Operations Case Studies

Question 1

McDonald’s - Strategic Role of Operations Management

Answer 1

McDonald’s sells at least 75 hamburgers every second and feeds 65 million people daily
Due to economies of scale, McDonald’s invested in a global operations training program, delivered through Hamburger University – creating consistency and efficiency, reducing overall costs

Question 2

McDonald’s - Globalisation (as an influence)

Answer 2

McDonald’s has 39k restaurants across 100 countries
In 2020, McDonald’s was ranked 10th on Forbes’ list of the most valuable brands
The Russian invasion of Ukraine forced McDonald’s to sell off its operations in Russia at a substantial loss

Question 3

McDonald’s - Technology (as an influence)

Answer 3

McDonald’s has signed long-term contracts with delivery companies Door Dash, Deliveroo, and Uber Eats, allowing the business to become more accessible to consumers
Experimenting with automated order taking in the Drive Thru using voice-recognition and machine learning
At least 50 employees in its Data Analytics team
Automated drink dispensers
Systems that extract waste heat from the kitchen air-conditioning to heat the hot water
Digital menu boards and displays that notify customers when orders are ready
Mobile ordering application
“Dynamic Yield”, a technology that suggests products

Question 4

McDonald’s - Government Policies (as an influence)

Answer 4

Mandated by Food Standards Australia New Zealand that fast-food restaurants display calorie counts on its menus
Food safety plan based on Hazard Analysis Critical Control Point (HACCP) approach
A meat patty goes through 52 checks before arrival in a McDonald’s restaurant

Question 5

McDonald’s - Legal Regulation (as an influence)

Answer 5

Ensure sites are located in commercially zoned areas

State-based laws – Workplace Health and Safety Act 2011 (NSW)
Responsible for enforcing laws and regulations around the COVID-19 pandemic

Federal laws – Australian Consumer Law 2010 (Commonwealth)
Australian Competition and Consumer Commission (ACCC)

Question 6

McDonald’s - Environmental Sustainability

Answer 6

Committed to reducing greenhouse gas emissions to net zero by 2050
Introduction of LED lighting, energy-efficient kitchen equipment, sustainable packaging, and recycling
Support sustainable agricultural practices particularly in the production of beef
Use of rainwater tanks, instillation of time-flow taps, and water-efficient spray guns
Committed to sourcing 100% of guest packaging from renewable, recycled, or certified sources by 2025
Partnership with Ford where the husk of the coffee bean, which is unusable in coffee, is sold to Ford, where combined with other substances is moulded into car headlamp housing
Reduction in fuel consumption

Question 7

McDonald’s - Corporate Social Responsibility

Answer 7

In 2020, McDonald’s Australia, together with its logistics partner, Martin Brower, provided Foodbank with 100k+ meals

McDonald’s refers to the following as the 3E’s, to ensure that the materials are produced in a responsible and ethical manner
- Ethical practices
- Environmental protection
- Long-term economic viability
Verified by organisations that McDonald’s coffee production is sustainable
McLibel case
In 2020, McDonald’s Australia announced that all chicken served in its stores is certified by the RSPCA
McDonald’s Australia has been using cage-free eggs since 2017

Question 8

McDonald’s - Transformed Resources

Answer 8

Shift in customer preferences for healthier goods resulted in healthier goods
In 2011, negative feedback led to a change in coffee blends and processes
In 2021, McVeggie burger was removed due to lack of sales

Question 9

McDonald’s - Transforming Resources

Answer 9

Employs 100K+ employees
In 2021, a large portion of the $2 billion USD invested was designated for facilities and systems

Question 10

McDonald’s - Technology, Task Design, and Process Layout

Answer 10

Automatic drink dispensers
MyMaccas app or self-serve kiosk
IBM: speech recognition

Question 11

McDonald’s - Customer Service

Answer 11

Goal of QSC&V [Quality, Service, Cleanliness & Value] for each and every customer, each and every time

Question 12

McDonald’s - Performance Objectives

Answer 12

In 2020, senior executive Lucy Brady stated, “Speed is in our DNA.”
KPI time-related targets – 11 seconds to toast a bun, 20 seconds to assemble, and 14 seconds to wrap
70% of orders are placed in the drive-thru
Create Your Taste and Gourmet Creations menu provides flexibility and customisation and was a response to Subway’s success

Question 13

McDonald’s - New product or service design and development

Answer 13

From McDonald’s website: “We’re testing a Crispy Chicken Sandwich that just might blow your mind”

Question 14

McDonald’s - Supply Chain Management

Answer 14

Established relations with reliable suppliers, ensuring all beef patties are made from 100% Australian beef

Question 15

McDonald’s - Outsourcing

Answer 15

95% of stores are ‘outsourced’ (franchised)
Sold McD Tech Labs and Dynamic Yield to IBM and Mastercard respectively; however, continues to work closely with these businesses – in a way outsourcing

Question 16

McDonald’s - Inventory Management

Answer 16

Initially, the restaurant manager was responsible for ordering stock; a centralised system with AI is now used

Question 17

McDonald’s - Quality Management

Answer 17

The McDonald’s Supplier Quality Management System (SQMS) ensures consistently safe food that adheres to relevant laws and regulations

Question 18

McDonald’s - Global Factors

Answer 18

R&D centres in each major market
In 2018, McDonald’s opened a new 250million USD headquarters in Chicago, USA, to replicate any global restaurants
Executive Chef and Vice President of Culinary Innovations ensures R&D

Question 19

Apple - Strategic Role of Operations Management

Answer 19

Partnerships with Foxconn and Pegatron, based in China, reduces labour costs
Foxconn is the largest contracts manufacturer (outsourcing partner) of electronics in the world and the third largest technology company by revenue, enabling the business to use its economies of scale
As reported in New York Times, on the 22nd of January 2012, China provided more qualified engineers than the USA
Redesigned and introduced cheaper models of the iPhone

Operating system
Recently, subscription services have been developed to provide more revenue streams and strengthen customer loyalty
In 2012 and 2018, Apple fell to second and third in sales of smartphones respectively
behind Samsung and Huawei with a major factor for this decline being the innovations of the SG and foldable devices from the competitors

The iPhone has been marketed as a premium product and the price tag is reflective of this perception
The iPhone 5c, which differed minimally from the iPhone 5, apart from the plastic casing, was perceived poorly, and as a compromise to Apple’s commitment to quality
This distaste from consumers was visible through the poor sales

Various Apple accessories and apps are produced to be compatible with each other, creating what is known as the ‘Apple Ecosystem’
The Apple Watch is an add-on that is limited as a number of key features are unusable without a compatible iPhone
These augmented features increase brand loyalty as it would be expensive to replace all the products in the Apple ecosystem

Question 20

Apple - Interdependence with other key business functions

Answer 20

Operations and Marketing
The market research collated indicated the popularity of phablets in Asia, leading to the design and development of larger iPhones
KPIs and benchmarks for sales are based on market research

Operations and Finance
When the Trump administration engaged in a trade war with China, profits were threatened as Apple depended on Chinese outsourcing partners, hence operations were moved to India and Brazil

Operations and Human Resources
The successful production of the iPhone 6 and iPhone 6 Plus required Foxconn to hire an additional 100,000 factory workers to meet the production target

Question 21

Apple - Influences

Answer 21

Economies of scale - Foxconn manufactures for other corporations
iPhone 8 was delayed as they were dependent on Samsung for OLED screens

In recent years, the lack of innovation and ability to differentiate the iPhone from competitors have resulted in a loss of market share

Marketed as a premium product and sold at the price tag of one
In 2013, the iPhone 5 was replaced with the 5c, which had a plastic casing, which was a compromise in Apple’s commitment to quality, resulting in lower sales

Apple has had legal battles with market leader Samsung, both claiming infringement on intellectual property: patents, trademarks, user interface and style
In 2013, Foxconn was investigated for breaches of Chinese environmental protection laws
Apple conducted its own investigations, the findings are published in its Supplier Responsibility Progress Report, addressing underage labour and suicide
In 2016, Apple was ordered by courts to pay 234 million USD to the University of Wisconsin-Madison for infringing the school’s patent on microprocessor technology

In 2019, Apple was caught in the crossfire of the China-US trade war and had to relocate aspects of its operations to India, Vietnam and Brazil
Lost 4% on NASDAQ on the stock market on the day of the announcement

In 2011, a group of Chinese environmental organisations published a report alleging that Apple has taken advantage of “loopholes in environmental management” of developing countries and continues to use Chinese suppliers that are known to cause serious pollution in Chinese water bodies
In 2018, Apple announced Daisy, a recycling robot that can disassemble up to 1.2 million devices a year. As part of the Company’s Trade In Program, Apple recycled 7.8+ million electronic devices, diverting 48,000+ tons of electronic waste from landfills

Question 22

Apple - Corporate Social Responsibility

Answer 22

Record of child labour, low wages and unsafe working conditions for suppliers and the factory workers who assemble Apple products
According to recent media reports on factory conditions at Foxconn, workers suffer a long list of human rights abuses: poor wages, unsafe working conditions, long hours, little to no freedom of speech, excessive overtime, and unreasonable production targets
A Dutch start-up company, Fairphone, launched a new smartphone in 2010 with claims to be sourcing materials fairly, paying good wages and designing products that are built to last and are well suited to recycling

Question 23

Apple - Transformed Resources

Answer 23

The popularity of larger screen sizes amongst Apple’s competitors has acted as an input in the design of the iPhone since the release of the iPhone 6 and iPhone 6 Plus in 2015. Conversely, feedback from some customers who prefer the smaller screen size of earlier models led to the release of the first iPhone SE in 2016

Question 24

Apple - Transformation Processes

Answer 24

The history of smartphone design has been an ongoing quest for a thinner phone, larger screen, more powerful operating system, better camera and longer battery life, stemming from customer feedback
Foxconn, Apple’s main outsourcing partner in producing the iPhone, has invested heavily in robotics in recent years

Question 25

Apple - Warranties

Answer 25

In 2018, the Australian Federal Court ordered Apple to pay $9 million in penalties for making false or misleading representations to customers with faulty iPhones and iPads about their rights under the Australian Consumer Law (ACL)

Question 26

Apple - Performance Objectives

Answer 26

According to industry analysts, the iPhone X release in 2017 was delayed due to issues with the OLED displays supplied by Apple’s key competitor, Samsung. This highlights the challenges for supply chain management when relying on a single supplier for iPhone components

Replacing suppliers with in-house development of components, such as graphics and audio chips due to cost

(Biscuit and Tea Story)
In 2007, Steve Jobs wanted a glass screen for the iPhone a few weeks from launching. American suppliers said the deadline was impossible. In China, a factory constructed a dormitory even before signing a contract so its employees could work 12-hour shifts. When the deal was sealed, 8,000 workers were roused from sleep, given a biscuit and tea, and they started fitting glass screens into the iPhone to produce 10,000 iPhones a day

Question 27

Apple - New Product or Service Design and Development

Answer 27

Exponential trend on investment on R&D

Question 28

Apple - Supply Chain Management

Answer 28

A recent report disclosed that Apple has over 750 suppliers in 31 countries. However, 97% of its supply chain is accounted for by approximately 200 suppliers, reflecting Apple’s strategy of having multiple suppliers for each component

The outbreak of Covid-19 led to factory lockdowns that delayed the release of the iPhone 12 series in 2020

The global shortage of semiconductor chips in 2021 led Apple executives to forecast a fall in production of iPhones in the fourth quarter

Question 29

Apple - Outsourcing

Answer 29

The “China-Plus-One” strategy involves the diversification of business operations beyond China

Question 30

Apple - Technology

Answer 30

In 2016, one Foxconn factory reported having reduced its number of employees from 110,000 to 50,000 with the introduction of robotics. Considerable cost savings were achieved by the company, who has publicly announced plans to invest heavily in such technology in the near future

Question 31

Apple - Inventory Management

Answer 31

Purchases inventory 150 days in advance

Question 32

Apple - Quality Management

Answer 32

Foxconn - lack of training and quality control issues. Media reports indicated that Apple returned 5 million+ iPhones to Foxconn in 2013 due to some kind of unnamed defect, with a reported cost to Foxconn of $1.6bn to cover the cost of making replacement handsets
In 2012, highly defective Apple Maps app launched
In 2018, problematic facial recognition feature on the iPhone X launched

Question 33

McDonald’s - The 4 V’s

Answer 33

The MyMaccas App and the self-service kiosks track volume of items sold

Has more variety than ever before

Demand varies for products (ice-cream)

Provides incentives for feedback

Question 34

Apple - The 4V’s

Answer 34

Customer surveys and consumer panels forecasted the future demand for new models of the iPhone