McDonalds India Supply Chain:

Supply Chain is one of the critical factors for the smooth functioning of any business. And when we are
talking about fast food business with McDonald’s as the subject of the study it can expected a Supply
Chain model of one of the highest precisions. It is this unmatched Supply Chain Structure, which not
just ensures on time delivery of raw materials and supplies to McDonalds but also enables it to cut
down on its cost and maximize profitability along with maintaining highest quality standards of its
products. The level of commitment of McDonalds can be gauged from the fact that even before it set
up its first restaurant in the country it infused Rs 400 Crore to set up its delivery mechanism.
McDonald’s initiative to set up an efficient supply chain and deploy state-of-art technology changed
the entire Indian fast food industry and raised the standards of performance to international levels.

As already mentioned, McDonalds had been working on its supply chain even before it opened its first
joint in the country. McDonalds, an international brand which was trying to make inroads into the
country, developed its Indian partners in such a manner that they stayed with the company from the
beginning. The success of McDonalds India was achieved by sourcing all its required products from
within the country. To ensure this, McDonalds developed local businesses, which can supply it highest
quality products. Today, McDonalds India works with 38 different suppliers on a long term basis and
several other stand alone restaurants for its various other requirements. McDonald’s distribution
centres in India came in the following order: Noida and Kalamboli (Mumbai) in 1996, Bangalore in
2004, and the latest one in Kolkata (2007). McDonald's entered its first distribution partnership
agreement with Radha Krishna Foodland, a part of the Radha Krishna Group engaged in food-related
service businesses. The association goes back to July 1993, when it studied the nuances of McDonald's
operations and requirements for the Indian market. As distribution centres, the company was
responsible for procurement, the quality inspection programme, storage, inventory management,
deliveries to the restaurants and data collection, recording and reporting. Value-added services like
shredding of lettuce, re-packing of promotional items continued since then at the centres playing a
vital role in maintaining the integrity of the products throughout the entire 'cold chain'.

Cold Chain was one of the unique concepts of McDonalds supply chain in India, on which it had spent
more than six years to get the system into place. This system brought about a veritable revolution,
immensely benefiting the farmers at one end and enabling customers at retail counters get the
highest quality food products, absolutely fresh and at great value. Through its unique cold chain,
McDonalds has been able to both cut down on its operational wastage, as well as maintain the
freshness and nutritional value of raw and processed food products. This has involved procurement,
warehousing, transportation and retailing of perishable food products, all under controlled
temperatures. The following list of suppliers, who build up the major supply chain of McDonalds,
reveal how this ‘Cold Chain’ works and contributes towards the efficiency of McDonalds.
Dynamix Dairy Industries (Supplier of Cheese):
Dynamix has brought immense benefits to farmers in Baramati, Maharashtra by setting up a network
of milk collection centres equipped with bulk coolers. Easy accessibility has enabled farmers augment
their income by finding a new market for surplus milk. The factory has:

 Fully automatic international standard processing facility.

 Capability to convert milk into cheese, butter/ghee, skimmed milk powder, lactose, casein &
whey protein and humanized baby food.
 Stringent quality control measures and continuous Research & Development
From farm two degrees Celsius in 90 minutes is the first step to quality. For example, the Rs 262-
crore Dynamix Dairy Industries, located in Baramati in Pune district of Maharashtra, manufactures
cheese slices for McDonald’s at 10 metric tonnes per month. Dynamix has helped set up 15 bulk
cooling centres throughout the district from which it purchases milk. Each cooling centre, which is
equipped with modern measuring and testing equipment and a large cooling tank, is not more than a
few kilometers away from local dairy farms. A farmer can deliver milk even twice a day on his bicycle
and get a printed receipt on the spot, which also lists the quality of the milk supplied by him as per fat
content, colour and solids content. If the milk is sub-standard or adulterated, it is rejected on the
spot. A batch of milk can vary from one litre to 10 litres, or more. Each batch is mixed in one large
stainless steel cooler and chilled immediately to two degrees Celsius to stop bacterial growth and
preserve freshness. From this point onwards, until just before the burger is actually served in a
McDonald’s restaurant hundreds of kilometers away, the temperature is never allowed to increase.
When the refrigerated milk arrives at the Dynamix plant at Baramati, the milk in every single tanker is
thoroughly tested and rejected if found sub-standard, adulterated or contaminated. The sophisticated
testing lab can check fat content with an accuracy of 0.1 per cent. It can even detect minute traces of
pesticides or antibiotics administered to cows. This instant feedback and the rejection of the entire
tanker-load forces farmers to follow the best practices in terms of animal husbandry, use proper
feeds, cut down on the indiscriminate use of pesticides and animal medicines and completely stop
even the slightest attempts at adulteration.

Trikaya Agriculture (Supplier of Iceberg Lettuce):

Implementation of advanced agricultural practices has enabled Trikaya to successfully grow specialty
crops like iceberg lettuce, special herbs and many oriental vegetables. Farm infrastructure features:

 A specialized nursery with a team of agricultural experts.

 Drip and sprinkler irrigation in raised farm beds with fertilizer mixing plant.

 Pre-cooling room and a large cold room for post harvest handling.

 Refrigerated truck for transportation.

Trikaya Agriculture, a major supplier of iceberg lettuce to McDonald's India, is one such enterprise that
is an intrinsic part of the cold chain. Exposure to better agricultural management practices and sharing
of advanced agricultural technology by McDonald's has made Trikaya Agriculture extremely conscious
of delivering its products with utmost care and quality. Initially lettuce could only be grown during the
winter months but with McDonald's expertise in the area of agriculture, Trikaya Farms in Talegaon,
Maharashtra, is now able to grow this crop all the year round. McDonald's has provided assistance in
the selection of high quality seeds, exposed the farms to advanced drip-irrigation technology, and
helped develop a refrigerated transportation system allowing a small agri-business in Maharashtra to
provide fresh, high-quality lettuce to McDonald's urban restaurant locations thousands of kilometers
away. Post harvest facilities at Trikaya include a cold chain consisting of a pre-cooling room to remove
field heat, a large cold room and a refrigerated van for transportation where the temperature and the
 relative humidity of the crop is maintained between 1º C and 4º C and 95% respectively. Vegetables
are moved into the pre-cooling room within half an hour of harvesting. The pre-cooling room ensures
rapid vacuum cooling to 2º C within 90 minutes. The pack house, pre-cooling and cold room are
located at the farms itself, ensuring no delay between harvesting, pre-cooling, packaging and cold
storage. With this cold chain infrastructure in place, Trikaya Agriculture has also a plan to export this
high value product to other international markets, especially to McDonald's Middle East and Asia
Pacific operations. McDonald's expertise in packaging, handling and long-distance transportation has
helped Trikaya to do trial shipments to the Gulf successfully. In addition to export, McDonald's
assistance has enabled Trikaya Agriculture to supply this crop to a number of star-rated hotels, clubs,
flight kitchens and offshore catering companies all over India.

Vista Processed Foods Pvt. Ltd. (Supplier of Chicken and Vegetable range of products
including Fruit Pies)
A joint venture with OSI Industries Inc., USA, McDonald's India Pvt. Ltd. and Vista Processed Foods
Pvt. Ltd., produces a range of frozen chicken and vegetable foods. A world class infrastructure at their
plant at Taloja, Maharashtra, has:

 Separate processing lines for chicken and vegetable foods.

 Capability to produce frozen foods at temperature as low as -35 Degree Cel. to retain total
freshness.

 International standards, procedures and support services.

Vista Processed Foods Pvt. Ltd., McDonald's suppliers for the chicken and vegetable range of products,
is another important player in this cold chain. Technical and financial support extended by OSI
Industries Inc., USA and McDonald’s India Private Limited have enabled Vista to set up world-class
infrastructure and support services. This includes hi-tech refrigeration plants for manufacture of frozen
food at temperatures as low as - 35° C. This is vital to ensure that the frozen food retains it freshness
for a long time and the 'cold chain' is maintained. The frozen product is immediately moved to cold
storage rooms. With continued assistance from its international partners, Vista has installed hi-tech
equipment for both the chicken and vegetable processing lines, which reflect the latest food
processing technology (de-boning, blending, forming, coating, frying and freezing). For the vegetable
range, the latest vegetable mixers and blenders are in operation. Also, keeping cultural sensitivities in
mind, both processing lines are absolutely segregated and utmost care is taken to ensure that the
vegetable products do not mix with the non-vegetarian products. Now, at Vista, a very wide range of
frozen and nutritious chicken and vegetable products is available. Ongoing R&D, both locally and in
the parent companies, work towards innovation in taste, nutritional value and convenience. These
products, besides being supplied to McDonald's, are also offered to institutions like star-rated hotels,
hospitals, project sites, caterers, corporate canteens, schools and colleges, restaurants, food service
establishments and coffee shops. Today, production of better quality frozen foods that are both
nutritious and fresh has made Vista Processed Foods Pvt. Ltd. a name to reckon within the industry.

Radhakrishna Foodland (Distribution Centres for Delhi and Mumbai)

An integral part of the Radhakrishna Group, Foodland specializes in handling large volumes, providing
the entire range of services including procurement, quality inspection, storage, inventory
management, deliveries, data collection, recording and reporting. Salient strengths are :
 A one-stop shop for all distribution management services.

 Dry and cold storage facility to store and transport perishable products at temperatures upto
-22 Degree Cel.

 Effective process control for minimum distribution cost.

McDonald's local supply networks through Radhakrishna Foodland, which operates distribution centres
(DCs) for McDonald's restaurants in Mumbai and Delhi. The DCs have focused all their resources to
meet McDonald's expectation of 'Cold, Clean, and On-Time Delivery' and plays a very vital role in
maintaining the integrity of the products throughout the entire 'cold chain'. Ranging from liquid
products coming from Punjab to lettuce from Pune, the DC receives items from different parts of the
country. These items are stored in rooms with different temperature zones and are finally dispatched
to the McDonald's restaurants on the basis of their requirements. The company has both cold and dry
storage facilities with capability to store products up to -22º C as well as delivery trucks to transport
products at temperatures ranging from room temperature to frozen state.

Amrit Food (Supplier of long life UHT Milk and Milk Products for Frozen Desserts)
Amrit Food, an ISO 9000 company, manufactures widely popular brands –

Gagan Milk and Nandan Ghee at its factory at Ghaziabad, Uttar Pradesh.

The factory has:

 State-of-the-art fully automatic machinery requiring no human contact with product, for total
hygiene.

 Installed capacity of 6000 ltrs/hr for producing homogenized UHT (Ultra High Temperature)
processed milk and milk products.

 Strict quality control supported by a fully equipped quality control laboratory.

All suppliers adhere to Indian government regulations on food, health and hygiene while continuously
maintaining McDonald's recognized standards. As the ingredients move from farms to processing
plants to the restaurant, McDonald's Quality Inspection Programme (QIP) carries out quality checks at
over 20 different points in the Cold Chain system. Setting up of the Cold Chain has also enabled it to
cut down on operational wastage

Hazard Analysis Critical Control Point (HACCP) is a systematic approach to food safety that
emphasizes prevention within its suppliers' facility and restaurants rather than detection through
inspection of illness or presence of microbiological data. Based on HACCP guidelines, control points
and critical control points for all McDonald's major food processing plants and restaurants in India
have been identified. The limits have been established for those followed by monitoring, recording and
correcting any deviations. The HACCP verification is done at least twice in a year and certified.

The relationship between McDonald's and its Indian suppliers is mutually beneficial. As McDonald's
expands in India, the supplier gets the opportunity to expand his business, have access to the latest in
food technology, exposure to advanced agricultural practices and the ability to grow or to export.
There are many cases of local suppliers operating out of small towns who have benefited from their
association with McDonald's India.

OUTSOURCING THE INGREDIENTS

Cheese Dynamix Dairy Industries Ltd., Pune

Dehydrated onions Jain Foods, Jalgaon
Iceberg lettuce Trikaya Agriculture, Pune
Chicken patty Vista Foods, Taloja
Veg. Patty, Veg. nuggets,
Kitran Foods, Taloja
Pineapple/Apple pie
Chicken (dressed) Riverdale, Talegaon
Buns Cremica Industries, Phillaur
Eggless mayonnaise Quaker Cremica Pvt. Ltd., Phillaur
Sesame seeds Ghaziabad
Iceberg lettuce Meena Agritech, Delhi
Fish fillet patties Amalgam Foods Ltd., Kochi.
Iceberg lettuce Ooty Farms & Orchards, Ooty
Finns Frozen Foods & Jain Foods
Vegetables for the patties
(Nasik, Jalgaon)
Mutton and mutton patties Al Kabeer, Hyderabad