Supply Chain Management: Coffee Supply Chain Analysis & Improvement

This report provides a comprehensive analysis of a coffee supply chain, focusing on improving its effectiveness and efficiency. It begins by defining coffee as a functional product with stable demand, inviting competition and necessitating cost minimization. The report proposes an integrated supply chain model where the company directly interacts with growers to ensure quality and ethical standards, adhering to CAFE and CSG guidelines. The process involves picking, packaging, transportation to storage sites in the US and Europe, roasting, packaging, and distribution, with close monitoring to maintain uniformity. The report suggests dividing supply chain jobs into categories (planning, sourcing, manufacturing, delivery), implementing a centralized logistics system, and using a binary scorecard system for monitoring. It emphasizes leveraging advanced technology for real-time demand monitoring, inventory management, and capacity scheduling. The report also discusses competitive strategies, such as owning the entire supply chain, focusing on sustainability, and targeting higher-income customers. Finally, it applies imperatives like value creation algorithms and optimized global operations metrics to enhance cash generation, cost reduction, and market differentiation. The analysis aims to improve the company’s competitive edge through cost leadership, differentiation, innovation, and operational effectiveness.

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Supply Chain Management Final Assignment
Supply chain management is one of the essential factors that help the company to obtain a competitive
advantage. Every business should aim at having strategic coordination within the supply with the objective
of improving the performance of the company and supply chain as a whole. The supply chain for coffee has
been derived on the basis of order accuracy, on-time delivery, and cost of saving metrics. This research will
draw a supply chain coffee and apply essential derivatives that can be used to improve efficiency in the
supply chain. An effective supply chain begins with an analysis of the nature of the demand for the product
in the company. Other factors put into consideration so the product lifecycle, predictability of demand,
market standards for the lead-time among others. The supply chain has a disproportionate effect on the
business performance in relation to the attention generally paid.
Nature of the Product
Coffee is a functioning product. People will thus purchase from a wide range of retail outlets as the
product fulfill basic needs which do not change over time. In addition, the product has a stable and
predictable demand. Coffee is one of the most cherished commodity. A research by Banker, Rajiva, and
Mitra explains that about one billion cups of coffee are consumed per day across the globe (320). This
number has increased by fifty percent in the last twelve years and its growth in consumption is expected to
increase. The stability of this product invites competition, which results in low-profit margins. However,
incorporating technology and the innovations into the production of coffee will give customers an additional
reason to buy from the company. Research by Christopher adds that the predictability of the functioning
product makes it easy to achieve a perfect match between supply and demand (35). The main focus thus for
the company is to minimize physical cost. The core factor under focus is, therefore, physical cost and
physical efficiency.
Table 1: Nature of coffee as a functional product
Coffee production Functional product
Lifecycle of coffee Two years and more
Contribution margin 5% to 20%
The average margin of error from the beginning of
production
10%
Average stockout rate 1 to 2%
Lead time Five months to one year

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Supply Chain Model for coffee
Standards
An integrated supply chain whereby the company is involved in every step of the supply chain of coffee
will be used. The company will strategically procure over 200, 000 growers for a start and this number will
grow with time. The objective is to interact directly with the growers to ensure that same quality and flavor
standards is achieved from the coffee beans. The farmers and the company will be committed to selling fair-
trade coffee that is ethically obtained. Coffer and Farmer Equity (CAFE) standards and Coffee sourcing
Guideline (CSG) guidelines will be applied to ensure that every supplier must meet the required ethical and
sustainable standards.
The guidelines also have well-stipulated rights that ensure all growers have conducive and safe working
conditions. Suppliers are also required to adhere to the minimum wage requirement and refrain from
unethical practices such as child labor. The company will be committed to providing training and education
programmes to the suppliers. According to (Anderson et al., 43), the company`s interaction with growers
and sourcing the social responsibility standards will make the supplier feel that they are a crucial part of the
company.
The Process
After picking and packaging of the coffee beans by the growers, the unroasted beans will be driven by
trucks to the ocean liners which will then transport the beans to the storage sites that will be around the US
and Europe. The roasting process in the storage facilities will then follow. Afterwards, the process of
packaging and distribution to various regions or distribution centers will commence. The storage facilities
will be handful enough for close monitoring of the operations and ensuring that there is uniformity in the
packaging and roasting. The company will closely monitor the roasting process as a measure to ensure that
coffee from the company tastes the same way in all the retail locations.
The roasting process will be monitored closely to ensure that all distribution centers receive the products
and all orders attended to. Roughly, it is anticipated that over fifty thousand weekly deliveries on time. The
supply chain process will be streamlined to a cost-effective structure integrated into a simple operation
metrics. The cost-effective strategy will be achieved first by dividing the supply chain jobs into several
categories. Those involved in the planning be it in the replenishment, production process or launching a new
product will be categorized under the planning group. The sourcing activities are categorized into a coffee or
non-coffee procurement. The other functional unit will include elements such as manufacturing, both for in-
house and by contract. On the other hand, the delivery group will include all the transportation, distribution,
and customer service.
The next step is to develop a centralized logistics system for better management and coordination of the
global network by the company. Another crucial factor is implementing a binary 0, `1 `scorecard system `
which will be used to monitor the supply chain process. The scorecard will ensure transparency in how cost

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is improved while maintaining focus in serving the customers. Departments in the supply chain will also
focus on reducing costs and improving efficiencies. Building a cost model will involve benchmarking
ingredients and process to ensure that the best prices are achieved in the negotiation process. Coffee will be
supplied from a smaller warehouse called central distribution centers (CDCs). The CDCs will be responsible
for carrying products like the napkins and cups, dairy products among others. A frequent delivery system via
the truck is expected to be achieved using fleets belonging to the company to retail stores and retail stores
that see the company`s branded products.
The company will heavily rely on advanced modern technology to monitor demand for coffee and other
products, inventory, capacity and scheduling in real time. The company will be in a better position to adjust
plans and operations with the changes in the business environment. Advanced technology will also help the
company to achieve high-level efficiency in its production and supply chain process.
Market
There are various competitors in the market such as Starbucks and Dunkin` Donuts. While else
companies such as Dunkin Donuts outsources its production process and rely on the third-party
intermediary, in this case, the company will own its entire supply chain. The company will franchise less
than forty-five percent of its retail locations, which is in contrary with competitors like Dunkin` Donuts,
which franchises it`s manufacturing and nearly all of its retail prices. The company will be committed to
using a one hundred percent sustainability growth instead of producing coffee as sustainable as possible
contrary to what Dunkin Donuts opts. In addition, the company will implement training programmes for the
farmers and bring about sustainable sourcing practices. The company will at creating a global presence with
over twenty thousand stores in over sixty countries in various countries.
The company will focus on a different market, higher-income customers who are looking to get an
experience of a premium coffee. The customers thus will be willing to pay higher for a luxurious but
expensive coffee.
Future
The organizations aim to gain customers trust and standards of offering high-quality beverages and a
better customer experience. According to (Seuring, Stefan and Muller 1670), this strategy is helpful in
outperforming other competitors in the market and in creating an efficient global supply chain.

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Flow Chart
Application of Various imperatives to Improve Effectiveness and Efficiency of Supply Chain
Various imperatives are the greatest strategic fit which when executed well will help the company to
generate cash, reduce operational cost, and improve asset productivity, increase revenue generation, market
differentiation, and environmental sustainability. These guidelines serve the s democratization what would
make the coffee business a high performing business.
Creation of value algorithm
Value creation algorithm creates value for the customers, prepare the company on what they need to
do continue satisfying their needs and fostering growth in the company. Carter, Craig, and Easton (55)
explain that the two components of the value creation are valued proportion orientation and the growth
orientation. In order for the company to have a competitive advantage over its competitors, it needs to
perform more value creation activities that generate more value than it`s competitors. Competitive
advantage is obtained through cost leadership, differentiation, innovation and operational effectiveness
along the supply chain.
Competitive advantage is fostered by factors such as flexibility, innovation, output, resource, and
information. A study by (Gupta, Omkar and Palsule-Desai 236) holds that responsiveness and
effectiveness are essential in achieving competitive advantage. There exist a high correlation between
high responsiveness, time to market, quality of the product innovation and dependability. The food
industry will thus incorporate competitive advantages into the value chain of the company. The value
chain incorporates the set of activities performed by the firm in order to increase value from the delivery
RoastStoreReceive
coffee beans
Order
fulfilment
Failed /
discard
Package Palletize Finished
good
Failed/
Discard
Blend Cooling Quality
Testing
Sift Assort
Final
Testing

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of the products to the market. The company will set itself from the competitors by creating value for the
customers through making a cup of coffee affordable and give them luxury. Customers will be in given
an opportunity to customize their drinks and enjoy beverages in a relaxed and upscale environment.
Instead of focusing on the traditional advertising, the company would instead strengthen on value
provision by providing high-quality products and services. The company would focus on the delivery of
consistent experience for the loyal customers and at the same time retain new customers.
Optimise the global operations metrics for accessibility, scale, flexibility and risk mitigation
The concept requires that the company convert worldwide footprint and reach of business into a
competitive advantage. Optimized global operations architecture takes into account obtaining the correct
balance between local, regional and global considerations (Ketchen, David and Hult 573). The adopted
operations metrics will need to be cost-effective, flexible, give service and take into consideration factors
such as the carbon emission to the environment.
Table 2: Resource versus Capabilities in Making Better Decisions
Core Contextual
Gives a competitive advantage to
the company
Does not contribute to gaining a
competitive edge more pov
competitors
Mission critical In-house Out task and have control
Nonmission critical Out-task Outsource and give out control
Deployment of an information system that delivers insightful analytics, responsiveness sand alignment
An information system that delivers insightful responsiveness and alignment means that the company
needs to enable levels of coordination and alignment throughout the supply chain process. In order to avoid
conflicts in the company and decisions in the supply chain, it is thus necessary that performance
expectations are aligned throughout the organization (Personal. kent.edu, 2018). In the supply chain
organization, decisions are distributed throughout the network even though they still need to be aligned. The
aim is to achieve a unified expectation for performance with the aligned accountabilities for success.
The coffee brand will rely on demand planners and data scientists behind the scenes to increase market
share. Use of software and predictive analytics will be applied to learn more about customers and how to
increase sales. Use of micro-targeting and personalized sales is key to keeping consumers coming to the
retails and visiting the company website. This forms the basis for analyzing every physical and touch point
thus helping the company figure out what customers rely on want and allocate resources appropriately to
meet the demand. The company will use loyalty cards as the key to digitalization of consumer insights. Data
captured in the loyalty card is then captured by their mobile app whereby they can redeem point for drinks.
The data will be useful to fund out what kind of coffee is on demand, at what time of the day. This data
when paired with other customers, can give real and actionable insights. Use of Predictive analytics and

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Artificial Intelligence (AI) is used for forecasting. Through the use of machine learning, customer`s
behavior can be predicted and can easily target customers to increase sales.
Focus on Execution Disciple with the right Talent and Powered by a Culture that Enables High
Performance
People and culture form essential concepts that should be integrated with the overall supply chain,
business strategy and be managed proactively. According to (Gold et al., 233) supply chain high performers
focus on developing a strategic approach to talent and assessing, measuring and improving certain cultural
traits. The company would take into consideration issues such as retirement emergence of new talents,
virtual working methods and growing divisions on the workforce culture.
The company in its production of coffee and other beverages will devote more time and energy than
the existing competitors devote. Creation of a `talent mindset` and aligning talent with changing strategies is
a critical hurdle for success (Banker, Rajiva and Mitra 311). The company will conduct a recruitment
program that will invite professionals from outside to support the program. After that, there will an
internship program for those with an interest in supply chain career with the company. The interview will be
conducted from universities with students with knowledge in logistics, engineering, and operations research
where talent will be tapped. Graduating students will also be considered where they will have exposure to
fortune 500 organizations through internships or experience. Those chosen will have to show top leadership
skills and be willing to rotate between domestic and international positions. The company will also have in
place programs covering thirty supply chain capabilities and training manual of the new hires. The idea is to
develop skill building and development for each individual. A training system that will add formal
mentoring and coaching around the supply chain process will also be implemented.
Conclusion
It takes a good and well-strategized supply chain for the production of a good cup of coffee. The reason is
that the journey from coffee bean to cup is a complex one. Simplifying the structure and supply chain
process and clearly defining roles is key to reducing operating expenses and improve day-to-day supply
chain execution. The discussed imperative when applied will create a high performing supply chain. In
addition, it would lead to a sustainable value proportion at a reduced cost. Application of these imperatives
will see to it that the company remains relevant, optimize the right parts of the supply chain at the right time
and achieve a breakthrough performance. With time, the company will be able to manufacture, distribute
coffee and other products at a lower cost. The needs of the customers will be met and inventory and
transport cost will be reduced. In general, revenue generation and profit will be realized and shareholders
will get value for their investment.

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Work Cited
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management." Supply Chain Management Review 11.3 (2007): 41-46.
Banker, Rajiv D., and Sabyasachi Mitra. "Procurement models in the agricultural supply chain: A case study
of online coffee auctions in India." Electronic Commerce Research and Applications 6.3 (2007): 309-321.
Carter, Craig R., and P. Liane Easton. "Sustainable supply chain management: evolution and future
directions." International journal of physical distribution & logistics management 41.1 (2011): 46-62.
Christopher, Martin. Logistics & supply chain management. Pearson UK, 2016.
Gold, Stefan, Stefan Seuring, and Philip Beske. "Sustainable supply chain management and inter‐
organizational resources: a literature review." Corporate social responsibility and environmental
management 17.4 (2010): 230-245.
Gupta, Sudheer, and Omkar D. Palsule-Desai. "Sustainable supply chain management: review and research
opportunities." IIMB Management Review 23.4 (2011): 234-245.
Ketchen Jr, David J., and G. Tomas M. Hult. "Bridging organization theory and supply chain management: The
case of best value supply chains." Journal of operations management 25.2 (2007): 573-580.
Personal.kent.edu. (2018). High Performance in a Volatile World Seven Imperatives for Achieving Dynamic
Supply Chains. [online] Available at: http://www.personal.kent.edu/~vberardi/34060/34060--SCM--
assignment.pdf [Accessed 23 Sep. 2018].
Seuring, Stefan, and Martin Müller. "From a literature review to a conceptual framework for sustainable supply
chain management." Journal of cleaner production 16.15 (2008): 1699-1710.