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Key takeaways from Supply chain familiarisation visit

We visited McDonald’s (Westlife) food processing facility (Vista Processed Foods) and distribution centre (Radhakrishna Foodland - RKFL). Westlife has a network of 341 restaurants with presence in 52 cities and plans to add 250-300 stores over next 5 years. In order to achieve its store expansion plans and ensure service quality in a cost efficient manner for such large network, a well-integrated supply chain is critical element. Over the past decade, company has seen healthy GM expansion and supply chain efficiencies play a important role in that. In its Vision 2027, as part of its cost optimisation program, company has categorically highlighted cluster based distribution wherein the focus will be to unlock supply chain efficiencies by setting up new distribution facilities & realign store opening priorities to optimise existing distribution infrastructure. Our visit helped us better understand this process & we came out positive on Westlife’s supply chain capabilities. Few key points which came out were a) stringent focus on product quality & servicing, b) McDonald’s belief in having long term relationship with quality partners and c) jointly & rigorously working with partner to drive cost efficiencies across supply chain.

* Well integrated farm-to-fork supply chain: Westlife has a well-integrated supply chain comprising of Tier 2 suppliers (3 aggregators for Lettuce, Potato, Poultry etc), from where the ingredients move to Tier 1 supplier (eg: Vista Processed Foods). Post processing, the goods are shipped to Distribution Centres (4 DCs for West & South market) from where the entire restaurant network is serviced. Further, rather than working with multiple adhoc processors/logistic partners, McDonald’s works with few large partners, with whom they have relationships since their entry into Indian market. Vista foods, with a frozen capacity of 50,000 tonnes, are the largest supplier pan-India for Mcdonalds. Similarly, the entire movement of goods as well as reverse logistics, demand planning, supplier payments is handled by RKFL. As a result, both company & partners are able to enjoy synergy benefits – partner benefits from the scale, growth & global best practices of Mcdonald’s; while company benefits from commercial standpoint by getting competitive rates and a more streamlined/accountable supply chain process, which then translates into superior servicing in terms of quality as well as helps drive cost efficiencies.

* Strong focus on cost optimisation: Westlife along with its suppliers/logistic partners rigorously focuses on cost optimisation. Given the wide network and large store opening potential, it is essential to drive supply chain efficiencies, optimise logistics costs and management highlighted some of the initiatives undertaken on that front along with partners. For eg: earlier lot of raw material was getting sourced from Punjab which used to take longer time, however, McDonalds along with its partners, has now developed ecosystem in South by addition of new vendors, processing facilities (Vista is developing capabilities for non-veg offering) as well as new DC’s (RKFL added DC’s in Bangalore, Hyderabad & recently in Ahmedabad) which has helped reduce time and save on costs. Similarly, it works with RKFL on route optimisation every 2 years, which helps optimise logistic costs & reduce food miles. For small towns (eg: Bilaspur) which can’t be serviced regularly, as cost of servicing is c.1.5x cost of servicing a Mumbai store, company has invested behind larger cold storage rooms

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