Localizing the Big Maharaja Mac's Supply Chain

I wish that I could walk into a local McDonalds and order a Big Maharaja. The name just has a certain ring to it (if you're curious, in India, the Big Mac -- which is made out of chicken -- is called the Maharaja Mac). But what interests me most about the Indian take on the fast food icon is not how it tastes or what it's called, but how McDonalds is moving to localize its supply chain in India. According to the above-linked story, after more than a decade in India, "McDonalds is looking for ways to cut down on its logistics costs ... by looking at different regional suppliers, to minimize its supply chain costs, by reducing transportation costs."

The move to further localization within regions in India shows how serious McDonalds is about getting its global cost structure down. Originally, McDonalds beat Burger King and other competitors from a global cost standpoint by sourcing as much locally in each country it entered as possible. Now, looking for second-level results, the fast food purveyor is looking on an even more local basis to overcome the high transportation costs within India. In a previous post, I summarized an article noting how it "takes eight days at an average speed of 6.8 miles per hour -- including 32 hours of waiting at checkpoints -- for a lorry to travel from Kolkata to Mumbai." In a country where transportation costs and time represent such a large portion of total costs, it makes perfect sense to favor a greater number of localized suppliers rather a supplier rationalization program designed to reduce the total number of vendors.

Jason Busch

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