May 20, 2010

Product and Service Innovation - McDonald's & Oatmeal

CNBC reports on the product development cycle at McDonald's (you may have to watch a commercial first, also, don't bother watching past 2:40 unless you like watch talking heads....):

The video states that McDonald's starts with 1,800 new product ideas but less than 5 that make it into the 14,000 stores in the US. The oatmeal that is being tested was in development for over 2 years and it is still not done. Why did it take so long?

Chef says: "Trying to find out how this fits in our operations. It's not real until it is real in our restaurants."

Yeah!!! Strike one up for operations management!   I wish there were more details, but I imagine the challenges of introducing a new product into McDonald's are similar to introducing a new product onto the shop floor of a manufacturing plant: a new procedure has to be created that is simple enough that an unskilled16 year old can do it efficiently, effectively, and consistently.  Additionally, McDonald's does not have the luxury of adding additional space to accommodate new production lines, so where the procure will happen is also an issue.  

To top it off, the chef mentioned that McDonald's supply chain representatives have to give the thumbs up on the recipes.  Clearly McDonald's has to consider the demand for new products and what that means for the supply chain.  Since McDonald's is has such a large footprint, a new product launch may very well stress the supply chain of a certain ingredient.  Last year I meet with a representative of Darden Restaurants and they mentioned that when Red Lobster puts crabs on sale, they have to be prepared to essentially capture the world wide crab supply  in order to meet the demand.

Maybe oatmeal will be hard to come by soon...?  

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