McDonalds Case

In this report, the writer will critically evaluate the use of, and how the 'Lean' and Just in Time (JIT) manufacturing models are applicable within the service sector, using McDonalds as a prime example.

Lean principles derive its history from the manufacturing industry, with Toyota Motor Company being given credit to the development of this approach (Duclos & Lummus, 1995). Its founder 'Kiichiro Toyota' was influenced by Henry Ford's mass production methods of the 1920's. Motor vehicle demand was low in Japan after their defeat in World War II, (Dale & Lwaarden, 2007) Toyota's Production System (TPS) built many prototypes of motor vehicles with little capital outlay. What followed were reduced costs, better quality and a fulfilment of customer needs, thereby producing greater efficiency (Slack et al., 2007). TPS was created by 'Taiichi Ohno and Eiji Toyoda' on the existing schools of thought.

The term 'Lean' was first coined by John Krafcik in 1988 in the article 'Triumph of the Lean Production System' published in the Sloan Management review, and defined by the National Institute of standards of Technology Manufacturing Extension Partnership's Lean Network published by Kilpatrick (2003, p.2) "... A systematic approach to identifying and eliminating waste through continuous improvement, flowing the product at the pull of the customer in pursuit of perfection."

Lewis (2000) stressed that Lean is an amalgamation of management principles to eliminate waste (muda called by the Japanese), and defined by Canel et al., (2000) "...anything other than the minimum amount of equipment, materials, parts, space and worker's time, which are essential to add value to the product or service."

Lean is commonly linked with the term Just in Time (JIT), namely, producing products and services as required, and defined as a process waste-elimination philosophy (Chase & Aquilano, 1992). JIT is simple: inventory is waste. The JIT inventory system ensures that costs are kept to a minimum. An array of new methods is necessary to manage the consequences of change. This path arises from the disciplines of statistics, industrial engineering, production management, and behavioural science. The JIT inventory philosophy defines how inventory is viewed and how it relates to management.

Both concepts overlap to a certain degree. However, as stated by Slack et al., (2010, p.433) "...The concept of 'lean' stresses the elimination of waste, while 'just-in time' emphasizes the idea of producing items only when they are needed."

Lean and JIT are useful to managers in the service sector. Examples of the service sector include Retail Sales, Insurance, and Health Services. The Lean and JIT models will now focus on McDonalds. Product development is essential whether in services or manufacturing. What distinguishes a service company from that of a manufacturing organization is the degree of service performance.

In the study conducted by Levitt (1976) cited in Bowen & Youngdahl ( 1998), the importance of Lean developed in manufacturing, could be applied equally in the service sector with similar beneficial results. Over a long period of time the service sector customer has demanded better service with little or no increase in the product price, and to this end, Lean contributes to this outcome with the elimination of waste from the value chain (Bowen & Youngdahl, 1998).

However, there is a need to continually address the principle of improvement in the service sector and by utilising the five Lean theories as outlined by Womack & Jones (2003), would thereby achieve accomplishment (Melton, 2005). These theories are value, the value stream, flow, pull and accomplishment. In order to eliminate waste, these theories go hand in hand with the seven features of waste described by Womack & Jones (2003, p. 352);

"Taiichi ohno's original enumeration of the wastes commonly found in physical production. These are overproduction ahead of demand, waiting for the next processing step, unnecessary transport of materials (for example, between process villages or facilities) over processing of parts due to poor tool and product design, inventories more than the absolute minimum, unnecessary movement by employees during the course of their work looking for parts, tools, prints, help, etcetera and production of defective types" (Womack & Jones, 2003 p.352)

Lean involves broad understanding, high commitment and a deep analysis of problems. Service organizations are implementing Lean as a long-term basis for improving quality, reducing costs, fast delivery and efficient communication between staff (Womack & Jones, 2003). Organizations like McDonalds require clear and effective communication between management and staff. Constant feedback from employees to management is essential with Lean, with any changes implemented only when there is a perceived increase in value (Chase et al., 2004). Additionally, Lean permits the employees to complete their tasks in the minimum possible time, resulting in a successful service operation, a contented customer and financial rewards (Hanna, 2007). These authors state that implementing Lean in the service industries can resolve difficult situations, encourage staff to accept responsibility, with the natural outcome of high customer satisfaction. (Krajewski, et al., 2010). Therefore, the manager is able to extract the maximum dedication of a McDonald's employee to the overall benefit of the company, whilst not alienating an employee's commitment to the overall achievement of competitive advantage; namely excellent delivery time and reliability.

There are differing views to what the writer has explained so far as argued by Sarker (2009), that staff behaviour in the service sector is important for the Lean principles to be successful. In the day-to-day working environment, the employee's mood is vital. Unhappy employees can seriously disrupt the process. Staff harmony cannot be understated, as each individual is just one cog in the overall process. Employees must feel they are valued in eliminating waste (Worley and Doolen, 2006). The by-product of employees being enlisted to the principle of Lean is an increase in stress levels of the workforce to identify waste wherever it occurs (Womack et al., 1990).

There have been challenges when implementing Lean in the service sector. Worley and Doolen (2006) point out that it is hard to persuade workers in a service organization to change their thinking, in order to focus on customer value and waste identification, because they might be resistant to the new tools, such as Lean.

However, some authors