Best small company sponsored by Development Board for Rural Wales.
Standardisation is something of a religion at McDonald's. A Big Mac or doughnut should look and taste the same in Madrid as in Manchester or Milan. The fast-food chain is famous for other virtues, too, which it instils into every new employee who steps through the door: such as quality, service, cleanliness. So much is common knowledge. Less widely known is the fact that every McDonald's doughnut or fruit pie consumed anywhere in Europe was made at Kitchen Range's Peterborough plant - which is clearly dedicated to the same values as its big customer. The business was founded 23 years ago, by managing director Simon Lebus's father, shortly before McDonald's first landed in the eastern hemisphere. Today there are more than 2,000 McDonald's distributed across Europe. Keeping them supplied with doughnuts and fruit pies accounts for about 45% of revenues at Kitchen Range. In 1991 production for McDonald's was transferred to the long, thin, custom-built factory on a Peterborough trading estate, where two extended lines occupy most of the building. It is all very clean and well equipped. Unusually for the food industry, the plant even has a well set-up engineering workshop, and has just replaced all the gearboxes on its conveyors in the name of improved reliability.
In spite of the importance of the connection, contractual arrangements between the parties are remarkably relaxed. Indeed, Lebus explains, 'the way McDonald's operates means that there isn't actually a contract as such'. Close liaison and mutual dependence, plus occasional 'suggestions' from McDonald's, are what keep the relationship going. When Kitchen Range installed its first apple pie line, back in the 1970s, the US supplier of apple pies - at McDonald's suggestion - sent over staff to help with the commissioning in order to ensure consistent quality. (Among other things, it was necessary to locate Italian and French sources of the frozen chipped apples that are extruded into each sausage-roll-like pie: English apples pulp too readily, it seems.) Continuing the tradition, Kitchen Range - under similar prompting - has lately been assisting a Russian supplier to McDonald's to set up in Moscow.
So do McDonald's outlets now have the option of buying from this new Russian supplier? No, says Lebus. That would reduce Kitchen Range's volumes - which would consequently put up the cost to other McDonald's outlets. McDonald's has an 'open book' understanding with its suppliers on costs and prices, and pays them their costs plus an agreed margin. Cost-plus has had a bad press - particularly in the area of military hardware - but McDonald's seems able to make it work. Suppliers are positively encouraged to expand, as this spreads overheads and so reduces McDonald's own costs. There is nothing to stop the Peterborough plant taking on other customers, as long as this doesn't lead the factory to transgress the ultimate McDonald's commandment: 'Thou shalt not go out of stock.' In practice, Kitchen Range has regularly come up with prices that are lower, year-on-year, in nominal - as well as real - terms.
An invitation, two years ago, to produce McDonald's doughnuts gave the company a major boost. In this case, differing statutory requirements affecting foods meant that the US recipe could not readily be replicated. In food technology terms, operations director Mike Ellison explains, the doughnut is a hi-tech product, and months of experimentation were needed to arrive at a recipe that combined the necessary quality and consistency. The process control specifications - which are prominently posted at every appropriate workstation - include a tightly specified batter recipe, a mixture life of no more than 40 minutes, half-a-thousandth-of-an-inch clearance on the forming equipment and a cooking temperature of +/-1 deg C. Even so, packers at the end of the line throw out a certain amount of doughnuts on purely aesthetic grounds - which is apparently allowed for in the open-book costing arrangement. In the quest for a consistent standard, nothing is too much trouble.
Small Company Award
Sponsor: Development Board for Rural Wales
The Development Board for Rural Wales is responsible for economic development in over 3,000 square miles of outstanding natural beauty. The region's rapidly growing business infrastructure offers 50 superb locations for every type of company: quality premises from £1.95 per sq.ft, a low-cost design and build service on magnificent greenfield sites, the best value in business rates, a highly motivated workforce, low crime rates, low-cost housing and excellent standards of education.
Activity: Manufacture of doughnuts and fruit pies for McDonald's
Task: To achieve consistent standards of quality, stock availability and constant price reduction
Size: 98 employees
Outstanding Features: Process control, quality improvement, process technology.