+The Coffee and Its Logistics

49473 International Logistics seminar Week 13: 30th May 2014

+Agenda

!!What is coffee?

!!From beans to cup

!!Coffee trade

!!Supply chain of coffee industry

!!Case study: Starbucks supply chain

+What is Coffee

+Discover

!!The global spread of coffee growing and drinking began in the Horn of Africa. According to legend, coffee trees originated in the Ethiopian.

!!Where the legend of Kaldi, the goatherd discovered coffee after noticing that his goats, upon eating berries from a certain tree, became so spirited that they did not want to sleep at night.

+Spread of Coffee

!!The Arabian Peninsula

The Arabs were the first, not only to cultivate coffee but also to begin its trade. By the 15 century, coffee was being grown in the Yemeni district of Arabia and by the 16 century it was known in Persia, Egypt, Syria and Turkey.

+Spread of Coffee

!!Coffee Comes to Europe

By the 17th century, coffee had made its way to Europe and was becoming popular across the continent.

With the coming of coffee to Venice in 1615, the local clergy condemned it. Before Pope Clement VIII was asked to intervene, he decided to taste the beverage for himself. He found the drink so satisfying that he gave it Papal approval.

+Spread of Coffee

!!The New World

In the mid-1600's, coffee was brought to New Amsterdam, a location later called New York by the British.

Though coffee houses rapidly began to appear, tea continued to be the favored drink in the New World until 1773 when the colonists revolted against a heavy tax on tea imposed by King George.

The revolt, known as the Boston Tea Party, would forever change the American drinking preference to coffee.

+Plantations Around the World

!!As demand for the beverage continued to spread, there was tense competition to cultivate coffee outside of Arabia.

!!In the latter half of the 17th century, the Dutch obtained some seedlings and failed to plant them in India but succeed in Batavia (Indonesia).

!!The plants thrived and soon the Dutch had a productive and growing trade in coffee. And expanded the cultivation of coffee trees to the islands of Sumatra and Celebes.

+Plantations Around the World

!!In 1723, the French cultivate the coffee throughout to Caribbean, South and Central America.

!!In only 100 years, coffee had established itself as a commodity crop throughout the world.

!!Plantations were established in magnificent tropical forests and on rugged mountain highlands.

!!New nation's were established on coffee economies. Fortunes were made and lost.

!!And by the end of the 18th century, coffee had become one of the world's most profitable export crops.

+From bean to the cup

+From the seed to the cup

"! Planting A coffee bean is actually a seed. When dried, roasted and ground, it is used to brew coffee. But if the seed is not processed, it can be planted and will grow into a coffee tree. #! Harvesting the Cherries It will take approximately 3 or 4 years for the newly planted coffee trees to begin to bear fruit.

+From the seed to the cup

$! Processing the cherries Once the coffee has been picked, processing must begin as quickly as possible to prevent spoilage. Coffee is processed in one of two ways.

%! Drying the beans If the beans have been processed by the wet method, the pulped and Fermented beans must now be dried to prepare them for storage.

+From the seed to the cup

&! Milling the beansBefore it is exported, parchment coffee is processed in the following manner: Hulling, Polishing, Grading & Sorting

+From the seed to the cup

'! Exporting the BeansThe milled beans, now referred to as 'green coffee,' are ready to be loaded onto ships for transport to the importing country (! Tasting the Coffee At every stage of its production, coffee is repeatedly tested for quality and taste. This process is referred to as 'cupping' and usually takes place in a room specifically designed to facilitate the process

+From the seed to the cup

)! Roasting the coffee Roasting transforms green coffee into the aromatic brown beans. Roasting is generally performed in the importing countries because freshly roasted beans must reach the consumer as quickly as possible.

*! Grinding coffee The objective of a proper grind is to get the most flavor in a cup of coffee. How coarse or fine the coffee is ground depends on the method by which the coffee is to be brewed.

+From the seed to the cup

+! Brewing coffee

Before you brew your coffee, take a moment to look carefully at the beans. Smell their aroma.

+Coffee trade

+Supply chain of coffee industry

+Key players in coffee supply chain

!!An industry supply chain describes the processes (steps) by which a product is produced and ends up with (final) consumers.

!!The green (unroasted) coffee bean travels through many steps in the supply chain (also known as the value chain) from harvest to final customer.

!! A summary of some of the key players found in the value chain is presented in next slide "Coffee Global Supply Chain".

!!Coffee roasters or manufacturers are the key or focal player in the coffee supply chain.

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+Introduction & Agenda

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+About the Starbucks

+Product Offerings

!!Product offering: coffee beverages, complementary type breakfast foods, sandwiches, salads, coffee accessories, music and games.

!!Alliances:

!!Dreyer’s Ice Cream !!Jim Beam Brands !!PepsiCo

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!!Age range: 18-24 years

!!Higher than average incomes.

!!Highest usage of coffeehouse brands: self-employed or work full-time.

Race/Ethnicity All White Black Asian HispanicStarbucks Coffee 18% 18% 13% 27% 24%

Distribution of Starbucks Coffee by Race/Ethnicity

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Country # StoresUnited States 7,353Japan 572China 209

Number of Stores in Main Regions

+The supply chain

+Upstream Supply Chain of StarbucksFrom Farmers to Starbucks

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(Amsterdam x 1, U.S. x 3)

From Arabica to Latte

+From Arabica to Latte Roasting Plants

Washington, Nevada, Pennsylvania Distribution Centers

(DC)

Approx. 9000 stores Company Owned & licensed

Warehouses are near roasting plants

Everywhere in the US!

Individual Retail Stores

Supply Chain Revisited

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+Coffee Growers

!!Operations: !!Equatorial Belt !!High quality and service !!Send dried beans by ship

!!Inventory: !! Storage facilities

!!Information Technology: !! GPS tracking devices

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+Vendors

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+Roasting Plants & Warehouses

!!Operations !!3 in US, 1 in Amsterdam !!Roast, de-stone, taste profile !!Packaging: !!Automated boxing !!Palletizing systems

!!Inventory: !!Store palletized café in warehouse

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+Distribution Centers

!! Operations:

!! Located regionally

!! 24 hours / 5.5 days a week

!! Outsources distribution to 3PL

!! Inventory:

!! Push/Pull boundary

!! Order supplies from vendors

!! Hold packaged products and merchandise

!! Information Technology

!! HighJump Software's Supply Chain Execution Solution to !! Streamline Product Distribution

!! Prepare for Future Growth

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+Retailers

!!Operations !!10,500 Stores located globally !!Company owned and licensed !!Standardized regulations !!Relationship Management

!! Inventory !!Periodic Review

!! Coffee, milk and paper products: Once per week !! Food products: Four times a week

!! Information Technology !!Computers information systems

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+!"#$%'(")%*)+,-'"&./,-!!Predictable demand

with seasonality !!Long term fixed and

future contracts !!Periodic review

inventory system

!!High inventory level

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+Procurement: Quality

!!Focus on high quality and service

!!Pays premium prices

!!Preferred customer

+Procurement: Relationships

!!Long-term relationships

!!Mutually beneficial

!!Relationship management

Losing a vendor is like losing an employee — you lose the money and time you put into training them,” -John Yamin, Starbuck’s Vice President of food.

+Corporate Social Responsibility

!!Fair Trade Movement !!Price setting !!Focus on value of entire supply chain

!!“Coffee for Conservation” Project !!Improves quality while focusing on

environmental sustainability !!Current Regions:

!! Tanzania !! Rwanda !! Kenya !! Ethiopia

+Overall SC Strategy

!!Maintains “relational capital”

!!Focuses on quality and purity

!!Education

!!Strategic retail locations

+Future outlook

+Future Outlook

Starbucks can…

!!leverage their unique skill set

!!develop relationships with and procure from other countries

!!expand into other markets.

!!continue assisting African coffee growers

!!improve demand forecasting at the retail levels

!!expand product offerings

+Development Opportunities

+Korean coffee market

+Korean coffee market

+Competitor analysis

+

+Reading list

!!Sustainable Business Cases: Chapter 8

http://2012books.lardbucket.org/books/sustainable-business-cases/