Page 632 - Introduction to Business

606 PART 6 Managing Business Operations, Management Information Systems, and the Digital Enterprise

Case in Point

Information Systems Development at McDonald’s

In 1991, McDonald’s began its first sends information via modem to McDonald’s
campaign to collect daily sales data corporate headquarters and some of its partners—
from its restaurants via an electronic including Martin-Brower and Perlman-Rocque,
register, or point-of-sale (POS) system. But rather than companies that distribute everything from food to
turning to a system from outsiders, McDonald’s trash bags to the clothes worn by McDonald’s crews
decided to cook up one of its own. —to drive store replenishment. The information sent
Most of McDonald’s fast-food restaurant back to McDonald’s headquarters is collected in
competitors—and most retailers, for that matter—use databases and then transferred to the burger giant’s
packaged POS software, as those systems are not IBM mainframe systems. This information, when
usually viewed as strategic. McDonald’s was aggregated, provides a number of ways for
convinced that by building its own system, it could executives to track restaurant performance,
save money. This belief led to a long-term internal measuring metrics such as the time from when orders
development effort that culminated with McDonald’s were placed to when they were cleared from the
spinning off its POS development effort as a separate system. The ISP also provides restaurant managers
business backed by eMac Digital—a technology with software to manage employees’ schedules. “The
incubator supported by McDonald’s and venture process of doing that—it used to take 8 to 12 hours a
capitalists Accel-KKR. After some initial franchisee week for an assistant manager just to schedule the
resistance, the POS system became a standard for crew—was shaved down to 2 hours,” says Dill. The
McDonald’s American restaurants. While McDonald’s system also automated inventory management and
is currently looking to upgrade this now-outdated reordering of nonfood supplies, such as napkins,
POS system, it remains at the heart of the company’s bathroom soap, and crew uniforms—things that
restaurant operations. previously had been done on paper. Dill estimates
POS systems play a key role in automating the that the ISP saved each restaurant manager 30 hours
interaction between retailers and their customers. a week in paperwork.
When these systems electronically capture the details “We developed something good for all our
of each purchase, they not only yield sales totals but restaurants,” says Dill. “But it was hard to get
also information on what has been used from on- licensees to commit to it.” Some franchisees already
hand inventory. At an aggregate level, POS data can had established relationships with other POS vendors,
indicate to managers the products that are selling well and many were concerned about how much of their
and the products that are not moving, as well as when data would be sent back to McDonald’s corporate
the load in operations reaches peaks and valleys. headquarters, according to Dill. “There was always a
According to Carl Dill, who was McDonald’s chief concern about Big Brother looking over their
information officer from 1982 to 1998 and oversaw shoulder,” Dill says.
the development of the POS system, McDonald’s Now McDonald’s is looking to a newer system and
wanted to use the system to improve its relationship this time it is looking outside the company. This way
with its suppliers and to gain a better understanding the fast-food giant can now focus on hamburgers
of product demand. instead of cooking up its own code.
The software that McDonald’s developed, called
Source: “McDonald’s Wants It Their Way,” by Sean Gallagher,
PC POS, is a two-part system. The first part consists of Baseline, at www.baselinemag.com, July 2, 2003.
the actual POS terminals used at the counter and
Questions
drive-through window. These terminals provide
“software functionality for cash registers” says Dill, 1. What problems was the POS system going to
“like taking orders, communicating to cooking solve?
operations, and giving change.” The second part to 2. Was the development of the POS system a
the system is the back-end “in-store processor” or success?
ISP. The ISP helps turn POS data into information that 3. What would you propose to make it easier for
can be used to better manage the restaurant. The ISP franchisees to commit to the POS system?

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