Abstracts.
Today, in an international and globalized scenario, managing the development and the
right functioning of a supply chain requires a strong risk propensity, a great ethical and
responsible commitment towards stakeholders.
Moreover essential are a complex use of resources, monitoring, inspections and
certification throughout the supply chain. In particular, food business, management and
control of the supply chain requires more attention.
It 'is essential to continue along the chain a fair treatment and a correct preservation of
raw materials to ensure the quality of products coming into the hands of the end user,
tracking the production process, giving an identification and traceability to the finished
product, and selecting accurately the players taking part in the chain.
For the consumer it is important the nutritional aspect, and his health, then we must
prevent the contamination with pesticides, hazardous substances and bacteria in the
processed product along supply chain and ensure a certain level of nutrients to the final
product.
In addition to ensuring compliance with laws, standards of hygiene and nutritional
characteristics, it is important to reassure consumers about the environmental impact
that supply chain has on the ecosystem for the consumption of primary resources and
pollution.
In the coffee sector ethical and responsible aspects are fundamental, we find ourselves
to manage a complex and difficult supply chain that must be faced with important
trends such as: the problem in coffee prices, the livelihoods of coffee producers in the
countries of origin and the level of quality and sustainability of the production.
The final consumer is the starting point for organizing and managing a proper and
functional Supply Chain. We must address the structure and organization of the supply
chain based on individual need expressed by the consumer.
If we can satisfy these needs, we are almost certain to hit our final objective: to have a
fully satisfied customer and a company that can maximize their profits and maintain a
wild and strong position over to the market.
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Introduction.
The objective of this thesis is to present and discuss the important theme of Supply
Chain Management from a perspective of sustainability, taking into account changes in
sensibility of the final customer in the food sector.
Subsequently, I analyze the supply chain management of a 'leader in the food sector, in
this case in the coffee industry, which pays attention to ethical, sustainable, of its chain,
which takes into consideration high quality standards, compliance with the regulations
of the countries of production and distribution that focuses its activities and, as a
starting point, the customer's needs. We analyze illycaffè company.
The main questions from which started my analysis were the following: how the choices
of supply chain management are linked to consumer needs? How the company decides
to organize its strategy of action taking into account the views of consumers,
competition, institutions and media? In the management of Supply chain the topics of
social marketing, green, ethics and responsibility how much influence they have??
These are the questions to which I started to analyze the supply chain management.
In particular, in Chapter 1°, I discussed how it is organized and structured a supply
chain and its management, what are the challenges which need to meet in the
management, its strategic vision and operation. Then, I introduced the salient points of
the evolution and history of supply chain management, definitions of lean and agile
supply chain, development and integration of the SCM process. Finally, I consider his
organization, the choices and characteristics of SCM in international and global level
and the main trends of reference. The final paragraph of the first chapter introduces the
Food Supply Chain on a global scale.
Once introduced into all the peculiarities and characteristics of management, in the
2°chapter has started by the consumer as a starting point to determine decisions and
choices of marketing and supply chain management; such as being able to achieve full
customer satisfaction and maximum efficiency in the supply chain management.
In the 3° chapter we talk about how the Supply Chain Responsibility is a competitive
factor to maximize profit, visibility and image of a company in the eyes of stakeholders,
of how the ethical and responsible consumption are driving factors for the public and
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the consumer and how companies, to respect them, should therefore organize the supply
chain management compliance standards, and certification criteria.
In Chapter 4°, I decided to analyze a company belonging to the coffee industry, the
brand illycaffè. This company was chosen because it is a leader in its industry, is
recognized as a brand linked to the consumption of coffee quality, valuable and
sustainable coffee. It was the first Italian company to receive certification for the
management and sustainable supply chain process.
The supply chain of a leading food company it’s a complex network of linkages upstream
and downstream and concern a lot of attention and focus to give in the hand of customers a
good product responsive in the food processing, with ethical standard of cultivation and
production and satisfactory for the need of customers.
In the era of globalization, many industries producing raw materials, components and
finished products has moved from industrialized countries to developing countries, in
order to contain production costs. In these countries the legislation is less stringent, and
therefore the globalization of the supply chain increases the risks involved in social and
environmental.
The increasing use of outsourcing leads companies to outsource more and more
significant share of their business processes. Often contractors rely on themselves to
other parts of the processing companies, and not always the customer has full visibility
into who make up its supply chain working conditions on them along the chain.
Over the last years, consumers' views on social and environmental issues has increased
significantly, thanks to the attention of the media. This attention has resulted in
companies having to deal with the so-called "reputational risk".
Potential violations of working conditions and respect of the rights of workers
throughout the supply chain can cause damage to the image with a heavy impact on the
market. The company is seen as responsible and guarantees the quality of working
conditions throughout the supply chain.
But how can we manage the risks along the supply chain and ensure compliance with all
regulations, certifications and inspections?
More and more frequently, large companies or brands feel the need to increase the
knowledge of the supply chain to prevent risks and damage to image and reputation.
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The common need is to identify tools to explore, select and monitor the supply chain.
Become refined tools to detect social and environmental performance of their suppliers
(questionnaires, audit). Looking for competitive prices is accompanied by the search for
guarantees in terms of respecting the rights of workers and the environment, in the
belief that only a supply chain that provides these guarantees is sustainable coffee over
time.
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1. Descriptions and characteristics of the supply chain
management.
Supply chain management (SCM) can be defined as:“ the active management of supply
chain activities to maximize customer value and achieve a sustainable competitive
advantage” ( Bozarth C., Handfield R., 2005 ). Supply chain encompass purchasing
and supply management; physical distribution management; material handling, and
logistics. In essence, Supply Chain Management integrates supply and demand
management within and across companies.
Supply Chain Management can also refer to Supply chain management software, tools
or modules used in executing supply chain transactions, managing supplier relationships
and controlling business processes.
The main objective of Supply chain management is to maximize customer value and
reach a sustainable competitive advantage. To reach these important objectives, it’s
important to develop and run supply chains in the most effective and efficient ways
possible.
1.1 Supply chain definition and activities.
The concept of Supply Chain Management is based on two main ideas; as we can see
from the image below, every product that reaches an end consumers represents the
cumulative effort of multiple organizations ( marketing, sourcing, operations, logistics,
engineering). These organizations are referred to jointly as the supply chain.
Supply chain activities include everything from product development, resources,
production, logistics, and the importance of the information systems needed to organize
these activities.
The organizations that create the supply chain are linked together through physical and
information flows. Physical flows involve the transformation, movement, and storage of
goods and raw materials. They are the most visible piece of the supply chain.
Information flows enable several supply chain partners to coordinate their long-term
plans, and to control the day-by-day flow of goods and material upstream and
downstream the supply chain.
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Picture 1: A graphic description of supply chain activities.
The second idea is that while supply chains have existed for a long time but were
ineffective. Few organizations understood the importance of a good management of
supply chain and the means that the entire chain of activities ultimately delivered
products to the end customer. The responsibility and authority for implementing SCM
must be placed at the highest levels of an organization. Firms that attempt to consider
SCM within a functional unit such as sourcing or logistic usually have limited success.
SCM adds another layer of complexity to a firm’s strategy development efforts. Years
ago, firms could succeed by being particularly good in one functional area, such as
marketing or operations. Then firms recognized that in order to survive, they had to
have sufficient capabilities across multiple functional areas. Now-a-days, much
competition occurs between “multi-firm” supply chains, not just between individual
firms; and managers verify how they will partner with other firms in order to compete.
Firms strive to focus on their core competencies and becoming more flexible. They have
reduced their ownership of raw materials and distribution channels, and outsourced
these functions to other entities that can perform the activities better or more cost
effectively.
This procedure is doing in order to increase the number of companies involved in
satisfying the end customer demand, and reducing management control of routine
logistics operations. The concept of supply chain management is to reduce control on
operations and improve trust and collaboration among supply chain partners.
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1.2 Problems connected with supply chain management.
In the execution of supply chain we manage and coordinate the movement of raw
materials, information and found; it can occur that SCM can address different problems.
First of all, it can occur a problem in the configuration of the distribution network:
we have to establish the number of supplier, their location and network missions, where
disseminate production facilities, distribution centers and warehouses.
A second problem could be how defining the distribution strategy; it’s important to
define if the operating control it’s centralized in a unique unit or if it’s decentralized or
shared. We have also to decide what is the delivery scheme, the mode of transportation
and control this transportation. The logistical activities are so costly and can be a
problem in developing an efficient and effective SCM strategy. In order to achieve the
lowest logistic total cost, it’s necessary to well coordinate these logistical activities and
to balance cost of all the activities. The Information could be a problem through the
supply chain if we don’t share important and valuable information along the supply
chain: it’s important to share information about forecast about the market, inventory
(quantity and number of products, about product processing and finished) and about
transportation.
1.3 The strategic vision and function of SCM.
The strategic mission that organizations must to pursue to cope with competitors in the
markets it’s first to be able to provide quality products or services in a timely, cost-
effective manner if they want to deal with broader supply chain issues.
Therefore, key themes are Total Quality Management, Just-in-Time manufacturing,
concurrent product development. The second thing to understand is that it often requires
significant changes in the firm’s organizational structure. SCM issues cut across
functional areas and even business entities. Third, SCM requires firms to focus on
performance across the entire supply chain and not on individual units, because if
individual units seek to maximize their performance without regard to the broader
impact on the supply chain, it can cause problems.
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To avoid this circumstance it’s necessary to establish suitable information systems and
metrics, to make intelligent decisions and presents a significant challenge to supply
chain partners.
The starting point for a firm is the development and execution of a long-term supply
chain strategy. The strategy should have the aim of identify what kind of supply chain
the firm want to take part, understand and explain to all the staff how the firm provide
value to the supply chain and least but not last, doing a careful selection of supply chain
partners, suppliers, transportation providers and distributors.
Firms can begin to understand how they add value in a supply chain, what is needed to
make the supply chain work in the most effective and efficient way possible. It’s
important to understand what kind of supply chains we compete in and what are the
valuable assets in the supply chain, for this reason it’s often valuable to map the
information and physical flows that make up the supply chains.
The firm’s supply chain strategy must be consistent with both the overall business
strategy and efforts within the enterprise as purchasing, logistics, manufacturing and
marketing.
In the creation of the vision of supply chain, we have to structure our supply chain on
three different levels: strategic, tactical and operational level.
On the Strategic level we have to consider all strategic points of view in the chain. We
have to optimize the network with positioning the different location; decide number and
size of store house and distribution center. In order to create appropriate communication
channels and make easier any kind of interaction between all partners, create strategic
partnership with suppliers, distributors and end customers. It’s important to integrate in
the supply chain all new and existing products, take make and buy decisions
strategically and create commitment and align each strategy with the entire supply
strategy.
On the tactical level we manage contracts, purchasing and production decisions.
We can plan processes, we decide about inventory: their quantity and quality standards;
we take decisions about transportation, we create benchmark about actions of
competitors and the most important, we focus on the customer demand.
As tactical level, if an organization is going to be responsive to market changes, it’s
important to manage effectively time-based competition (Christopher, 2005).
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Time based competition has three dimensions:
• time to market: the speed at bringing a business opportunity to market;
• time to serve: the speed at meeting a customer’s order;
• time to react: the speed at adjusting output to volatile responses in demand.
We use these three dimensions to develop strategies for strategic lead-time management
of supply chain, and we differentiate between horizontal and vertical time. Horizontal
time is time spent on processes such as manufacture, assembly, in-transit or order
processing. Vertical time is the time when nothing is happening, no value is added but
only cost and products are standing as inventory.
On the other hand, on Operational level we have the most practical and daily routine.
We plan and schedule the distribution and production in the supply chain, we analyze
the customer demand and we forecast about market demand.
At the operational level we also consider the organization of all the activities of the
supply chain: inbound logistic, production operations, outbound logistic, the fulfillment
of all the order promising from production to supply level and assure that there are not
financial or quality loss.
1.4 Keys development in SCM attract companies.
Supply chain management is a body of tools and techniques, view as much as a
philosophical approach. However, between companies SCM requires a great deal of
interaction and trust to work together. As we said before, organizations understood the
importance of a good management of supply chain. The three major developments that
have brought management’s attention are:
1) The information revolution.
2) The increased competition and globalization in today's markets.
3) Relationship management.
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1)The Information Revolution.
In the early 1960s when computers were first developed, a mainframe computer had a
big dimensions and fill up an entire room. Subsequently, with the development of the
integrated circuit, the cost and speed of computer power increased exponentially.
Today, a laptop computer exceeds the storage and computing capacity of mainframe
computers made only 15 years ago.
The evolution and the mass culture of the personal computer, the Internet, and the low
cost and availability of information resources allows easy linkages and eliminates
information-related time delays in any supply chain network.
In the last decade, a new concept known as e-commerce (electronic commerce) rise
approval. In this virtual market, thousands of buyers and sellers were put in touch with
one another and these create the opportunity of on-line trading communities.
In this communities information transactions are automatically completed via Electronic
Data Interchange (EDI), Electronic Funds Transfer (EFT) and Point of Sale (POS)
devices. The old paper-type transactions are becoming increasingly obsolete. Moreover,
the proliferation of new telecommunications and computer technology has made
instantaneous communications a reality.
2) The increased competition and globalization in today's markets.
The second major trend is increased competition and globalization of businesses. The
rate of change in markets, products, and technology is increasing continuously.
New foreign competitors are entering into markets that have traditionally been
dominated by domestic companies, and companies must defend their domestic market.
Today it’s important to increase market share on a global basis, rapidly expand our
global presence and be prepared for rapid global expansion. Consumers demand
products and services fitting with their individual needs, with a quicker delivery and
state-of-the-art technology.
It’s important to be competitive in the market to survive. In some industries, the
imposing challenges of today’s competitive environment reduce product life cycles
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