Coffee - The Supply Chain
A Nestlé case study

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Page 2: The Supply Chain

Nestle 5 Diagram 1The supply chainis the sequence of activities and processes required to bring a product from its raw state to the finished goods sold to the consumer. For coffee, the chain is often complex, and varies in different countries but typically includes:

  • growers - usually working on a very small plot of land of just one or two hectares. Many do some primary processing (drying or hulling) themselves
  • intermediaries - intermediaries may be involved in many aspects of the supply chain. They may buy coffee at any stage between coffee cherries and green beans, they may do some of the primary processing, or they may collect together sufficient quantities of coffee from many individual farmers to transport or sell to a processor, another intermediary, or to a dealer. There may be as many as five intermediary links in the chain
  • processors - individual farmers who have the equipment to process coffee, or a separate processor, or a farmers, co-operative that pools resources to buy the equipment
  • government agencies - in some countries the government controls the coffee trade, perhaps by buying the coffee from processors at a fixed price and selling it in auctions for export
  • exporters - they buy from co-operatives or auctions and then sell to dealers. Their expert know-ledge of the local area and producers generally enables them to guarantee the quality of the shipment
  • dealers/brokers - supply the coffee beans to the roasters in the right quantities, at the right time, at a price acceptable to buyer and seller
  • roasters - people like Nestlé whose expertise is to turn the green coffee beans into products people enjoy drinking. The company also adds value to the product through marketing, branding and packaging activities
  • retailers - sellers of coffee products which range from large supermarkets, to hotel and catering organisations, to small independent retailers.

A supply chain is only as strong as its links. Different relationships exist between organisations involved in the separate stages of the chain - whether it is in the structuring of product distribution, arrangements for payment and arrangements for handling, or in storing the product. At the heart of these relationships is the way in which people treat each other. Long-term business relationships need to be based on honesty and fairness - parties to a trading agreement need to feel that they are getting a fair deal.

Nestlé | Coffee - The Supply Chain