Background Facts

McDonald`s Japan uses just over I million pounds of French fries per day Each distribution center (3 of them) in Japan keeps between 4

6 weeks of inventory of French fries

Sales of fries goes up 20-30% in May for the Japanese holiday season (starting with Showa Day)

French fries are purchased in the Columbia basin (Pacific Northwest, U.S.) from three suppliers (Lamb Weston, Simplot and McCain)

50% of the product is delivered to Tokyo with a shipping time of 3 weeks

30% of the product is shipped to Kobe with a shipping time of 4 weeks

20% of the product is shipped to Kyushu with a shipping time of 5 weeks

All containers normally ship out of Tacoma Washington on a weekly basis

Inland freight within the U.S. takes 3 days some by truck some by barge Maximum storage space at each distribution center in Japan is 6 weeks of inventory

Outside frozen storage (for additional capacity)in Japan is extremely expensive (see cost below)

Product is currently stored (inventory)only in Tokyo, Kobe and Kyushu There is storage available in other cities (Hiroshima, Sapporo, Nagoya)

Cost Information

French fries cost 40 cents a pound from the suppliers

They are packaged in 36 pound boxes ;1,400 boxes can fit in a container

Overflow ad-hoc strage in Japan costs 3 cents a pound per month. This is outside the normal DC

Storage in the U.S. is 1 cent per pound per month. One 40' container costs $2,500 to ship to Japan from Tacoma Washington

Airfreight: 1 week of inventory costs US$ 1 million

Fries from Australia and New Zealand are approved for sale in Japan. Shipping is 20% more

Fries from Europe are also approved for sale in Japan and are 10% more expensive for the product, with shipping 20% more

Due to geopolitics, the Yen/USD exchange rate is fluctuating by 17% (Yen is weakening) recently.

News: EventWatch Alert It is currently March 16 Dock workers on the West Coast have begun threatening to go on strike if the conditions of their employment are not improved.

The labor union is meeting regularly with the dock owners and have some very specific demands.

The threat to strike is very real and they have chosen June 1 as the day to start strike. All companies that export from the west coast have been informed of the pending action.

Potential Implications

Based on previous strikes, when a strike occurs, hundreds of ships become stranded off the West Coast

Containers from the Gulf of Mexico take an additional 2 weeks and cost 10% more

Houston and the East Coast of the U.S. become inundated with containers and booking space on a vessel is nearly impossible as freight demand is transferred from the West Coast Moving product from the East Coast takes 3 weeks longer and costs 20% more

If a strike is not averted, it is likely to last for 7 weeks and disrupt the supply chains of multiple companies in Japan and across Asia

Sympathy strikes mean that every port from Alaska and south to San Diego will be interrupted.

Business Continuity Plan:

Understanding McDonald`s policy of NEVER RUN OUT design a plan/strategy to maintain supply at the lowest cost

. Include contingency planning if the strike never takes place (cost estimate) or if the strike occurs and last longer than anticipated

As April 29 is the day you report back to management, the plan should be implementable by the deadline

.

1.Using the provided information and your own data, determine what a normal week/month of costs looks like (without considering the possible strike).Along with other industry sources that you find, determine what a maximum cost, maximum customer service solution would cost.