Between 2014 and 2015, McDonald’s experienced one of its poorest years in history as the company’s full-year net income had dropped by 15% (Neate 2015). The fast-food chain was slowly losing its touch up until the introduction of the new self-service kiosks to the 14,000 branches in the US by newly appointed CEO, Steve Easterbrook in 2016. With the latest technology, McDonald’s was able to generate an increment of up to 8% in gross profit since 2015 (McDonalds 2018). This report will discuss digital ordering along with models and key theories such as the 5 Key Performance Measures, Triple P model, and the Transformation Process in order to answer the questions provided based on the case study.
Firstly, this report will address digital ordering’s role in offering more flexibility to the customers of McDonald’s restaurants. In the future, digital ordering is predicted to create a world of “Wait Time Zero” which is known as the ability of a company to serve its customers as soon as they arrive in store (Noah Glass 2014). McDonald’s will be able to offer the choice of in-house pickup through paying ahead of time and also the possibility of indicating a specified pickup time for each customer (Hospitality Technology 2017). Additionally, McDonald’s will also be able to develop their online applications by introducing recommendation engines which help customers decide their orders based on allergens, dietary requirements and even previous orders (Raut 2017). There has also been the practice of drone delivery by Amazon (Burke, Hughes 2015), which could soon look to be implemented by the fast-food industry if flawlessly perfected. The implications could help decrease labour costs as well as being environmental-friendly.
Deloitte (2016) determined the possible future of the Next Generation Guest Experience that showcased the capabilities of restaurants with digital ordering that could be implemented by McDonald's. These capabilities included the introduction of loyalty programmes, social platforms and menu customisation which has been a popular implementation by McDonald’s in recent years. Besides that, McDonald’s will also be able to easily monitor its consumer behaviour through the data collection of the digital ordering systems (Markovitch, Willmott 2014). This will help McDonald’s further understand the purchasing attitude of its customers and ultimately decide if there would be a need to expand or reduce the size of the menus. The one active constant in this movement, however, is speed. The remainder of the report will look to indicate what speed is, its impact on operational management terminologies and how McDonald’s has or can continue to benefit from it.
Speed is a part of the 5 Key Performance Measures (Slack, Brandon-Jones, Johnston 2017) and has proven to be a critical objective for McDonald’s to serve the greatest number of customers in the quickest time. With growing speed of service, McDonald’s can maximise the profits of the company and increase its market value in the world. The speed of service at McDonald’s is also essential for consumer retention (Hanaysha 2018). According to Naqshbandi (2012), the modern consumer desires speedy delivery without delays and McDonald’s has been able to retain its customers because of the reputation built by the company as being able to serve large numbers in minimum time while still maintaining quality which also provides the company with a substantial advantage over its competitors.
Nevertheless, speed does have its downside. When a business operates in a fast-paced environment, there is a chance of the company undergoing a loss in quality of its outputs (Adiele 2017). However, McDonald’s managed this situation through better design in the restaurant. For example, with the perennial French fries, close consideration was taken in the production line. The fryers are located close to the counters in order to maintain the quality and temperature of the French fries while unique scoops were designed accurately to “overfill” the French fry packaging while only needing one scoop per customer. This ensures a speedy process and reduces the wait time per customer (Levitt 1972). Although, there still lies the popular comment of McDonald’s staff inaccurately producing orders made by customers purchasing at the drive-thru. McDonald's could learn from its competitor, El Pollo Loco, which trains its staff to repeat the customer’s order when handing them their bags (Oches 2017)
Moving on to efficiency and productivity; efficiency is defined as being able to maximise the usage of available resources (Slack, Brandon-Jones, Johnston 2016) while productivity is defined as the ability of a company to maximise the difference between quantifiable inputs and outputs (Heizer, Renden, Munson 2016). A higher amount of productivity would generate a higher amount of efficiency. A method of increasing productivity is through ensuring the company’s inputs remain constant while increasing its outputs, or conversely, decreasing the inputs while keeping the outputs constant (Syverson 2011). McDonald’s is proven to be a highly productive company because it operates on a minimal input (cost, time) while maximising its outputs (production capacity, variety) which also showcases efficiency because it is using its available resources to its full potential.
In relation to the Triple P model (Tangen 2005), efficiency and productivity are closely related to other factors such as profitability, effectiveness, and performance where productivity plays a central role in the process. Speed is an integral non-cost factor that influences the process as it can improve the performance in McDonald's which also ultimately enhances both efficiency and productivity at the same time. A higher speed will increase performance capabilities, which helps complete more tasks on a day to day basis, thus showcasing high productivity, which in turn would improve the efficiency of McDonalds’ operation in the long term. Moreover, the increase of productivity and efficiency warrants an increment in profitability as well (Gummesson. 2014). An example of this is the usage of digital ordering. McDonald's uses a monitor system to communicate its orders to its staff rather than have a human expediter shouting out the orders. This reduces labour costs and cuts off the risk of human error (Bortone 2017) in the orders which could disrupt the speedy service and provides for efficient and productive service at hand.
Subsequently, throughput rate and production capacity also play a significant role in McDonald's. Throughput rate is the average number of flow units passing through a process per unit time in a specified business (Anupindi, Chopra 2013), while production capacity is the capability of a company's output production over a specified period (Hill, Hill 2016). In relation to the transformation process, the throughput rate of McDonald's would be the time a customer spends at McDonald’s from his/ her arrival to their departure of the restaurant. A lower throughput rate provides a higher production capacity because a lower throughput rate creates a lower average time spent per customer, allowing McDonald's to provide for a higher number of customers served over a specified period.
Speed improves them both because if McDonald's spends less time on a customer, then the throughput rate will decrease, hence increasing the production capacity. This in return, will increase the profits and revenue of McDonald's. As a customer arrives, less time is spent placing an order as the digital ordering system assists flawlessly and eradicates the need for human interaction. With this, customers now only need to choose what they want from the machine, and the order is placed right away for the kitchen to prepare. However, a recent study by QSR magazine (2016) indicated that although the introduction of the self-serve kiosks has created a more efficient method of order taking, it has also subsequently increased the wait time per customer/throughput rate. The wait time has risen from 167.1 seconds (2006) to 208.16 seconds (2017) per customer which is a whopping 25% increase (Taylor, 2017). This is because of a variety of reasons such as a more extensive menu selection as well as more time spent in the kitchens, preparing the customers’ orders in large numbers compared to before when the orders in the kitchen were arriving in a systematic structure which has now increased a bottleneck that is showcasing a loss of speed in the operation. It could be that McDonald's may need to redesign its menu and operation to overcome this underlying issue in the near future as they seek the world of “Wait Time Zero.”
In conclusion, McDonald’s has proven to showcase high-level operational management abilities and continues to lead the way for the fast food industry with its constant improvement on speed and quality. The future for McDonald’s does look bright if it continues to deliver in terms of the application of new technology in its operations worldwide. This in return will cement its place as being miles ahead of its competitors, be it in the US, UK or anywhere in the world. With Wait Time Zero slowly becoming a reality, McDonald’s will only have the future to look forward to from here on in as it is a company that seeks continuous development. A valuable asset for any business to possess.