McDonald’s Logistics and Supply Chain
By Samarth Singh
McDonald’s is arguably the largest company in the Fast Food Industry. Its market share is greater than 40%. Its sales are $45.96B, almost double that of Starbucks, its next competitor. The chain has 41,000 locations across the globe, across 120 countries and serves 68 million customers daily. Despite its scale, the company manages to make meals with the same taste consistently. Its Consumer Satisfaction Index in the USA was 71/100 in 2024, and it has been around that figure for the past 10 years. So how does such a large company cater to such a diverse audience, and what goes on behind the scenes?
The story begins in 1961 when Ray Kroc bought the company from the McDonald’s brothers. He is credited with making the company the fast-food giant it is today. He realized that to scale the business, he didn’t need to just sell more burgers, he needed to sell burgers that had the same good taste throughout. And even today, the taste of McDonald’s burgers mostly stays the same across countries.
The magic begins from the start of the supply chain. In the 1950s, McDonald’s switched to the OSI Group (meat-packing company) from regular beef suppliers in order to ensure that their food remains healthy. The company has built strong relationships with suppliers, allowing it to control every supply chain step, also known as vertical integration. This makes its products cost-effective and consistent. Most agricultural products need to be shipped in cold containers, which is another barrier to fast transport. However, McDonald’s has some of the strictest supply chain regulations. Over 60,000 food safety audits were conducted in McDonald’s restaurants in 2023, and 98% of them operated consistently with McDonald’s Distributor Quality Management Process (DQMP) audit standards.
In the kitchen, rather than letting a chef’s experience define the taste of a burger, McDonald’s has standardized procedures for how long something should be fried to even how to clean a restaurant. McDonald’s restaurants follow similar designs. This is why a McDonald’s restaurant is recognizable even with stiff competition. Ray Kroc even made a university called Hamburger University to teach franchisees how to manage a McDonald’s store.
But how does McDonald’s manage such large amounts of inventory? McDonald’s follows a Just In Time Inventory system, meaning it only places orders when it predicts demand. McDonald’s collects data like store traffic, customer interactions, flow-throughs in the drive-thrus, ordering patterns, point-of-sales data, video data and sensor data. These metrics can forecast what kind of orders are likely to be placed in the future. For example, its systems can predict what kind of orders are likely to be placed at a particular time of the day: a coffee might be more common in the morning and ice creams in the evenings, for example. This data is then used to make menu and drive-through navigation easier.
Needless to say, their efforts have paid off.
Even though 38,000 McDonald’s stores are franchise-owned, customer service remains the same. This is much different from Starbucks, which gets 81% of its revenue from company-owned stores. McDonald’s total expenses are less than $14B, while Starbucks spends more than $30B on operating expenses. The benefit of automation can also be seen: McDonald’s employs 150,000 people while Starbucks employs 381,000. Reducing labour costs is better from a profit perspective only, though. McDonald’s brand value ($150B) is much more than any of its competitors. Food can be prepared within just 3-5 minutes after order confirmation. This, combined with efficient online apps, can allow for quick deliveries. McDonald’s menu items are also much cheaper than its competitors. Gartner Ranked McDonald’s supply chain as the 20th best in the world.
Looking ahead, McDonald’s wants to make its supply chain sustainable. It wants to supply 100% of its eggs cage-free, eliminate antibiotics from its food, and ethically source chickens and pork. It also wants to reduce its carbon footprint. These claims certainly are big, and only one of them has been achieved yet. Overall, its greenhouse gas emissions have reduced by 5%. 97% of its packaging was from fiber-based sources. These are a few among the many statistics published by the company.
However, the flip side is also true. McDonald’s is accused of sourcing meat from sources which use antibiotics, and given the large scale of the company, its carbon emissions are huge even after improvements in the field.
Either way, McDonald’s is a story of how automation, standardization and quality control scaled the company to the giant it is today. It truly has the supply chain, done properly.
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