McDonald’s to Rebuild Supply Chain in China
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As six senior executives of Husi Foods were arrested for producing fake and low-quality products， the incident of expired meat of Husi Foods， which is the Shanghai branch of OSI Group in the U.S.， was officially ended. However， the trouble for mcdonald’s， which is Husi Foods’ largest partner in the world， is far from being over.
On the morning of September 10， McDonald’s announced that the same-store sales dropped 3.7% in the world in August， slightly worse than the-3.1% increase expected by the market. The biggest decline happened in AsiaPacific， Middle East and Africa as the same-store sales volume went down 14.5%. In the U.S.， the same-store sales volume decreased by 2.8% in August， continuing the trend in the three previous months. The European market also has the same-store sales volume down 0.7%. In addition， the Russian court ordered several McDonald’s restaurants to temporarily stop their operation.
The performance in August was the worst monthly figure of McDonald’s since February 2003. At that time， the same-store sales volume once dropped 4.7%.
The spokesman for McDonald’s attributed the slumping sale in every region to the influence of the Husi Foods incident in China and the increasingly serious competition in the U.S. market. The Husi Foods incident cut the EPS of McDonald’s in the third financial quarter by 15-20 cents. Meanwhile， the decline in the sales volume and the increasing expenditure in recovering the fame would further affect McDonald’s global business development.
The Change of Supply Chain
The Japanese market had the worst performance in August. The sales volume in this market dropped 25.1% year on year. It is known that the terrible decline of McDonald’s in Japan was also a result of the “expired meat”of Husi Foods.
Husi Foods was previously one of the suppliers of meat for the McDonald’s Japan. According to the data from McDonald’s， the number of consumers of McDonald’s in Japan went down 16.9% in August， more than the 9.6% decrease in July. The per capita spending of consumers also went down 9.8%， the largest in this year so far.
On August 29， the Shanghai Municipal People’s Procuratorate announced the arrestment of Hu Jun and other five senior executives of Husi Foods for their involvement in producing and processing food with expired materials.
The wrongdoers are waiting for the legal punishment for their crimes， but McDonald’s still has a long way to get rid of the negative influence from the suppliers. At the beginning of August， the restaurants of McDonald’s in China temporarily stopped the supply of chicken and beef. And its hamburgers have been without vegetables for a long while.
When you went to a McDonald’s restaurant in Shanghai in August， the workers there would tell you that there were no vegetables right now before you ordered something. When asked why， they would usually reply that they were still looking for a new supplier （of vegetables）.
Finding new suppliers and rebuilding the supply chain have already become the most urgent and important task for McDonald’s in china. In the list new suppliers of McDonald’s China， Husi Foods is no longer seen. These taking its place were McKey， Cargill， Hormel， Trident and Sunner.
It is known that Cargill is one of the Top four grain suppliers in the world and set up a project in Chuzhou， Anhui， covering the production of forages， incubation， fostering， primary and intensive processing of chicken meat. McKey is a meat producer with leading position in North America. It entered the Chinese market in 1990 and set up its headquarters in Shenzhen. Now it is one of the largest chicken producers in South China. Hormel is also headquartered in the U.S. and has branches in Beijing and Shanghai. Sunner is a listed company in China known for its chicken products.
It took longer for McDonald’s to choose new vegetable suppliers. Creative Food Group， which was founded by UKbased Bakkavor Group， has already been chosen. Golden State Foods is also likely to become a supplier of vegetables in China.
“Firewall” Set Up
After the lesson from Husi Foods incident， McDonald’s set up a series of new requirements for the suppliers. For example， all vegetable suppliers must pass relevant tests at control points， such as the examination in risk prevention and land use， the system of irrigation and water use management， the use of fertilizers， soil additives and pesticide， the hygiene of planters， planting field and the control of unwanted things in the field.
“The standard will not only work in China， but also the world. McDonald’s will have strict examination of every new supplier and its plants. That’s why the restoration of vegetables took longer than the one of meat，” says an insider of McDonald’s.
It is known that all new suppliers must pass examinations in 29 items， including behavior codes， damage analysis ， hazard analysis and critical control point （HACCP）， crisis control， water and air quality management， detergent and sanitizer control， food allergen， McDonald’s food specification， traceability and sustainable supply.
According to a director of a Hangzhou-based food processor， previously， the selection of suppliers by food companies was mainly based on the qualification of the suppliers， the third-party detection test and the traceability management， but now the food companies need to spend more time and energy supervising the raw materials in the upstream sector.”
It is known that McDonald’s also built a set of “firewall” system for the newly-built supply chain in China. With the new defense system， McDonald’s is going to intensify the inspection over the suppliers’ production sites and increase the proportion and frequency of sudden inspections. Cameras are going to be installed in some key production links. If a McDonald’s employee that is responsible for the safety issues have some doubts about the decisions in the raw material purchasing and production， they have the veto.
In addition， McDonald’s also set up an external supervisor for the supply chain， which is shown through the hotline for suppliers， employees and consumers. Anyone reporting the malpractices and wrongdoings are going to be checked by appointed third parties and the safety commission of McDonald’s China is directly responsible for handling it after rewarding the reporters.