WASHINGTON -- Though it has far fewer stockkeeping units than a supermarket -- about 400 -- McDonald's, Oak Brook, Ill., operates 31,000 units worldwide, and has to carefully control its inventory.
Thus, the fast-food operator has been implementing a supply chain system from Manugistics both in this country and abroad that has had a major impact, reported Rob Bauer, information technology director for supply chain at McDonald's, at a recent users conference held here by Manugistics, Rockville, Md.
"We expect to see $53.8 million per year in savings in Europe from implementing this supply chain solution," Bauer said, noting that the savings amount to $8,962 per restaurant.
McDonald's only applies the supply chain system in the United States for limited supply items used in special promotion -- and it has paid off, according to Bauer.
Before using the system, only 45% of the 12,100 participating restaurants in the United States remained in stock during a 28-day special promotion, but after the implementation, 90% remained in stock throughout the promotion. McDonald's has 13,000 U.S. restaurants.
In France and Germany, participating restaurants used the system to reduce raw-item waste by 30%, and cut inventories by 30%. In addition, the number of times a manager had to bring store product from one restaurant to another due to shortages was reduced from eight to four, Bauer said.
The Manugistics system does daily reads of sales at each restaurant, and converts the information into theoretical inventory. From this, it analyzes how much inventory a restaurant will need in the future -- for promotions in the United States and for all products in Europe.
Bauer noted that the majority of McDonald's restaurants are franchises, and franchisees are not required to participate in corporate initiatives.
"One of the biggest challenges for McDonald's was convincing franchisees to agree to the system and provide records," he said. "The company has to offer incentives such as buying back Happy Meal promotions from the franchises if they don't sell."