CoffeeRunners

CoffeeRunners sells coffee to different customers. Currently, CoffeeRunners buys 6 coffee

types from a roaster and keeps an inventory. Customers are mainly different companies
with different types of coffee machines. A company may buy a selection of different types
of coffee.
A different company maintains the coffee machines and CoffeeRunners provides the com-
panies with coffee.

1 Supply chain and strategy

CoffeeRunners current strategy is to provide fast, accurate, and relatively cheap coffee to
its customers. It is important that the customer does not run out of coffee.

1. Visualize CoffeeRunners supply chain from the beans to the customer.

2. How would you rate the different performance measures from a customer point of
view?

3. How does the strategy affect

• inventory and inventory levels (costs);

• facilities, location, and production equipment;
• transportation, transportation costs (amounts, types, when);
• IT, what do we have in-house, downstream and upstream orders, order system?

Due to the high competition in the industry, CoffeeRunners need to review their business
model. More companies want high-quality coffee and are willing to pay for it. Many com-
panies have high-tech coffee machines where employees can select among a selection of
different types of coffee.
CoffeeRunners revise their strategy and want to provide a large selection of high-quality
coffee with a high level of service. Customers should be able to have their customized blend.
They still want to target the old customer base if possible.

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Case - CoffeeRunners p2

4. How would you rate the different performance measures from a customer point of
view?

5. How does the strategy affect

• inventory and inventory levels (costs);

• facilities, location, and production equipment;
• transportation, transportation costs (amounts, types, when);
• IT, what do we have in-house, downstream and upstream orders, order system?

6. Which manufacturing process and level of customization seems best?

2 Sourcing
With the new strategy, CoffeeRunners has decided to keep a small roastery where they
roast the different coffee beans. Moreover, they want to keep an inventory of the most used
coffee types they sell. Hence, they have to revise their sourcing strategy.
First, CoffeeRunners consider outsourcing the transportation to the customers. Currently,
they transport their products to the customers in-house using a truck. However, the truck is
not utilized much (a few hours per day) and many competitors use a Third Party Logistics
(3PL) provider. Consider Step 3 in strategic sourcing:

7. List advantages and disadvantages for outsourcing transport.

8. Make a total cost analysis of the expected costs per year. Consider the data in Table 1.

9. Make a portfolio analysis. In which quadrant is the transport?

CoffeeRunners has decided to use performance measures: cost, delivery excellence, special
orders possible, corporation potential. Consider Step 5 in strategic sourcing, and assume
that the score of three possible suppliers are given in Table 2.

10. Calculate the weighted score for each supplier given the four performance criteria are
weighted (0.6, 0.25, 0.05, 0.1)

Consider CoffeeRunners process of buying coffee beans for their roaster machine.

11. Should CoffeeRunners use single or multiple sourcing for this process?

12. Should CoffeeRunners focus on sustainability, CSR and disruption?

BUSINESS AND SOCIAL SCIENCES Lars Relund Nielsen

DEPARTMENT OF ECONOMICS AND BUSINESS ECONOMICS larsrn@econ.au.dk
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Insource
Packaging (per package) 7,5
Petrol (per package) 3,5
Truck (yearly) 425.000
Human resources (yearly) 725.000

Outsource
Packaging (per package) 3,5
Shipment (per package) 19,5
Human resources (yearly) 225.000

Tabel 1: Cost data (DKK). An estimate of packages per year is 75000.

Supplier 1 Supplier 2 Supplier 3

Cost 2 5 3
Delivery 4 2 5
Special orders 5 1 3
Corporation 5 3 3

Tabel 2: Performance score.

BUSINESS AND SOCIAL SCIENCES Lars Relund Nielsen

DEPARTMENT OF ECONOMICS AND BUSINESS ECONOMICS larsrn@econ.au.dk