Recently McDonald’s, the world’s largest food-service provider, has been (forgive the cliché) through the grinder.
Poor performance led to the departure of its CEO and plenty of critical attention in the business pages. Part of this story relates to the provenance, or origins, of its products: Chains such as Panera, Chipotle, and Shake Shack have brands that speak of freshness, health and trustworthy sourcing.
In 2010 I wrote an HBR article predicting increased interest in supply-chain transparency: firms needed to develop strategies for knowing and explaining where stuff comes from.
Product provenance is now a critical concern for boards and governments. In the UK, for example, legislation is in progress that would build on the California Supply Chain Transparency Act. McDonald’s woes offer lessons about supply-chain transparency.
Transparency needs a long game; reputational problems don’t mend fast. Few firms have faced such reputational challenges as McDonald’s. The movies Super Size Me and Fast Food Nation cemented the view that the corporation was complicit in promoting bad health, bad environmental practice and food that was just, well, disgusting. McDonald’s has made substantial changes to both its practices and its communication.
The trouble is that bad reputations die hard.
A generation of middle-class customers have already decided that McDonald’s is a tarnished brand. The lesson for other firms: If you have problems in your supply chain, don’t let the critics get there first.
Global operations need global standards. Despite the great strides that McDonald’s has made in some markets, its progress and practices have not been uniform. Last year McDonald’s and other major food companies were plunged into a food-safety scandal in China.
This is a case of your defense’s being as strong as your weakest point. So supply-chain transparency initiatives are not a normal program to be rolled out region by region.
Sometimes transparency has paradoxical consequences. In a series of documentary-style promo films for McDonald’s, the host holds up a great chunk of flesh and declares, “Look, it’s real wholesome meat!” Even hardcore carnivores like me blanch at this amount of dead animal.
You’ve just reminded me of things that I don’t want to know. This is a paradox that firms in a wide range of industries will inevitably need to grapple with.
It may be that McDonald’s future lies in yet further reinvention of the brand. But the provenance agenda is not going away: The new CEO will need to tough out current problems and stick to the mission of ever-greater openness.
Steve New
Steve New teaches operations and supply-chain management at the University of Oxford’s Saïd Business School and is a fellow of Hertford College.