contributes to the strategy and therefore helps the organisation to gain competitive advantage. 3. Describe and evaluate the company’s use of teams in production and operations management. A team is a group of people with complementary skills who are committed to a common purpose, approach, and set of performance goal (Boone and Kurtz, 2011, p. 329). A good team is said to be one where the whole of the team is greater than the sum of its parts; and this signifies that the team members are working in teamwork with each other. Many teams have worked together and the output has been lesser than teams made up of less intelligent minds. So while a team does move towards a common goal, how well it achieves this goal depends solely on how well the team members work in collaboration with each other. According to Goldman (2008), McDonald’s owes is success to its team functionality rather than the efforts of one individual. McDonald’s does not have very highly integrated teamwork, but they would be unable to deliver their products and service without sufficient team unity and cooperation (Observation of Leadership, para . 5). Team members have one area that they focus on during their shift. If they leave their post or are not productive, other line members will not be able to accomplish their jobs and the production line will suffer. For example, when a customer enters the restaurant places an order with the cashier, the later inputs the order into the computer and the information is displayed in the kitchen at the sandwich and grill stations. The grill worker prepares the meat and then places the burger on a bun. The sandwich maker then assembles the sandwich according to the type of sandwich and any additional requests the customer has. If the sandwich maker leaves his post, another worker has to cover for him or the entire product delivery process shuts down. Without everyone working together and having sufficient motivation to provide good and quick quality service, all members of the team fail. As a result of one person losing motivation or failing to adequately perform his duties, customers may complain and business can be lost. Even though most employees are trained to perform multiple tasks at various stations, they are not usually able to perform all of these tasks simultaneously. 4. Analyze and evaluate the company’s ability to adjust to a major economic, environmental, or natural crisis (such as the real estate crash, financial crisis, nuclear meltdown, hurricane, flood, oil spill, etc. ) and communicate effectively with their employees and customers about issues caused by the crisis. Every major corporation faces external and internal challenges. External challenges faced by organizations can be economic, environmental, or natural. We will take a look at the environmental challenges that McDonald has encountered and how it has been able to find solutions to those challenges. Svoboda (2007) argued that, in 1989 McDonald was facing environmental protests in the form of demonstrations, letters, and customers mailing their polystyrene clamshells back to the company. In order to take care of those protest McDonald stepped up its recycling effort by creating a joint task force with the Environmental Defense Fund (EDF) (p . 5 ). Developing a strong company-wide environmental policy, declaring that McDonald is committed to protecting the environment for future generation, was one of the first result of the task force. McDonald has also been active in educating its customers about the company’s environmental activities and positions. There are brochures available in restaurants informing customers about McDonald position on such as ozone depletion, the rain forest, and packaging. McDonald has realized that in order to achieve its waste reduction goals, it must collaborate with its suppliers. In order to promote collaboration McDonald has developed an annual environmental conference intended to train suppliers and has included environmental issues in its annual supplier reviews and evaluations. According to Svoboda the following initiatives were proposed by the task force and had since been followed by McDonald: Source Reduction, Reuse, Recycling, and composting. Section 40196 of the California Public Resources Code defines source reduction as any action which causes a net reduction in the generation of solid waste. â€Å"Source Reduction† includes, but is not limited to, reducing the use of non-recyclable materials, replacing disposable materials and products with reusable materials and products, reducing packaging, reducing the amount of yard wastes generated, establishing garbage rate structures with incentives to reduce the amount of wastes that generators produce, and increasing the efficiency of the use of paper, cardboard, glass, metal, plastic, and other materials (Department of Resources Recycling and Recovery, 2010 ) . Over the past twenty years , McDonald has made substantial progress in its source reduction efforts. Svoboda (2007) believed that, McDonald’s â€Å"average meal† in the 1970s — a Big Mac, fries and a shake — required 46 grams of packaging. Today, it requires 25 grams, a 46 percent reduction. McDonald’s has also reduced the weight of packaging in its sandwich wraps, hot cups, and napkins, removed corrugated dividers in some shipping cases, and switched to bulk containers wherever possible ( p . 4 ) . Re-use is using an object or material again, either for its original purpose or for a similar purpose, without significantly altering the physical form of the object or material (Department of Resources Recycling and Recovery, 2010). McDonald reuse options include the reuse of plastic (rather than cardboard) disposables, shipping trays for bakery items, and plastic shipping pallets that last at least three times longer than wooden pallets (Svoboda, 2007, p. 5). Recycling can be defined as using waste as material to manufacture a new product. Recycling involves altering the physical form of an object or material and making a new object from the altered material. McDonald’s tries to use recycled materials whenever possible . According to Svoboda (2007), in April 1990, McDonald’s announced the McRecycle Program, a commitment to spend $100 million annually on the use of recycled materials, especially in the building and renovation of its restaurants. In 1991, it surpassed its goal, purchasing more than $200 million of recycled materials (p. 6). McDonald’s continued to work with suppliers to develop packaging that was consistent with curbside recycling programs, to support the recycling of material that leaves the restaurant via takeout orders. Composting is the biological decomposition of organic materials such as leaves, grass clippings, brush, and food waste into a soil amendment. Almost 50 percent of McDonald’s waste stream consists of paper packaging and food organics that could be composted. McDonald’s is reviewing the compostability of its packaging and studying materials such as the coatings used on its paper-based packaging to determine if they impair compostability. Where possible, it will replace materials that are not compostable with materials designed for compostability. Conclusion This paper has discussed the use of team work in production and operation management, we started by describing a major global corporation ( McDonald) , next described Macdonald’s production or operations management, then described and evaluate the MacDonald’s use of teams in production and operations management, and finally we analyzed and evaluate the McDonald’s ability to adjust to a major economic, environmental, or natural crisis (such as the real estate crash, financial crisis, nuclear meltdown, hurricane, flood, oil spill, etc. ) and communicate effectively with their employees and customers about issues caused by the crisis. References Department of Resources, Recycling and Recovery. (2010). Waste Prevention Terms and Definitions. 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