McDonald's India: Optimizing the French Fries Supply Chain
Before opening its first store in India in 1996, McDonald's spent six years building its supply chain. During that time, the company worked to successfully source as many ingredients as possible from India. However, French fries ("MacFries") were a particularly tough product to source locally-and importing fries was undesirable for both cost and availability reasons. Growing potatoes suitable for use as fries was challenging in India. By 2007, 11 years after opening its first restaurant, the MacFry was finally being produced in India. McDonald's main MacFry supplier was the Canadian company McCain, which spent many years working on potato agronomy and with farmers to build up supply in India. From 2007 to 2011, local MacFry production increased from none to 75 percent of sales. Despite the strides made, in 2011 Abhijit Upadhye, McDonald's then senior director of Supply Chain India was still a worried man. Double-digit food inflation in India had been putting cost pressure on the company. McDonald's had aggressive growth plans for the coming years. The company had 240 restaurants, and planned to more than double by 2014. The MacFry was the single largest procurement item, so having a 100 percent local supply was critical to avoiding high import duties. The question that troubled him was: "Will I ever be able to eliminate imported fries from my supply chain?" This case describes McDonald's India and McCain India's efforts to optimize the MacFry supply chain by increasing local supply in a fast-growing emerging market using agronomy, farmer relationship development and value chain innovation.