East Balt Commissary, Billions served

Manufacturing in Action, Source : The Manufacturer US

Linda Seid Frembes finds out how East Balt Commissary, a dedicated supplier of buns and muffins to McDonald’s restaurants, uses statistical process control and total quality management to maintain consistency, quality, and food safety

East Balt Commissary in Chicago has a legacy founded on a fortuitous meeting between Ray Kroc, the man who made McDonald’s what it is today, and Louis Kuchuris, a local baker and East Balt’s founder. The two men met in 1955 in Des Plaines, IL, when Kuchuris approached Kroc about supplying buns for Kroc’s first-ever McDonald’s franchise. On a simple handshake, the two agreed upon a customer-supplier relationship that still stands today.

Five decades later, a few things have changed. A second-generation Kuchuris now leads the company, with the third generation of the family coming on board. “Contracts are a funny thing. You can never fully cover everything about a supplier relationship in one contract,” explained Frank Kuchuris, CEO and chairman of East Balt and son of founder Louis. Kuchuris joined the company in 1967 and credits his first job at East Balt for teaching him about the dynamics of the systems, product, and employees. “It’s who you’re dealing with that really matters. McDonald’s is now more than 75 percent franchisees, but the company is still run the way Ray Kroc wanted it. It’s still a personal company.”

As one of nine dedicated bakeries, East Balt has continued to grow with McDonald’s for the past 50 years and during that time has learned to anticipate and respond to its largest customer’s needs. Thanks to more marketing efforts and a shift in its food offerings, McDonald’s is enjoying a resurgence. The company recently reported 36 consecutive months of sales growth at stores open at least a year, and its stock has increased 170 percent in value.

To properly service the ever-expanding McDonald’s enterprise, East Balt owns and runs 19 bakeries worldwide. Those bakeries are spread out in three regions: the US, Europe, and Asia. Gary Brodsky, senior vice president of operations, joined the company in 1996 and oversees all quality control, engineering, and operations for new setups. “After the facility is up and running, mine is more of a support role,” he explained. “I have three engineers and one baker for troubleshooting on staff. Otherwise, regional managers in these areas take care of day-to-day operations and regional quality assurance.”

About nine years ago, East Balt recognized that its growth would continue to explode for the foreseeable future. There were already a few East Balt bakeries overseas, and the company was also building bakeries in Japan and Korea simultaneously. “We needed to ensure there would be some standardization, with the only variation being the size of the line,” Brodsky noted. “We needed a cookie-cutter layout with the same equipment worldwide and no variations, so that quality assurance can quickly troubleshoot. We also recognized this would benefit training as well.”

What’s known today as the supplier covenant began when East Balt put out the bidding for the Japanese and Korean bakery projects. The company created set terms and documentation for supplier agreements such as billing terms, service, and support. When they found suppliers who would agree to the terms, the company decided to form a covenant of those suppliers who would then supply equipment to any East Balt bakery in the world. “The only variation between suppliers is the type of equipment they’re supplying,” said Brodsky. “A total of six suppliers are in the covenant; some supply more than one type of equipment.”

However, once a supplier gets into the covenant, it doesn’t necessarily stay there forever. “Once we decide who is supplying what equipment, everyone in the covenant must play nice. If someone causes trouble, they’ll be let go,” explained Brodsky. “We also conduct spot checks on the market to ensure that pricing and support are fair.”

East Balt also has a covenant agreement with its ingredients suppliers. Since they can’t ship US wheat all over the world, the locally sourced wheat has to be as close to specification as possible. “Our biggest market factors are wheat prices and quality. Milling processes differ from country to country, so we tend to work more with local suppliers in developing countries to address quality,” said Kuchuris.

As East Balt marches with McDonald’s into emerging markets, the company has learned to take a phased approach to ramping up production. It starts with a small leased building and installs the basics, like rack ovens and mixers, to keep capital expenditures minimal. The start-up phase takes a few years, and as the market grows, the bakery will expand. Next is the step to a full-sized bakery. At this point the plant is partially manual and partially automated; it will grow over the next 10 to 15 years into a full-capacity bakery.

Like the floor space, the equipment also expands with the plant. The conveyorized oven can initially handle 1,000 dozen buns an hour but can expand its capacity up to 5,000 dozen per hour. When first installed, the oven may be missing burners or conveyors, but those pieces will be added to the frame as the extra capacity is needed. Similarly, the start-up plants begin with two small mixers, and as capacity is needed, larger mixers will take their place, and the smaller mixers will be moved to another operation. “No equipment is ever thrown out as we expand,” said Brodsky.

According to Brodsky, the McDonald’s dedicated supplier system emphasizes consistency, quality, and food safety. McDonald’s chose a dedicated supply system in order to control such factors worldwide. The supplier can choose the individual methods and systems to use, but it must meet the criteria for McDonald’s supplier quality index. To meet the rigorous standards, East Balt has employed several methods.

First off, the restaurant franchise requires third-party inspections. East Balt chose to conduct inspections four times per year so that its Hazard Analysis and Critical Control Point (HACCP) and other documentation are always ready. The company has gone one step further and has achieved HACCP accreditation from the Guelph Food Technology Centre (GFTC ) in Guelph, ON, Canada, the country’s only independent technology center for the food industry.

The GFTC HACCP emphasizes documentation and rigorous follow-through. “It makes you follow your documentation,” Brodsky explained. “The GFTC belief is that if it’s not documented, then it doesn’t exist. During the in-person audit, they also spend a day talking to the employees to ensure that each person knows all procedures. They also check logs on all equipment inspections that should occur on an hourly and daily basis.”

That vigilance also spills over into employee training. All employees have to attend food safety and HACCP training classes and document that they understood what was taught. Those forms, along with class program outlines, must be kept on file for the GTFC audit. “Documentation gives management a sleep factor. We know that things are in good hands and will be done correctly,” said Brodsky. That sleep factor can be important, considering that the company’s responsibility goes all the way to when the bun arrives at the end customer.

Another method of continuous improvement is the use of total quality management. The company has been using TQM techniques for over 20 years. “TQM, in particular, is easy for employees to adopt, involves management, is simple and easy to deploy worldwide, and is consistent and easy to train employees on the subject. Over time, we’ve improved TQM and adapted it to our business,” said Brodsky.

Part of its TQM strategy is the use of a statistical process control (SPC) system to monitor quality. Quantitative processes are monitored by ASI’s DataMyte Quantum software, which monitors equipment and measures every step in the baking process such as time, temperature, and weight. “Our SPC system uses scanners to quality-check finished products. The system scans for color, shape, proper seeding, volume, and height on every bun,” said Brodsky. (For trivia fans, McDonald’s requires that every bun have 22 percent seed coverage on top—no more, no less.)

The Dipix Technologies Qualivision optical scanner is installed once a bakery ramps up to producing 2,000 dozen buns per hour. As the buns come down the line to packaging, the Dipix system scans 100 percent of the product and can instantly pick out and reject a bun. The newer version of the scanner can also scan the bottom of the bun for inconsistencies. Scanner data is sent to the line operator sitting next to a computer monitor. Color indicators alert the operator to problems in the system: green is normal operation; yellow means there are rejects but the buns are still in spec; orange means the operator must make adjustments. If the system goes red, the line stops or the batch is rejected in sum until the problem is fixed. All that information is then sent to the company mainframe, which also collects data from each department. Field service is dispatched to the stores to review the buns. Via a PDA, field service also transmits quality data that adds to the daily data picture.

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