Operation Management in McDonalds in Malaysia

1.0 Operation Management 3

This report focuses on the subject of Operation Management where the McDonald’s Corporation in Malaysia will be used as the real-life example to illustrate and explain the distinct mechanics and elements present within Operation Management. To obtain the data and information necessary to accomplish this report, the non-participant observation method was utilized by the author to gather primary data while secondary data was mostly sourced through online sources.

This report will comprise of two main sections, where the first being focused on understanding McDonald’s current operational standards and activities so as to identify any potential operational improvements for smoother and quicker procedure for food preparation as well as to provide a better service experience. On the other hand, the latter is concerned with establishing and understanding the roles and responsibilities held by the manager in the selected branch of McDonald’s as well as to analyze and diagnose any challenges that are currently being faced so as to propose a suitable solution for matter at hand.

The findings of this report provide an insight into the operation management and the standard operational activities carried out within McDonald’s Malaysia. Besides that, steps which can be taken to improve upon the current operational standards of McDonald’s to ensure a smooth were discussed along with providing solutions and recommendations for the overcoming the challenges that were identified.

As seen in the case of McDonald’s, proper operation management is crucial in ensuring the success of any organization in effectively carrying out its standard operational activities as well as ensuring the activities are done efficiently to reduce and eliminate wastages of resources and time, which ultimately would then further bolster the organization’s profitability and boost its overall competiveness.

Table of Contents

Order: Title: Page No:

1.0 Operation Management 3

2.0The McDonald’s Corporation in Malaysia 3 – 4

2.1World’s Leading Quick-Service Restaurant Brand 4

2.2 The Operations Function of McDonalds 4

2.3 The Speedee Service System 4 – 5

2.4 “Just-in-Time” and the Modern McDonald’s 5 – 6

2.5 Recommendation for Improvement 6 – 7

3.0 Operation Managers 7

3.1 Roles and Responsibilities of Operation Managers 7 – 8

3.2 Overcoming Operational Issues as a Manager 8 – 9

4.0 Conclusion 9

5.0 References 10 – 11

1.0 Introduction

Operation Management can be defined as the administration of business activities that are concerned with the conversions of inputs (resources such as labor and raw materials) into outputs (good and services) in achieving the highest level of efficiency to maximize the profitability of the organization (Kamauff, 2010). Hence in a nutshell, Operation Management is the managerial activity that is concerned with streamlining the activities involved in the production of an organization’s goods and services to enhance the overall efficiency of the organization through the use of effective planning, sourcing and management of inventory and production. The roots of Operation Management can be traced back to Frederick Taylor’s theory of scientific management in the early 1910s, where the subject of Operation Management has since grown to incorporate other elements such as the Six Sigma, Toyota’s Lean Manufacturing and the Kanban (JIT) production systems (Shim and Siegel, 1999).

In this report, the McDonalds Corporation will be used as a real-life example to illustrate the principals and elements present within the subject of Operation Management. The McDonald’s outlets selected for this report would be the one located at Jalan Mustapha Al-Bakry in town and the branch at Persiaran Kuala Kangsar respectively, where the author used the non-participant observation approach to obtain the necessary information to accomplish this report. The outlet located in town was chosen as this is the oldest branch of McDonald’s in Ipoh while the other branch is selected to identify any potential variations in its operational patterns between the two.

2.0 The McDonald’s Corporation in Malaysia

The McDonald’s Corporation is one of if not the most famous hamburger and fast food chains across the globe, with more than 35,000 outlets across 119 countries. According to its official website, McDonald’s first began its humble existence as a hamburger/barbeque drive-in restaurant operated by the two McDonald brothers in California in the early 1940s, and it wasn’t until 1955 when Ray Kroc partnered with the brothers and established the McDonald’s Corporation as the modern franchising business. In 1982 McDonald’s opened its first branch in Malaysia at Jalan Bukit Bintang, and currently has a total of 250 branches throughout the country which serves an average of 13 million customers on a monthly basis. The success of the McDonald’s Corporation can be attributed to several factors, where one of the main factors involved would be its highly efficient Operation Management function and systems as well as the constant improvements in its operations.

2.1 World’s Leading Quick-Service Restaurant Brand

As with any fast-food restaurant, McDonald’s specializes on providing Low Cost, High Volume, High Speed products with a strong focus on providing its customers with efficient and responsive services. Hence to differentiate itself from competitors such as KFC, Wendy’s and Burger King, McDonald’s aims to be the world’s leading quick-service restaurant. In order for McDonald’s to achieve its goals, it would need to have to structure and manage its operations in a specific manner which will be analyzed in the following sections.

2.2 The Operations Function of McDonald’s

The term Operation Management is normally associated with the activity of managing an organization’s resources that is used to produce and deliver its good and services, while the term Operation Function is more specific in the sense that it signifies the specific part of overseeing and controlling the activities producing the organization’s goods and services (Collins, 2008). To ensure a complete understanding of McDonald’s Operation Functions, the early Speedee System and its modernized “JIT” system will be explained and analyzed in the following paragraph.

2.3 McDonald’s “Speedee Service System”

The origin of McDonald’s operation management function can be traced back to its “Speedee Service System” which was built for the sole emphasis of speed, volume and lowering costs that was incorporated into McDonald’s in 1948 (Highwayhost.org, 2015). Prior to the introduction of the Speedee Service System, McDonald’s operational pattern was similar to other dine-in and drive-ins that employed a host of carhops and waitresses as well as hiring skilled short-order cooks. The operational costs involved such as wages as well as the need to constantly replace the short-order cooks which were in huge demand at that time lead to the McDonalds brothers to come up with the Speedee Service System.

The Speedee Service System reconfigured the entire procedure of food preparation and changed it to something which is similar to that of an assembly line, where one employee would specialize in cooking the burger patties while another prepares the French fries, thus eliminating the bottle-neck that was previously faced when a single chef is required to prepare both items (Schlosser, 2001). In addition to that, the Speedee System eliminated the need for waitresses and car-hops and introducing the Customer Self-Service system which further reduces McDonald’s operational costs, thus increasing its efficiency and lowered the prices of its products, ultimately increasing the number of customers. In its essence, the Speedee Service System revolutionized the restaurant businesses were done and became the precursor for the modern operation management function that is being practiced in McDonald’s today.

2.4 “Just in Time” and the Modern McDonald’s

As with the Speedee Service System, the modern McDonald’s daily operations function emphasizes on the need for efficient workflow processes to minimize the occurances of delays, bottlenecks and unnecessary procedures which will impede its performance. To effectively do so, McDonald’s focuses on managing its food preparation processes to account for every second, as service time is the single most crucial factor for customer satisfaction within the fast-food industry (Dentch, 2009).

True to its motto of Fast Service and Fast Food, the modern McDonald’s system functions in the manner where a customer places an order and pays at the counter, and then the order will be prepared by other staffs within a short time frame. As McDonald’s targeted service time is to be not more than 90 seconds, its operation functions and process workflow is structured in a manner where there is minimal bottlenecks; there are dedicated staffs who handle specific roles such as one employee who cooks the burger patties, another who applies the sauce and seasoning to the burger buns and another who will then finally prepare the finished burger and package into its box and then serve it to the customer (Wilson, 2015). The other food items such as it French fries, soft drinks and deserts will have their own specialized workstations/departments where these items can be prepared independently, hence cutting down on waiting time.

With such systems in place, McDonald’s is able to effectively serve its customers on a timely basis and incorporating a just-in-time (JIT) approach to its food preparation process, it ensures that the food remains fresh and unnecessary wastage or spoilage of food is avoided ultimately. As explained in the book Making Fast Food, McDonald’s operations functions that incorporates the just-in-time (JIT) system and multi-function workers has granted McDonald’s an effective means of mass producing its foods in a way that is not only uniformed and consistent across all its branches but also guarantees a quick and efficient service experience to its customers (Reiter, 1991).

2.5 Recommendations for Improvement

Based on the author’s observation, the standard operational standards of the McDonald’s branches located at Jalan Mustapha Al-Bakry can be furthered improved by eliminating the bottlenecks effect present in the area of its service time. A bottleneck effect can be explained as the specific part or stage of a process where the capacity is at its lowest, which could be due to factors such as a long processing time which then acts as the weakest link in the entire process (Terwiesch, 2014).

In the case of that particular McDonald’s, the main bottleneck being faced would be its point of service during peak hours as there ratio of counters to the total number of customers in queue is out of balanced. For example, it is not uncommon to see more than ten customers lining up behind a single queue and many a times multiple customers who have already paid for their food can be seen hanging around while still waiting for specific items such as their French fries to be prepared.

To an extent this bottleneck can be somewhat minimized by the presence of a dedicated drive-thru counter which radically cuts down the length of queue when comparing the McDonald’s at Jln Kuala Kangsar to the older branch in town that doesn’t offer the drive-thru service. The comparison was made by the author by benchmarking the total time taken for both branches to serve a customer as well as how long it takes for the queue to clear during peak hours. Other than to incorporate a drive-thru into its operations, the McDonald’s in town will be able to eliminate its bottleneck by increasing the number of point of sales (counters) so that more customers can be served at the same time. The only downside of this would be the possibility of the extra counters becoming redundant when there isn’t enough customers at hand.

As for faster food preparation, hiring additional staffs would be a critical step in reducing the total customer waiting time as based on the author’s observation, the major contributor to customer waiting time would be slowdowns caused by insufficient staff in preparing certain food items. For example, at times there is only a single staff that has to juggle between frying the French fries and manning the counter which then creates a bottleneck in the entire process when he or she is unable to finish preparing the fries when the rest of the customer’s set meal is ready.

3.0 Operation Managers

As with Operation Management and Operations Function, the Operation Managers play a critical role in ensuring the effectiveness the of an organization’s operation as these managers are responsible for the management of the organization’s resources that is part of the Operations Functions.

3.1 Roles and Responsibility of Operation Manager

Within each branch of McDonald’s there will be at least two managers; a general manager/restaurant manager and an assistant manager where each will their own roles and responsibilities which will be discussed below.

The general manager/restaurant manager plays the all important role of controlling and overseeing the restaurant’s daily operations and ensuring that the outlet and all its activities are running as smoothly as possible. In addition to that, the general manager is also in charge of other aspects such as controlling the profitability and sales as well as optimizing the management of the restaurant, human resources and team management in their respective stores (McDonald’s Malta, 2015).

On the other hand, an assistant manager’s role would be to assist the general manager in his or her management tasks and plays the important role of filling in for the general manager and running the restaurant should the general manager be absent. The specific role of assistant managers would be to supervise the training and recruitment efforts as well as to ensure that the quality levels and safety level is up to standards as well as to carry out sales forecasts and to analyze operational standards and results. In addition to the general manager and the assistant manager, larger branches would have a dedicated shift manager who is tasked with ensuring that everything is in order during their shift and to keep track of the outlet’s inventory levels and maintenance of equipment (McDonald’s Malta, 2015).

Diagram: Sourced from McDonald’s Malta (2015)

3.2 Overcoming Operational Issues as a Manager

As discussed in the previous section, the issues that are being faced in the selected McDonald’s can be overcome through effective operational planning of the manager. To prevent problems such as insufficient or inadequate number of staff during peak hours, the manager should consider hiring additional number of staffs to cope with the increase in number of customers during the its peak hours. As the crowd usually tends to gather from 12pm to 3pm in the afternoon and from 6pm to 9pm, the manager can effectively schedule and arrange for an extra staff or two to come in to work at these times to work on a shift basis. With the sufficient number of staff, the operations of McDonald’s will be efficient and the bottlenecks that were mentioned in the previous section can be effectively eliminated. A long term solution to the problem would be to restructure the working schedule of the employees where there will be more employee working during peak hours.

4.0 Conclusion

In a nutshell, Operation management safeguards the success of an organization by effectively overseeing and controlling the standard operational activities to ensure that these activities are done in an efficient manner to reduce and eliminate wastages of resources and time, which ultimately would then further bolster the organization’s profitability and boost its overall competiveness. As seen in the report, Operation Management plays a vital role in ensuring the long term and sustainable success of any organization, where the usage of the example of McDonald’s proves itself to be a testament to the effectiveness of proper operation management and operations functions and its impact on the organization. Hence it can be said that without any form of proper operation management, McDonald’s would have been a far cry from the global fast-food giant that it is today.

5.0 References

Aboutmcdonalds.com, (2015).History of McDonald’s :: AboutMcDonalds.com. [online] Available at: http://www.aboutmcdonalds.com/mcd/our_company/mcdonalds-history.html [Accessed 2 Jun. 2015].

Collins, K. (2008).Exploring business. Upper Saddle River, NJ: Pearson/Prentice Hall.

Dentch, C. (2009).McDonald’s Speeds Orders by Seconds to Keep Customers (Update3) – Bloomberg. [online] Bloomberg.com. Available at: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aGL2uS5ybOyk [Accessed 3 Jun. 2015].

Highwayhost.org, (2015).Mcdonald’s Self-Service System: page 1 of 7. [online] Available at: http://www.highwayhost.org/Mcdonalds/mcdonalds1.html [Accessed 2 Jun. 2015].

Kamauff, J. (2010).Manager’s guide to operations management. New York: McGraw-Hill.

McDonald’s Malta, (2015).A Closer Look to Each Role | McDonald’s Malta. [online] Available at: http://mcdonalds.com.mt/employment/a-closer-look-at-each-profession [Accessed 1 Jun. 2015].

Mcdonalds.com, (2015).Our People :: McDonalds.com. [online] Available at: http://www.mcdonalds.com/us/en/careers/our_people.html [Accessed 2 Jun. 2015].

Mcdonalds.com.my, (2015).I’m lovin’ it! McDonald’s® Malaysia | History. [online] Available at: http://www.mcdonalds.com.my/about_us/corporate_info/history.aspx [Accessed 3 Jun. 2015].

Reiter, E. (1991).Making fast food. Montreal [Que.]: McGill-Queen’s University Press.

Schlosser, E. (2001).Fast food nation. Boston: Houghton Mifflin.

Shim, J. and Siegel, J. (1999).Operations management. Hauppauge, NY: Barron’s Educational Series.

Slack, N., Chambers, S. and Johnston, R. (2010).Operations management. Harlow, England: Financial Times Prentice Hall.

Terwiesch, C. (2014).Operations Management Basics: Capacity, bottleneck, process capacity, flow rate and utilization. [online] Scn.sap.com. Available at: http://scn.sap.com/community/uac/learning-center/blog/2014/08/28/operations-management-basics-capacity-bottleneck-process-capacity-flow-rate-and-utilization [Accessed 1 Jun. 2015].

Understanding Operations Management. (2011). 1st ed. [ebook] Saylor.Org. Available at: http://www.saylor.org/site/wp-content/uploads/2013/04/BUS300-1.1_Understanding-Operations-Management.pdf [Accessed 1 Jun. 2015].

Wilson, T. (2015).Mass-produced Food – HowStuffWorks. [online] HowStuffWorks. Available at: http://science.howstuffworks.com/innovation/edible-innovations/fast-food1.htm [Accessed 2 Jun. 2015].

Workflow101’s Blog, (2009).McDonald’s and Workflow: Every second counts. [online] Available at: https://workflow101.wordpress.com/2009/12/14/mcdonalds-and-workflow-every-second-counts/ [Accessed 3 Jun. 2015].

Introduction to Operations Management T22015Page 1