Wednesday, September 23, 2009

Inventory

After doing some inventory research on McDonalds we came up with some very useful information:

McDonalds is considered a JIT inventory operation meaning "Just in Time" another company that uses this same technique, is Dell. This means that McDonald's doesn't begin to cook or reheat food until a customer has placed a specific order. This prevents extra food from being used and cuts cost because inventory can still be kept and not thrown out.
There are two major parts to JIT inventory operation
One is lowering the ratio between ordering costs and holding costs, and shortening lead times. The results is an operation with high holding costs, and that ordering very small batches very frequently is the most profitable solution. This allows McDonalds to eliminate average inventory above the safety stock level. Then if lead times begin to decrease safety stock can be decreased. The result is inventory coming "just in time."

The biggest benifit McDonalds sees out of running there inventory this way is better food at a lower cost. They also improve customer service because it allows special orders to be made correctly and it does not cause delays.

McDonalds is obviously a huge company and is run very well. They operate over 31,000 restaurants worldwide, and employ more than 1.5 million people. With these kinds of numbers it becomes even clearer that the McDonalds Franchise is a very succesful one and we personally feel without their inventory running so smoothly this would not be possible.

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