Supply chain management is an integral part of any business, and even small independent coffee shops such as Wild Dog Coffee Company have to engage in it. According to researchers, supply chain management promotes the integration of businesses with other value chain actors in industries to meet the fluctuating demand (Gligor & Holcomb, 2012). Logistics is one of the essential elements of supply chain management, yet these two spheres of business operations are often confused. Logistics is only one area of the supply chain management which is responsible for the sourcing, movement, and storage of inventory. While supply chain management involves the coordination of all operational processes concerning a business in order to achieve a competitive advantage. Thus, in order to demonstrate proper supply chain management, Wild Dog Coffee Company must not only be able to source their materials but also see how the business is integrated into the value chain.
The First Supply Chain Design
The first option stresses the importance of cost-efficiency, which is particularly relevant for Wild Dog Coffee Company, a small enterprise which does not have extra resources. Essentially, according to the first supply chain design, the company carries out its operations through the first shop. Namely, all materials, including coffee beans, milk, paper cups, and flavoring, first get shipped to the first location, from which a share of the resources gets transported to the second location. In this design, the business buys coffee beans from one intermediary, and the product then passes through the exporter, importer, and roaster.
The Second Supply Chain Design
Wild Dog Coffee Company has two possible supply chain designs to choose from, and the second one stresses the importance of multiple sourcing. Essentially, such a design completely separates two coffee shops of the business, making them independent entities with their own supply chains. Since Wild Dog Coffee Company sources only one type of coffee bean, it is impossible to find supplies from completely different geographical regions. Nevertheless, coffee beans often have different distribution channels, which is demonstrated in the flow chart. Namely, the first shop purchases their beans from the intermediaries who buy their product from the processing plant in the country of origin. The second shop purchases beans from the farmers’ cooperative, an organization which owns its processing plant. As a result, two shops also have different exporter, importer, and roaster; similarly, each Wild Coffee Company location have their own suppliers of milk, paper cups, and flavoring. The flow chart does not show storage or a distribution center because both shops source their materials directly, and due to their size and volume, coffee beans can be stored right inside shops.
Supply Chains and Logistics
The first supply chain intersects with logistics on numerous occasions, which are mainly related to the transportation of the raw materials, including coffee beans, milk, paper cups, and flavorings. According to research, the question of ownership is essential for the sphere of logistics since it determines the level of control of the firm over the procurement process (Krajewski et al., 2019). Wild Dog Coffee Company is a small business which does not own its own logistics services and cannot be considered a private carrier. Therefore, the enterprise will have to rely on third-party logistics services and therefore will not have much control over the flow of coffee beans until they reach the destination country. In the case of the first supply chain, the logistics problems concern the choice of the mode of transportation and its conditions. Wild Dog Coffee Company has to choose not the fastest mode of transportation but the most reliable one guaranteeing the integrity of the beans.
Similarly, in the second supply chain design, the logistics issues related to transportation multiply because the company has to manage to separate flows. Thus, the company has to ensure that the contractors it hires to transport the beans have proper transportation conditions, which will not negatively impact the quality of the product. In both designs, the company will have to collect the beans from the roaster itself because it has to check that the beans can be used for coffee in the future. Taking into consideration that Wild Dog Coffee Company is not a large enterprise, the logistics of collecting coffee beans will involve using a car.
Inventory management is another key part of logistics, and Wild Dog Coffee Company will have to embrace different approaches to it in each design. It is important to approach inventory management carefully in order to avoid encountering the problem of bull-whip effect, when shortage may lead to inflated demand, which was common during the COVID-19 pandemic (Shih, 2020). In the first supply chain design, the company will have to store beans and other resources in the first location and then distribute the required volume to the other one. While in the second design, both locations will store their own inventory separately and independently. Similarly, in the first design, the company will have to order new inventory simultaneously for two locations which means that the volume of one order will be large. While in the second design, the locations will order their inventory separately; nevertheless, on certain occasions, locations can exchange their inventories if one shop lacks certain resources.
First Design’s Bottlenecks
The first supply chain has a considerable bottleneck in the form of single-sourcing, namely, the company order coffee beans from one distributor. The intermediary business which buys beans from the processing plant or farmers themselves may at some point not have the product due to various reasons. The aforementioned problems can be resolved by finding a possible substitution for the wholesalers, as well as by utilizing supply chain tools such as shipping status alerts. One of the key bottlenecks inherent to the first design is the necessity to calculate the demand and approximate inventory simultaneously for two locations which can lead to the lack of raw materials or their excessive volume. To solve this problem, the company can introduce a supply chain tool such as demand forecasting, which will provide evidence and data for the correct order volumes.
Second Design’s Bottlenecks
The second supply chain design also has certain bottlenecks; namely, it involves conducting considerable planning since it adds new members to the company’s supply chain. As a result, Wild Dog Coffee Company will have to manage two separate supply chains, which significantly contribute to low visibility. In other words, if certain problems arise with the supply chain, the company may not be able to detect where the issue occurred who is responsible for it. Such a bottleneck can be overcome with the help of allocating areas of responsibility to all members of the supply chain in advance. Essentially, the company can use supplier-management tools such as better communication with merchants, automated procurement, and data collection.
Value of Supply Chains and Logistics
The ultimate goal of Wild Dog Coffee Company’s supply chain is achieving a competitive advantage through the provision of the highest-quality coffee to customers. While the goal of logistics is to ensure that all raw materials are always in stock and that inventory is properly managed. The first supply chain and its logistics deliver value to the business through cost-efficiency since larger orders help reduce the overall price. Thus, the first design of the supply chain promotes the cost leadership strategy, which promotes a high-quality but affordable product for the clients. The second supply chain design relies on multiples sourcing and implies ordering coffee beans and other raw materials from different suppliers. Such a design helps the company achieve the differentiation strategy, which assists it in minimizing the risk of running out of inventory. Essentially, by following the second design, Wild Dog Coffee Company ensures a steady inflow of coffee beans and other inventory at all times, even if suppliers to one location cannot deliver on their responsibilities.
The first supply chain design can be recommended to Wild Dog Coffee Company as the most relevant one, yet it is necessary to list the deficiencies of the second one first. The second design is not appropriate for the company because it ultimately wastes resources. Even though it offers a more reliable flow of inventory, it forces the business to maintain two separate supply chains, which increases expenses. Additionally, double sourcing creates additional planning, which also requires more human resources to manage it.
Thus, the preferred supply chain design for Wild Dog Coffee Company is the first one because it helps the business pursue the cost leadership strategy. Essentially, the approach saves the company a lot of financial and human resources by decreasing the workload to simply managing one supply chain. Additionally, the supply chain is quite flexible because it does not involve many suppliers, and the company can quickly replace them with new ones if they fail to deliver on their responsibilities.
Supply chain management and logistics are vital areas for all businesses, and Wild Dog Coffee Company has to approach them carefully to deliver excellent quality of services to clients. The first supply chain design was chosen as the most appropriate one because it lets the business easily manage its inventory and brings down costs. Wild Dog Coffee Company can achieve its goal of providing affordable, high-quality coffee to clients only by acting in an agile manner which can be attained using the first supply chain design
Gligor, D. M., & Holcomb, M. C. (2012). Understanding the role of logistics capabilities in achieving supply chain agility: A systematic literature review. Supply Chain Management, 17(4), 438–453.
Krajewski, L. J., Malhotra, M. K., & Pitzman, L. P. (2019). Operations management: Processes and supply chains (12th ed.). Pearson.
Shih, W. (2020). COVID-19 and global supply chains: Watch out for bullwhip effects. Forbes. Web.