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8/13/2019 Cartel Coffee Lab Supply Chain Analysis
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Team 6
Matthew Thomas, Erik Sandstrom, Dylan Baxter,Chenghan Kuo, Wangpiaoxue Shi
Cartel Coffee Lab
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Company Profile
Cartel Coffee first opened in 2008 in Tempe, Arizona
Grown from owner-operator to small business in 5years
Stores in Tempe, Phoenix, Scottsdale, Sky Harbor,Tucson
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12 Full-time and 25 part-time employees
$2.4 million revenue, after-tax profit of $500,000 in2012
Serves specialty coffee beverages, pastries, coffeebeans
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2ndmost-traded good in the world
Fluctuating prices
Seasonal goodsOnly cultivated in certain regions near
the equator
Increasing demand Bean quality continuously improving
Coffee Beans
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Coffee Industry
Large and growing
20,000 stores, $11 billion revenue in US
11 million employees
150 million Americans drink coffee daily Competitive
20,000 coffee shops in the US
Future trends
Innovation Brand
Sustainability
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Competitors Top 50 companies generate 70% of sales
Cartel competes with local coffee shops
Gold Bar Espresso
Xtreme Bean Coffee Co.
Steves Espresso
As well as national brands
Starbucks
Dunkin Donuts
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Sourcing Process Overview
Jason (founder) and Paul (roaster) meet monthly todiscuss purchase requirements
90% of green coffee beans purchased from Green
Room, 3rd
party vendor in Washington Yields lower-quality beans at a higher price
10% purchased directly from farmers in Mexico andGuatemala
Profit margins are minimal, many small suppliers comeand go annually
Difficult to find new suppliers
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Jason visits farms annually
Currently only have two criteria for sourcing
Value
Assurance of supply
Beans are the basic ingredient of nearly all products Output of sourcing process is ultimately consumed
by customer
Cartel has not considered all sourcing options and
opportunities
Sourcing Process Overview
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Process Description Coffee is ordered as needed, usually monthly
Jason and Paul involved in procurement
Paul is an experienced roaster and specifies qualityrequirements
Jason makes ultimate purchasing decision
Jason revisits suppliers annually and finds othersuitable suppliers
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Process Description- Direct fromSuppliers
Identify potential suppliers from government-issued resources
RFI
Farms tours and evaluation
Create shortlist of suppliers
Evaluate value and supply capability
Create contract with suppliers
Maintain relationship with suppliers
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Sourcing Impact- QuantitativeInformation
52,000 lb. demand/yr. Current annual spend: $203,275
$3.50/lb. from Green Room
$35/order
$22/60 lbs. for transportation
Market price: $1.45/lb.
132 lb. bags
Stored in 5 storesAnnual travel costs: $12,750
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Process Improvement 1- CreateSourcing Team/Work with Provision
Create a sourcing team/Provision
Work with Provision Coffee to source green beans Provision Coffee is a faith-based, specialty coffee company that
maintains direct relationships with farmers in developing countries in
an effort to benefit their communities. Create a sourcing team composed of a roaster, a member of
Provision, and a purchasing manager Roaster responsible for recognizing and specifying quality of beans Purchasing manager and member of Provision to gather information
about suppliers, benchmarking, negotiations
Identify potential suppliers
Farms tours and evaluations
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Process Improvement 1- CreateSourcing Team/Work with Provision
Sourcing team will increase value
Must coordinate with Provision and hiresourcing manager
Hire buyers as need Expensive- $60,000 annually
High startup cost and time
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from Other Countries using Fair
Trade
Fair Trade Pay 10% premium
Additional 5-10 cents above fair market price Used for community development
Sourcing options China
Africa
South America
Identify potential suppliers
Maintain relationship with suppliers
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from Other Countries using Fair
Trade
Region Country Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug
North South America
MexicoBest Best Best Best Best
Best Best Best Best Best Best Best Best
Costa RicaBest Best Best Best
Best Best Best Best Best Best
El Salvador
Best Best Best Best
Best Best Best Best Best Best
GuatemalaBest Best Best Best
Best Best Best Best Best Best
ColombiaBest Best Best Best Best
Best Best Best Best Best Best
Africa RwandaBest Best Best Best Best
Best Best Best Best
Asia ChinaBest Best Best
Best Best Best Best
Harvesting Period
Best Best Harvesting Period
Shipping Period
Best Best Shipping Period
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from Other Countries using Fair
Trade
Freshest productApproximately cost of Green Room
High travel costs- $50,000 annually
Difficulty in maintaining relationships Slight increase in cost over market price
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Process Improvement 3- BalancedSupplier Scorecard
Current supplier criteria
Assurance of supply Value
Easier to identify suitable suppliers
Low cost but must spend more time with suppliers
Some criteria subjective
Evaluate value and supply capability
Table 3
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Table 3
Category Weight Performance Indicator PointsQuality 30% Quality assurance: Awards and certifications.
Value creation processes: Agricultural practices and transparency of the growing methods; Effectiveness of converting techniques (coffee fruits cherry green
beans); Sustainability.
Quality consistency:Rate of defective beans that are not acceptable for roasting;Quality improvement actions.
8
4
4
5
63
Delivery 20% 1. Lead time: Harvesting period length and consistency.1. Reliability:
Order fulfillment accuracy; Quality of delivery process (% beans damaged during transportation); On-time deliver.1. Flexibility: Minimum volume; Transportation modes.
3
45
4
22
Relationships 20% Auspicious conditions for strategic alliance creation: Willingness to collaborate; Supplier responsiveness; Communication infrastructure of a farm; Logistics infrastructure of a region;
Historical data: Past sourcing experiences; Business customs and practices; Government and economic stability of a region;
5322
422
Price 18% Product price:Green bean price per pound;Following trends of the commodity market;
Total cost of ownership:Transportation costs;
Farm supervision costs;Safety stock requirements;
Other expenses:Set up of communication and transportation infrastructure;Farm development.
32
2
14
33
Capability 12% Ability to anticipate demand: Capacity; Land utilization; Actual farm output; Efficiency of growing methods.
Potential of a farm: Ability to increase capacity; Continuous improvement;
2222
22
Total: 100% 100
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Executive Summary
Green Room has significantly increased prices inpast 6 months
We aim to decrease dependency, increase
quality, reduce risk Implementation of suggestions will improve direct
sourcing process
Locating new suppliers
Maintaining Relationships
Improved quality and lower cost
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Executive Summary
Implement all three solutions in stages
Balanced scorecard to standardize supplier evaluation- immediate
Source from other countries using Fair TradeAgreements1 year
Create purchasing team to better source product 3years
Decrease dependency on Green Room to 35% ofsupplies
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Sources http://provisioncoffee.com/pages/about-us http://www.sweetmarias.com/coffee.prod.timetabl
e.php
http://www.accuval.net/insights/industryinsights/detail.php?ID=101
http://provisioncoffee.com/pages/about-ushttp://www.sweetmarias.com/coffee.prod.timetable.phphttp://www.sweetmarias.com/coffee.prod.timetable.phphttp://www.accuval.net/insights/industryinsights/detail.php?ID=101http://www.accuval.net/insights/industryinsights/detail.php?ID=101http://www.accuval.net/insights/industryinsights/detail.php?ID=101http://www.accuval.net/insights/industryinsights/detail.php?ID=101http://www.sweetmarias.com/coffee.prod.timetable.phphttp://www.sweetmarias.com/coffee.prod.timetable.phphttp://provisioncoffee.com/pages/about-ushttp://provisioncoffee.com/pages/about-ushttp://provisioncoffee.com/pages/about-usRecommended