'Handshake as good as a contract' at McDonald's

Will Green is news editor of Supply Management
18 June 2014

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19 June 2014 | Will Green

The leader of UK supply chain for McDonald’s has revealed the company has no contracts in place with key suppliers.

Warren Anderson, vice president of supply chain at McDonald’s UK, said the company instead developed long-term relationships with food, packaging and distribution suppliers and involved them in planning decisions to set prices and volumes.

“We don’t have contracts, but we do have our very assured supply partnerships with our food and paper suppliers,” he said. “A gentleman’s handshake is just as powerful here.”

As McDonald’s celebrates 40 years operating in the UK the firm announced it had made a £25.7 billion contribution to the UK supply chain since it opened its first restaurant in Woolwich in 1974, with the company’s total contribution to the economy valued at £40 billion.

The company says it supports 13,600 jobs in its supply chain each year, including 5,500 in food and agriculture, 2,000 in property and construction and 1,000 in transport and storage.

Anderson said there was no contract in place with the firm’s longest-serving supplier, a paper and packaging company in Scotland it has been working with for 36 years.

He describes the relationship between the company, the franchisees that operate restaurants and suppliers as a “three-legged stool”, where none of the legs is more important than another “otherwise it becomes unstable”.

“The way we work having this balanced three-way effect is incredibly powerful and having that transparency of debate and strong relationships has helped us give suppliers confidence in our future requirements, investing ahead of time, investing in technology, investing in innovation, to give us what we need in terms of change,” he said.

“They are just as much involved in our plans as we are.  We involve them in our planning process every year to deliver our growth requirements, not just for the following calendar year, but our plans for successive years as well.”

Anderson said this work had enabled them to set the price of lettuce for a six-year period. He said they may not have “negotiated every single penny off the table” but it was “incredibly powerful having predictive and competitive pricing”.

A full interview with Warren Anderson will appear in the July edition of Supply Management

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