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McDonald's adds new policy amid meat shortage concerns

Business Insider logo Business Insider 4/30/2020 Kate Taylor

A sign for a McDonald's restaurant is seen in Times Square on June 9, 2014 in New York City. © Andrew Burton/Getty Images A sign for a McDonald's restaurant is seen in Times Square on June 9, 2014 in New York City.

McDonald's is temporarily changing how restaurants get their supply of beef and pork, as the U.S. faces potential meat shortages due to slaughterhouse closures. 

McDonald's has put items including burger patties, bacon, and sausage on controlled allocation. That means the company's supply chain will send restaurants meat shipments based on calculated demand across the system, as opposed to the usual practice of management ordering the amount believed will be needed. 

The company confirmed to Business Insider that, while McDonald's is able to meet the system's needs at this point, distribution centers went on managed supply and restaurants on controlled allocation as of Wednesday out of an abundance of caution.

The new approach does not necessarily mean that McDonald's is facing shortages, but instead that the company is more closely monitoring and managing meat supply across the U.S. as the situation changes on a daily and hour basis. 

Meat industry executives at companies including Smithfield Foods and Tyson — both of which are McDonald's suppliers — have warned of shortages in recent weeks, as meat processing plants shutter across the U.S. More than 5,000 workers have contacted COVID-19, with at least 20 workers dying, according to the United Food and Commercial Workers International Union. 

"As pork, beef and chicken plants are being forced to close, even for short periods of time, millions of pounds of meat will disappear from the supply chain," Tyson chairman John Tyson said in an open letter on Sunday. "As a result, there will be limited supply of our products available in grocery stores until we are able to reopen our facilities that are currently closed."

Related video: Restaurant closures hurt McDonald's sales (provided by Reuters)

In an internal call on Wednesday, McDonald's executives said that major reductions in production are expected to continue through at least the first half of May. Citing experts, executives said that production is set to increase in the back half of May but will likely take months to return to pre-COVID-19 levels. 

McDonald's CEO Kempczinski said on Thursday in a call with investors that McDonald's has not had a single supply chain break globally. However, he acknowledged in an interview with CNBC that the current state of the meat processing industry in the U.S. is "concerning."

"We are monitoring it, literally, hour by hour," Kempczinski said. 

McDonald's has a "special relationship" with suppliers, Kempczinski said, and the company believes that they will do everything possible to guarantee the chain's supply. 

"Right now we are in a good position, but there is concern there," Kempczinski added.


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