Beijing, Nov. 10 - McDonald's Corp is looking to trim costs by supplying more of its restaurants around the world with food and packaging made in China, company officials said Friday.
Since the early 1980s, McDonald's has invested heavily in creating a large supply chain in China to serve its growing number of restaurants in the world's most populous nation.
Now, McDonald's is hoping its restaurants in other parts of the world will be able to benefit from that investment.
"The supply chain for (McDonald's Asia, Middle East and Africa unit) is looking at ways to leverage what is available in China to supply other parts of Asia and other parts of the world," Jerry Schafer, chief restaurant officer for McDonald's China, said at a media event at the company's Beijing distribution center.
When McDonald's opened its first restaurant in China in 1990, all it had was a single meat production plant. The rest of its products were brought in from elsewhere and subjected to hefty import duties, said Herbert Wong, senior director of supply chain management for McDonald's China.
It wasn't until 1999 that McDonald's was able to supply all of its restaurants in China with french fries made from Chinese-grown potatoes. That came 14 years after McDonald's and its primary french fry supplier, Boise, Idaho-based J.R. Simplot Co., invested in the creation of a commercial potato farming industry where there was none.
Today, nearly 96 percent of the products sold in McDonald's 770 restaurants in China are produced at 43 facilities there. And, its supply chain is far larger than what those restaurants demand. For instance, the company uses only two-thirds of the french fry capacity available to it in China, Schafer said.
As a result, McDonald's suppliers have started to export some of the products made in China to the company's restaurants in other markets where the cost of doing business is higher.
Snow peas grown in China are shipped to the United States for use in McDonald's Asian-style salad. McDonald's suppliers also export chicken, beef and apple pies produced in China to some of the company's other markets in Asia, including Singapore and Japan.
In addition, some of the packaging used in McDonald's European restaurants is made in China.
Tim Fenton, president of McDonald's Asian business, said the company was interested in consolidating manufacturing plants to cut costs and take advantage of its global scale.
"Whether it's chicken from Thailand or lettuce from China possibly going into other countries, we recognize it's an opportunity to take advantage of our size and our infrastructure," Fenton said.
Still, despite the huge changes McDonald's has been able to make in sourcing food, Schafer said moving goods around China was still a major supply challenge, particularly in light of increased freight and fuel costs.
"There is still a long way to go to improve on logistics from a distribution standpoint," he said.