Cartel Coffee Lab Supply Chain Analysis

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


2/21

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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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


GuatemalaBest Best Best Best


ColombiaBest 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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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-us

Documents

Cartel Coffee Lab Supply Chain Analysis