If you're one of the 68 million who stopped at McDonald's for a quick meal or snack today, you have JosÃ© Armario to thank for making it all possible. As executive vice president of worldwide supply chain, development, and franchising for McDonald's Corp., he's in charge of seeing that the product is always there when the customer wants it, no matter where in the world the restaurant might be.
Armario has served in a number of capacities since joining McDonald's in 1996, including group president of McDonald's Canada and Latin America, president of McDonald's Latin America, and senior vice president and international relationship partner for the Latin America region. In his current role, he oversees procurement of over $23 billion worth of food, packaging, and "premiums" annually and heads up the corporation's global food safety and quality systems initiatives. He also manages the overall franchising strategy for an organization that has served billions and billions of customers in 123 global markets.
Armario may be steward of one of the most far-flung and complex supply chains imaginable, but he is quick to credit others for his group's successes. These include what he calls the "very smart, capable, experienced people" who serve on the supply chain front lines as well as the corporation's famed founder, Ray Kroc, whose unwavering focus on customer satisfaction has provided the foundation for the company's decades-long success.
In addition to his day job, Armario is a member of the board of directors for USG Corp., where he serves on the audit and compensation committees; a director of the international advisory board and president's council of the University of Miami; and a director for the Chicago Council on Global Affairs. He earned a master's degree in professional management at the University of Miami and an associate's degree in business administration from Miami Dade College.
Armario met recently with DC Velocity Group Editorial Director Mitch Mac Donald to discuss the challenges of keeping billions and billions of customers satisfied.
Q: As one of the world's largest fast-food companies, McDonald's operates a supply chain of almost jaw-dropping size and scope. How do you cut through all the complexity to get to the point where you can make actionable decisions?
A: We are very fortunate to have a system in place that has survived the test of time. We call it the three-legged stool. It is the philosophy that was instilled in the company by McDonald's founder Ray Kroc. The whole principle centers on a great balance, a great will to win. In other words, when the company does well, when our owner/operators do well, and when our suppliers do well, we all win. Of course, the corollary to that is that if any leg is shorter or longer than the others, you don't have good balance.
We try to remind ourselves about the three-legged stool at all times. That is the philosophy going forward, but we also have very smart, capable, experienced people in all areas of the world we serve. Our staff works with very tenured suppliers to make the day-to-day decisions. Our role at corporate is to supply strategic direction and to ensure that the brand is protected along the way so that we are always delivering gold standard products at the highest levels of quality and safety. We want our customers to be confident that their Big Mac will taste the same whether they're in Germany, Argentina, the U.S., Canada, or any other part of the world. Everyone involved—from the supplier all the way to the restaurant—will meet the same standards.
Q: As important as adhering to those standards might be, I would guess that it's still important to have the flexibility to adapt to local market conditions?
A: You're right. There does have to be some level of flexibility in the framework because no two markets are exactly the same. You can't import all the products or even produce all the materials in one country, so when you create formulas for the products, there is going to be a little room for variance. The level of flexibility is not large, but it enables us to function and be successful in the marketplace.
Q: What are the biggest challenges you face right now?
A: There are several challenges. First, the consumer today is smarter and more aware than in the past and has more access to information about what they are consuming. That places more responsibility on every company that serves food. We know that our customers are looking at how the food is made. They are looking at the ingredients. They want to know if we are being responsible, if the products are sustainable, if there is any sort of code of conduct in place with respect to the labor forces in different markets.
So I think there is a greater degree of transparency required of companies today, and it's only going to get more intense. We are looking at everything we do with a lot more care. We are going to continue to be as transparent as we can be. We pride ourselves on that, on our transparency. We are holding ourselves accountable on the typical measures of success, but we are also increasing our level of focus around sustainability because it is becoming more and more important.
Second, I would say that one of our biggest challenges going forward is making sure we are prepared for further growth. We are fortunate. We have had a great deal of success, and we're seeing demand for more restaurants in more countries. That means we have to be as prepared as possible for that growth and, as you know, when you enter or expand in any marketplace, before you hire the first manager to run your business, you have to get your supply chain in order. The supply chain has a very long leadtime, so today we are asking ourselves how big we are going to be 10 years from now, and what we and our suppliers have to do to prepare for that growth. We're looking at everything from levels of investment, to the best places to grow and produce raw material, to the people needs behind that.
Q: How does the focus on the customer come into all of this?
A: We absolutely know that one of the things our customers appreciate most about McDonald's is that they get a great experience at a great value for their money, and that they can always depend on McDonald's, not just for consistent quality and taste, but to have the product there when they ask for it. That takes a lot of work. It requires years and years of working closely with our supplier partners to make sure we have the right forecasting systems in place. We continue to work very closely with several suppliers around those types of projections.
One of the things we are also working toward is a lot more automation. We envision making much better use of technology so that the restaurant-level information is being fed to our key suppliers, which will allow them to use actual consumption data to get a better handle on demand. At the opposite end, the benefit to the restaurants is that managers don't have to spend time counting inventory and projecting usage rates, which frees them to concentrate on running their operations.
Q: How important a role have enabling technologies played in your continuing ability to achieve the corporation's supply chain goals and objectives?
A: That it is one of our largest investments of time and capital. We have suppliers who have really invested time and energy and sweat equity in building these programs in conjunction with us. It brings to mind a recent example. Last year, when the U.S. ran the McRib promotion, the improvement by using this new technology to forecast usage was so impressive that there was barely any leftover stock at the end of the promotion.
Q: Which of your personal skill sets do you draw on most heavily in your day-to-day job?
A: I've been told by many people that my strength is my people skills and practices. I am blessed to be surrounded by extremely smart, capable, intelligent, experienced professionals who build great teams around themselves. We all know that in business, any business, it is all about the people at the end of the day.
Q: What advice would you offer someone considering a career in logistics and supply chain management?
A: I would say whether it is supply chain or any other industry, profession, or discipline, look for what you love to do. As the old Chinese saying goes, "If you love what you do, you never work a day in your life." But also realize that you are responsible for your own success. Don't leave it to others.