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Unformatted text preview: Prof.

Robert Ruggieri November 28, 2014 Case Study #2 -— Logistics &


Supply Chain Management (BUSlOSS) 1. What is a ’supply chain’? Who is involved in the supply chain?
The supply chain is the systematic sequence of activities and processes required to bring natural
resources or raw material to the finished goods sold and delivered to the consumer. All the people, I,
resources, information and activities in this sequence are part of it. Supply Chain participants includes the
planning and management of all activities involved in sourcing and procurement, conversion, all logistics
activities, as well as coordination and collaboration with suppliers, third—party service providers,
intermediaries and customers. The supply chain of coffee industry is complicated, and it varies in different
countries but typically includes growers, intermediaries, processors, exporters, dealers/brokers, masters
and retailers. 2. D0 consumers benefit from having a supply chain based on ’fair trade’? Yes, coffee
consumers definitely benefit from Fair Trade. First, Fair Trade among coffee supply Mchain helped to
build up long—term and trustful relationship among different participants. Second, Good ? business
relationships makes that the whole chain more tight—linked; market information is more frequently
shared; and finally the supply chain is more active and responsive to the market signal showing customer
demand. Third, Fair Trade enable the suppliers, for instance, the growers, to provide raw coffee beans
stably to the relevant next part ofthe chain, so that the supply price, as well as price of final product is
more stable than short-term relationship could bring. 3. How does Nestlé help coffee growers in the
developing world? Explain five different forms of help that Nestle gives. How might this help create a
’ripple effect’ in local economies? These are five ways of help that Nestlé gives to growers in the developing
world: 0 Nestlé is willing to pay higher price for higher quality. This procurement policy improve
techniques that the coffee growers that use, as well as their income. - Nestlé has a growing percentage of
direct purchasing from local growers, so that they get paid higher when intermediary levels are erased. ’
' o It provides reference price for local growers. c it visits and get to know as many people as possible in
the supply chain including the growers. That helps to improve relationship with them. a it agrees
procedures on everything during the supply chain including the growing step, for instance, pest control.
These methods help growers from developing world improve their growing techniques, quality of their
products, and finally their income. When the average level of income of growers improves, the local
market, especially in the areas where the coffee industry is dominant component, would develop '
accordingly. 4. Explain why intermediaries in the process of distribution, help to both lower and increase
the final price of goods. intermediaries may be help to increase the final price because they buy coffee
cherries and green beans from growers then sell them at a higher price than the purchase price to the next
link of supply chain. However, intermediaries help to lower the price because \theywmay do some of the
primary 9 ’pro‘ciesfisging, or they may collect together sufficient quantities of coffee from
maknymi’h‘diVicl'tia'l‘“faPhie'Fs‘to ' ,Eransport or sell to a processor. The relevant equipment is shared
by different growers or large amount ’Iof raw materials so that the cost would be reduced. 5. What do you
understand by the concept of ’value’? What aspects of the coffee supply chain enhance the 'value’ that the
customer receives in making purchases? ’Value’ is the way in which the consumer views an organization's
product in comparison with competitive offerings. Nestlé is creating a value chain for final customers by
having these value added /steps: growing, picking, processing, roasting the beans using local traditions,
bagging, boxing and M V shipping a complete product. a g; Nestlé agrees’lprocedures on everything during
its supply chain from pest control to methods of {/«packing to ensure everyone is working towards the
highest standards of quality. For example, it oversees the relationship between the dealer and exporter
and often invites shippers to the UK to train «-*-3:tt§f0ngside its own quality assurance staff. These
methods during different aspects all contribute to total value that customers receive at purchase. 6. How
might growers in the developing world benefit from selling direct to Nestle? in coffee—growing countries
where Nestle also manufactures for export or local consumption, the growers benefit from its series of
methods at guaranteeing their income and improving growing technology because the company: 0 offers
a fair price to the farmers, and so ensures regular supplies of guaranteed quality for its own factories. 0
pay at a higher price for higher quality commands, since good quality raw materials are essential to its
business. 0 widely advertise their price and a minimum base so that other traders are forced to keep their
offer prices competitive. 7. Why might it be impractical for Nestlé to make all of its purchases of coffee
direct from growers? it is impractical for Nestlé to make all of its purchases of coffee direct from growers
because: 0 there are too many local coffee growers who ultimately supply the company, and so the coffee
is bought from dealers using the international market; W ("2. 3; o the government control the deal of
coffee beans totally and plays as intermediaries between growers and Nestle; L - the growers sell to the
next link in the traditional supply chain, for example, the collector or processor, who would do the primary
processing steps before supplying Nestlé; 8. How is the price of coffee determined on international
markets? How does Nestlé contribute to keeping this price up? The price of coffee is determined by the
relationship between the amount of coffee available to be sold (supply) and the amount which people
want to buy (demand). When there is more coffee available than people want to buy at current prices, the
price will fall and vice versa. Nestlé contribute to keeping this price up by keeping active and responsive
to the market demand, and then have a great control over the supply chain, so that the amount of supply
won’t surplus the amount of demand. e. Business Case Studies LLP. (n.d.). Coffee - The Suppiy Chain.
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 TERMSpring '14
 PROFESSORRobertRuggieri
 TAGSManagement


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