McDonald’s Supplier Management principles

McDonald’s Supplier Management principles are one of the biggest reasons for the company’s success.

As one of the largest corporations in the world, it maintains one of the most significant supply chain operations. Considering the fast food giant’s robust supplier management system, it should be no surprise to you. On their part, McDonald’s goes to great lengths to set up strategic partnerships with its suppliers and ensure all parties are intricately committed to each other’s success.

This way, the entire operation can seamlessly achieve success.

Overview of Mcdonald’s Situation

Maintaining 38,000 physical locations in over 100 countries is incredible, but how does the company manage them? 

For starters, because of the company’s operation in several countries, global sourcing was their adopted supply chain technique. Frankly, it is quite a no-brainer. This is because, despite its advantages, global sourcing on such a large scale means a lot of suppliers. However, global sourcing, although efficient and cost-effective, can be quite complex. The complex nature of global sourcing naturally requires an equally robust system to manage it.

Now, you can imagine the workforce and level of infrastructure involved. 

How Does Mcdonald’s Manage to Make its Supply Chain Successful?

Mcdonald’s supplier management principles are the foundational pillars of its robust supplier management system.

There are basic principles that serve as the system’s pillars for managing the company’s global sourcing network better. The principles were highlighted by researchers from the University of Tennessee, who studied the McDonald’s supply chain process. The researchers noted that McDonald’s supply chain’s model primary ideologies were value-adding partnerships between the company and its suppliers.

The Mcdonald Supplier Management Principles

On their part, McDonald’s goes to great lengths to set up strategic partnerships with its suppliers.

This way, it ensures all parties are intricately committed to each other’s success. Although these principles are very effective, McDonald’s also picks its suppliers through a rigorous vetting process. It does this to ensure that the businesses or suppliers they partner with share the same values.

This helps the effectiveness of the principles mentioned below.

Concentrate On Perceived Results, Not Face-Value Transactions. 

McDonald’s focuses on creating long-term relationships with suppliers not only because of their face value but because the future value of their vendors is as important. 

Focusing on the future prospects of their suppliers has served to be both cost-effective and helped ensure both parties add immense value to each other. If you want an example, look at their historic partnership with Coca-Cola.

Concentrate on Achievements.

By focusing on the accomplishments or results of their vendors and not on the process, McDonald’s allows their vendors to have a lot of creativity in achieving results. 

As long as they maintain the agreed-upon values such as environment and sustainable practices, Mcdonald’s sees little reason to police their work. Such faith in their suppliers has rewarded them and proved profitable for the corporation.

Properly Articulated and Measured Results. 

McDonald’s ensures its suppliers understand that the McDonald’s system’s critical supply chain priorities are non-compromisable. 

The system’s primary goal is to sustain the company’s brand reputation while meeting the increasingly volatile needs of consumers. 

In a fast-paced business environment, reputation matters a whole lot. With increasing concern by customers and stakeholders on corporate social responsibility, Mcdonald’s ensures their suppliers keep to established guidelines. These guidelines help them maintain corporate social responsibility; otherwise, they leave their vendors alone.

Single Supplier Pricing System. 

McDonald’s maintains transparent pricing modules containing variables to help all parties grasp the total costs and their trade-offs.

The company’s pricing system aims to decrease overall costs without affecting prices. To ensure the stability of prices for the restaurants, McDonald’s and its vendors will regularly revise the pricing models based on food category and region.

Multi-Levelled Communication With its Partners. 

McDonald’s maintains communication with suppliers both in formal and informal styles. 

The goal is to encourage supply chain visibility and incorporate an open culture in communication. An open culture and communication also ensure all decisions are based on the company’s “System First” philosophy. 

Why McDonald’s Supplier Management Principles Work?

Although they look simple, the McDonald’s Supplier Management principles consider the basic tenets of human psychology.

You will notice these principles are designed to achieve four key objectives:

• Trust
• Freedom
• Clear and easy communication
• Scalability and profitability

Each principle by itself works well and makes for a good motivating tool. However, when coupled together, they can be very powerful in achieving an efficient supply chain process.

#Trust is reciprocal.

But more importantly, it builds comradeship in supplier relationships. When suppliers trust your values, they try their best to match expectations. Violating that trust could put a supply chain in a very difficult position. 

#Clear communications.

It ensures that both parties are well aware of their expectations, promoting the visibility of the supply chain. Indeed, Mcdonald’s trusts their suppliers to deliver on their contractual agreement, but more importantly, it is the freedom they give them to achieve results. 

#Freedom has its constraints.

Without excessive policing, you would be surprised at the amount of productivity the supply chain can achieve. 

#Finally, when suppliers know the rewards of their achievements, such as financial profits and supply scalability, they work towards it as a set goal for their company. 

According to their 2022 reporting, McDonald’s achieved excellent results in different supply chain segments. There might have been areas they need to improve, but the Mcdonald’s supplier management principles speak for themselves.