MBA 515 Business McDonalds Brand Strategy

MBA 515 Business McDonalds Brand Strategy

Instructions/Descriptions

MBA 515 Business McDonalds Brand Strategy

Please use references

Student 1 Rachel

How is it Week 5 already?!

For this week’s discussion, I am going to discuss how McDonalds uses the Economic Order Quantity (EEQ) model. McDonalds believes that the EOQ is the best way to order the most optimal order quantity and minimal costs while ordering materials and products or developing the system of producing the brand’s foods.

Not only does McDonalds have to think about the price of the item, it also has to take in consideration the transport costs and inventory costs. The optimal order quantity in relation to purchasing definite products for McDonald’s Corporation should contribute to minimizing the summed up annual ordering and inventory holding costs while following the fixed volume of demand. McDonalds develops its brand strategy based on high quality products and the speed of services provided.

Facts about McDonalds ordering:

Substantially achieved responsible sourcing goals for our six priority products: beef, chicken (soy for feed), coffee, palm oil, fish and fiber-based guest packaging

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100% of our soy sourced for chicken feed globally supports the responsible production of soy

7% of fish sourced for McDonald’s Filet-o-Fish®came from verified sustainable sources in 2020

6% of our primary fiber-based guest packaging was sourced from recycled or certified sources in 2020 and supported deforestation-free supply chains

The situation of ordering the inadequate quantity of definite products can result in problems with using the products and their realization in time, and the problem can involve the issues of increasing the holding costs along with the possible further growth of ordering costs. That is why, the usage of the EOQ model is important to provide the effective realization of McDonald’s products with references to the optimal order of the necessary materials and goods.

I thought McDonalds was a good source for this week’s topic because even with a big and successful as McDonalds is, it still must make good/smart choices when it comes to ordering supplies.

Collier, D. A., & Evans, J. R. (2011). OM 3. USA: Cengage Learning. McDonald’s Corporation: Annual Report 2011. (2012). Retrieved from https://corporate.mcdonalds.com/content/dam/AboutMcDonalds/Investors/Investors%202012/2011%20Annual%20Report%20Final.pdf (Links to an external site.)

Responsible Sourcing. (2022). Retrieved 4 July 2022, from https://corporate.mcdonalds.com/corpmcd/our-purpos…

Student 2 Serge

ABC looks at the overhead and indirect expenses associated with products and services (Will,2020a). McDonald’s has a thorough procurement procedure in place. The method features built-in functions that can optimize raw material procurement, manufacturing operations, and distribution costs all at once (Nano pdf, 2020). McDonald’s employs ABC costing to optimize each procurement cycle, processing, and distribution cycle in order to reach the lowest cost. McDonald’s uses the ABC costing approach to combine financial and operational models in order to determine the cost of manufacturing operations as well as the cost of multiple forecasted plans.

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Companies, in my opinion, should have a moderate batch size. The product will be in short supply if the batch is too small, and the product is popular. On the other hand, if the batch is too large, there will be an excess, resulting in additional costs for the company. When organizations are unsure how to order a batch, they can rely on EOQ to help them choose the optimal option. The best order amount for a corporation to buy in order to reduce inventory expenses is the economic order quantity (EOQ) (Will, 2020b).

Many fast-food establishments, such as McDonald’s and Burger King, employ the EOQ model to calculate the optimal order quantity and lowest costs. When ordering materials and products or improving the brand’s food production system, McDonald’s uses the EOQ model to identify the best order quantity and lowest cost (IvyPanda, 2019). Fast-food restaurants must order the best quantity of ingredients because the ingredients they utilize are restricted in quantity. McDonald’s optimal order quantity assists in meeting fixed demand while lowering the sum of annual ordering and inventory holding costs.

McDonald’s also employs the JIT method in addition to the EOQ system. By receiving commodities just when they are needed in the production process, JIT improves efficiency and decreases waste, lowering inventory costs (Caroline, 2020). McDonald’s adopts the JIT approach because it allows them to lower their total ordering and inventory costs. “High holding costs are the nature of the fast-food industry,” according to Studymoose (2016). Although McDonald’s cannot lower holding costs, it can cut ordering costs, thus it employs JIT in addition to EOQ to address this issue.

Caroline B. (2020, February 14). Understanding just-in-Time (JIT) inventory systems. Retrieved from https://www.investopedia.com/terms/j/jit.asp

IvyPanda. (2019, June 26). Economic Order Quantity in Operation Management. Retrieved from https://ivypanda.com/essays/economic-orderquantity-in-operation-management/

Nano pdf. (2020). McDonald\’s beefs up its supply chain and processing efficiency. Retrieved from https://nanopdf.com/download/mcdonalds-beefsup-its-supply-chain-and-processing-efficiency_pdf

Studymoose. (2016, July 19). Economic Order Quantity model (EOQ) and the Just-In-Time model (JIT). Retrieved from https://studymoose.com/economicorder-quantity-model-eoq-and-the-just-in-time-model-jit-essay

Will K. (2020a, February 10). Activity-based costing (ABC). Retrieved from https://www.investopedia.com/terms/a/abc.asp

Will K. (2020b, February 10). Understanding economic order quantity – EOQ. Retrieved from https://www.investopedia.com/terms/e/economicorderquantity.asp

MBA 515 Business McDonalds Brand Strategy

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