Case Study: Inside the development of McDonald's biofuel fleet

McDonald’s UAE has clocked 10-million kilometres running its trucks on biodiesel. Walid Fakih, general manager, McDonald’s UAE talks to Logistics Middle East about costs, competition and sending the right message.
Walid Fakih, general manager, McDonald’s UAE..
Walid Fakih, general manager, McDonald’s UAE..

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McDonald's UAE’s in December 2015 marked a milestone of running five million kilometres on the fast food giant’s recycled vegetable oil, now it’s doubled that.

McDonald’s UAE introduced the biodiesel initiative in the UAE in July 2011 in collaboration with Neutral Fuels, an innovative Dubai-based company selling clean fuel in the largest oil-rich region in the world.

McDonald’s is the first fast food brand in the Middle East and North Africa to recycle all of its waste cooking oil for fuelling the company’s logistics fleet to transport its goods throughout the UAE. The initiative is ground-breaking, no other company like McDonald’s is doing it, but for the brand it’s about more than just cost and convenience.

“Initially we weren’t looking to save money. In fact, today we pay a higher price for biodiesel than we would pay for the market price of diesel,” explains Walid Fakih, general manager, McDonald’s UAE. “Neutral Fuels needs to be able to sustain its business and we’re happy to pay that higher price because it has a significant environmental benefit and in a large oil producing region, it sends the right message.” McDonald’s UAE’s biodiesel campaign actually has a double impact on costs, according to Fakih. “We choose to forgo selling used cooking oil, while also paying a higher price for biodiesel.”

This is the consequence of being a market leader, of being the first to adopt a business model that will in time become the norm. And biodiesel will become mainstream in the UAE in years to come, according to Karl Feilder, chairman of Neutral Fuels.

“McDonald’s UAE’s milestone demonstrates long-term commercial innovation in action and proves beyond a doubt that biodiesel is the most viable commercial alternative to old style fossil fuels,” he says. “More fleet operators are being pushed to show how they are planning to comply with reducing their carbon footprint. Some fleet operators have also started to realise that using biodiesel will extend the life of their engines due to its superior lubricity, and hence see a move to biodiesel as a sensible fleet management decision.”

Feilder points to Neutral Fuels’ growth figures as an example of how demand for biodiesel in the UAE is growing. “We set up in 2010 and started commercial sales in 2011 with the McDonald’s UAE delivery fleet. Neutral Fuels doubled 2012 sales volume in 2013, and then again doubled in 2014, and in 2015 we doubled again. The demand for clean, green fuels is really growing.”

The biggest issue holding back even faster growth in biodiesel consumption is a lack of understanding and education, Feilder adds. “All diesel in more than 64 countries already contains up to 5% biodiesel by law, and yet many fleet operators here think it is some strange new invention. With the recent announcement that McDonald’s UAE has driven over 10 million km on our 100% biodiesel fuel without any engine modification and no change in fuel economy, we hope that other companies will see this as a quick, easy, and logical step.”

McDonald’s UAE’s fleet of 16 diesel logistics trucks required no modification to run on biodiesel and while the fuel is produced at Neutral Fuels plant, most of its customers have their own dedicated Civil Defence approved tanks and pumps provided by Neutral Fuels for convenient re-fuelling in-house.

This is the case for Mohebi Martin Brower, the 3PL that McDonald’s UAE uses for its logistics and supply chain needs. Being able to re-fuel on site provides Mohebi Martin Brower with time-saving convenient because of the nature of McDonald’s UAE’s logistics needs.

“Each of the 140 stores needs an average of five deliveries per week and everything is ordered the day before it’s required,” explains Fakih. “Mohebi has a fleet of 16 trucks running on 100% biodiesel that are reserved exclusively for McDonalds and they’re on the road constantly.”

Walid Fakih, general manager, McDonald’s UAE.

Each of the trucks serves three to four stores in a single rotation, carrying frozen, chilled and ambient products for each location. This is possible because McDonald’s UAE needs more frequent deliveries, but with less products than McDonald’s franchises overseas.

“Because of the price of real-estate here, our storage space at each store is very limited,” says Fakih. “Some US stores have huge freezers and pantries and only need one delivery per week. In the UAE market, we operate on a just in time basis so we require more frequent deliveries, with less products per delivery.”

All McDonald’s UAE’s medium-term supplies are stored in a 5,000sqm Mohebi Martin Brewer warehouse with 5,500 pallets in three different temperature zones, but the procurement is done in-house.

“We negotiate the volumes and cost with our suppliers directly and Mohebi collects and stores it for us. Each store then requests a delivery a day in advance of when it is needed,” says Fakih.

One of these suppliers, Del Monte, has followed McDonald’s UAE’s example and in 2013 contracted Neutral Fuels to run 20 vehicles from its logistics fleet on biodiesel. For Fakih it’s not enough to simply reduce emissions for its own operations, McDonald’s UAE wants to make its entire supply chain more environmentally friendly.

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