Clean Coffee Supply Chain Management: A Comprehensive Analysis

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OPERATION MANAGEMENT
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Contents
INTRODUCTION............................................................................................................................. 3
LAYOUT OF PRODUCTION FACILITY TO PRODUCE COFFEE BEANS.................................................4
SUPPLY MANAGEMENT AND LOGISTICS ISSUES ON ORGANIZATION AND SUPPLY CHAIN............7
QUALITY ISSUES ON ORGANIZATION AND SUPPLY CHAIN.............................................................9
PRODUCTION CAPACITY ISSUES ON THE ORGANIZATION AND SUPPLY CHAIN...........................11
INVENTORY MANAGEMENT ISSUES THROUGHOUT SUPPLY CHAIN............................................13
SUPPLY CHAIN INFORMATION SYSTEM ISSUES ON THE ORGANIZATION AND SUPPLY CHAIN....15
IMPACTS OF DISRUPTIVE CHANGE AND ARTIFICIAL INTELLIGENCE (AI) ON THE SUPPLY CHAIN. 17
CONCLUSION............................................................................................................................... 18
REFERENCES.................................................................................................................................19
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INTRODUCTION
Supply chain management and operation management are the broad terms used in both
manufacturers of the goods and services industries. There are several functions included in this
such as materials management, logistics, forecasting of demand, distribution, order fulfillment
and other related activities. The need for supply chain arises when the place of manufacturing
is different from the place of consumption (Hugos, 2018). It is used by large companies which
manufacture the goods at one place where the resources are available and send it to other
places for satisfying the needs of other people. This report includes a description of Clean
Coffee which is located in Singapore. The company imports the raw coffee seeds from Brazil
and then sells it to different retailers after grinding, roasting and packaging in Singapore
factories. The company wants to expand its start-up in local as well as international market and
focus on its SCM to successfully fulfill the needs of coffee for a particular region (Heizer et al.,
2017). The company is planning to expand its business operations by extending its product line,
starting a business at the online platform, and also through investing in different marketing
activities such as promotion and advertising.
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LAYOUT OF PRODUCTION FACILITY TO PRODUCE COFFEE BEANS
In the manufacturing company, facility layout means the design of the location which will help
in meeting the specific needs of manufacturing location. Production facility includes several
elements which affect the efficiency of employee’s performance such as decreasing
unnecessary handling of materials, proper flow of products with the help of facility, and other
factors and all factors help in reducing the cost of operations. The layout of the production
facility changes as per the requirement of the company and the convenience of employees
(Heragu, 2018). The Clean Coffee should pre-define the objective of the production facility
which helps them in deciding the layout of equipment, raw material, and other materials.
However, the production facility of Clean Coffee is classified into two categories and this is as
follows:
Product-based layout
In the product-based layout, the resources are arranged in a sequential manner as per the steps
required in manufacturing a product. In order words, Clean Coffee will arrange the activities or
materials as per the sequence of assembling a product which is ready to sell. For instance,
firstly the Clean Coffee get the raw materials from commodities traders of Brazil, after that it
was set for grinding, then roasted and then finally packed in a paper packaging. Therefore, the
machine and other resources are arranged in this sequential order so that it can operate
efficiently. It requires additional manpower to shift the semi-finished goods from one place to
another which increased its operating cost (Srinivasan, 2017). However, in order to operate
efficiently, the Clean Coffee should arrange the resources in a proper sequence.
Cellular layout
In the cellular layout, the machines were arranged in a group as per the requirement for the
similar products which require similar processing. Such groups are known as cells. Hence, the
cellular layout is the layout of a tool organized to assist cellular manufacturing. But this requires
that employees working on cellular machines should be well-trained so that they can work with
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all equipment as well as take responsibility for the results. For instance, the grinding step is
complete with more than one machine (Tayal & Singh, 2018). The workers working in this cell
or step should have complete knowledge about each machine and its operation so that he can
complete this step without the help of others.
Figure 1: Cellular layout
[Source: Lean six sigma definition, 2019]
Hybrid manufacturing process
The hybrid manufacturing process combines the characteristics and advantages of different
classic processes. It combines different machines, technologies, and also different
manufacturing systems. It consists of two terms, additive manufacturing is a term used to
shape a component, structure or part in other part and subtractive is used to polish, fabricate
and spot mill and other related activities (Zimmermann et al., 2017). The main reason for
combining both additives and subtractive is to design freedom and flexibility in developing
complex parts which conventional machines are not able to do so.
Continuous flow process
In this process, the manufacturing of coffee beans will be continuously and on a predetermined
rate. The Clean Coffee adopts this process and manufacture the coffee beans and stock is based
on predicting the demand. The equipment and resources are arranged in a product-based
layout i.e. according to the production process. The benefits of this process are that it ensures
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less wastage of resources, enhances productivity by manufacturing more outputs in less time,
modify the products as per the needs of customers and so on.
Figure 2: Continuous flow process
[Source: Lean enterprise institute, 2019]
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SUPPLY MANAGEMENT AND LOGISTICS ISSUES ON ORGANIZATION AND
SUPPLY CHAIN
SCM is an organization and management of goods and services and includes all the activities
starting before manufacturing the products and end with delivering the goods to final
consumers. SCM focus on transforming the raw materials into final products efficiently and
effectively. Logistics is defined as a procedure of controlling and coordinating different
resources and process such as inventory, people, material, and equipment from one place to
the desired destination (Schönsleben, 2018). The issues faced by the Clean Coffee concerning
SCM are as follows:
 Sourcing
The Clean Coffee is a start-up company and it is difficult to outsource some of the SCM
operations to other companies because of three main reasons. The first reason is that the
quality of customer service will negatively be affected, second, it increases the cost of
operations, and the third is maintaining a relationship with the supplier. Clean Coffee is
known for its quality products and if the quality of the products degrades than it may lose
its current customers (Babbar et al., 2018). Further, in order to stay in the competition, it is
essential that Clean Coffee should provide quality products at the reasonable rates but if
the company outsources its operations the expenses will increase. Lastly, Clean Coffee has
to maintain a positive relationship with suppliers and their external factors may affect the
operations of Clean Coffee.
 Accessing opportunities for spend analysis
Spend analysis is a procedure of assessing, collecting, assembling, dividing and analyzing the
resources with the main purpose of reducing manufacturing cost and achieve efficiencies.
Spend analysis will help Clean Coffee to identify the spending on different categories such as
whether it is beneficial for a company to spend on raw materials, or to follow labor-
intensive or capital intensive structure.
The issues faced by the Clean Coffee concerning logistics are as follows:
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 Transportation
The main issue faced by Clean Coffee is to reduce transportation cost. The company uses
different modes of transportation such as air transport and land transport. The main reason
for using these two sources of transportation is to get the advantage of both these
mediums.
 Warehouse
The main aim of the warehouse is to reduce the cost of transportation, reduce customer
lead times and lowering the cost of inventory. However, Clean Coffee has to invest a huge
amount on purchasing the warehouse which is the main challenge for a start-up company
(Koufteros et al., 2018). The company requires several warehouses for different locations
such as dock, superstores or other retailers and even if the size of the factory is small.
 Logistics information system
This is a system which helps in manage, measure and coordinates different logistical
activities so that the aim of the SCM will be achieved efficiently and effectively. However,
Clean Coffee will have to invest in customizing this system.
 Logistics strategies
The functional strategy of company guarantees that logistics choices of the organization are
consistent with the complete business strategy and ensures that an organization should
provide values to its customers. The main challenge faced by the company is to coordinate
logistics choices and business strategy.
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QUALITY ISSUES ON ORGANIZATION AND SUPPLY CHAIN
Quality management is the act of ensuring that the quality of the product is up to a particular
standard or it achieves an anticipated level of excellence. The activities included in the quality
management is defining a quality management policy, setting standards for quality control,
applying quality planning and strategies for improving the quality. Quality management
develops long-term goals and short-term strategies to achieve the objective of SCM. The Clean
Coffee also set some quality standards which make it different from its competitors. For
example, the company imports coffee seeds from Brazil and the reason behind this decision are
that they will get superior quality of coffee seeds as compared to its competitors (Pal, 2019). If
the raw material is superior, only then they will able to manufacture quality product for their
customers. Although, there are some issues faced by the Clean Coffee in maintaining the quality
of products which are as follows:
 Culture of organizing by departments
Due to the cultural gap between different organizational departments, it is found that
managing the quality is the responsibility of a particular department and not of the whole
organization. And it is also found in the Clean Coffee where the responsibility for ensuring
the quality of raw material is with the particular department of the SCM. Therefore, the
other departments do not coordinate with the quality management department.
 The poor dimension of metrics
The dimension of measuring the quality also affects the quality of products. This requires
collecting appropriate data from each function of SCM and then it should be used at the
time of collecting the data. Further, it is difficult for top management to describe the quality
of products in quantitative and measurable terms. But this can be filled through customer
feedback (Ageron et al., 2018).
 Quality of supplier’s material
The quality of supplier’s raw material i.e. seed will directly affect the output i.e. coffee
beans. The Clean Coffee has no control over the quality of the raw material which is also
affected by other factors such as climatic conditions, weather, transportation, warehousing
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and many more. In this situation, the company is not able to maintain the same quality of
coffee beans. This may affect the reputation and goodwill of the company.
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PRODUCTION CAPACITY ISSUES ON THE ORGANIZATION AND SUPPLY
CHAIN
The production capacity of the factory in the context of coffee powder is 3,500 units per week
and the estimated demand of coffee powder is 2,500 units per week. Further, the capacity of
factory to produce coffee beans is 4,500 units per week and the demand of the same is 3,000
units per week which show that it has sufficient equipment and manpower to manufacture
coffee powder and coffee beans but there are some factors which may affect the production
capacity of the equipment which directly affects the organization and its supply chain. The
company incurs loss if the production capacity of the company is high as compared to demand
of the products because machine or human resource are kept idle and also when the
production capacity is low as compared to demand which means that company does not have
sufficient resources to fulfill the demand of the customers (Wang et al., 2015). Following are
some issues related to production capacity which affects the organization and their supply
chains are as follows:
 Supplier’s evaluation and development
The raw material supplier plays a significant role in production capacity and management.
The Clean Coffee should ensure the quality and quantity of raw materials with their
suppliers so that they can continuously provide the coffee beans and coffee powder to their
customers. The challenges faced in the production of goods are a type of product, internal
resources of a company such as employees, financial resources, transportation,
warehousing facilities and so on.
 Lack of resources to invest in quality-related production equipment
The Clean Coffee should set some of the financial resources for repairing equipment,
replacement or refurbishment or to train the employees on new equipment. These
expenses increase the burden on the profit of the company and sometimes they do not
prepare themselves for bear these expenses and as a result, the production capacity of the
company is affected (Iranmanesh & Kazemi, 2017).
 Inadequate production and quality planning
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There should be proper team coordination between transportation, warehousing, CSR,
sales, inventory management and all other functions of the SCM so that there will be proper
planning of the final products. The production capacity of the Clean Coffee is affected by
inappropriate planning of products. Appropriate planning ensures to make available the
final goods to the customers effectively and efficiently. And this will directly affect the brand
image of the company.
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