The Backstory of Your Morning Cup

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The coffee supply chain is a complex system, perhaps more than most, as it comprises many stages spanning different continents and time-zones. However, understanding the supply chain in its fullness facilitates optimisation of it so that all parties win: the grower, the roaster and the consumer.

Back to the roots

The coffee beverage first emerged in the fifteenth century in the Middle-East. Since then, it has gained exponential popularity with the International Coffee Organisation (ICO) proposing 1.4 billion cups of coffee were consumed daily worldwide in 2008. This enormous demand sparks the need for increasing crops and yields, which are dependent on sustainable supply chains.

From the humble bean to the rich brew

Coffee is best grown in tropical areas that boast temperatures of approximately 25ºC. This equates strictly to areas of Africa, South America and Asia. The bean itself comes with a twin, encased in a red, husky flesh and is termed a cherry. These grow on trees which take 5-7 years to reach fruit-producing maturity. A single coffee tree only produces one pound of green coffee beans per year. Nine billion kilograms of coffee is estimated to have been consumed worldwide in 2016, which of course, equates to billions of fruit-producing trees requiring harvesting.

The coffee cherries on each tree are all ripe at different times and there is a particular window in which the cherry can be picked. Therefore, cherries are picked by hand and each tree requires several pickings. The coffee cherries are then de-husked and the beans are removed and laid out to dry in the sun. Now, imagine how many hours it takes to carry out this process for nine billion kilograms of little coffee beans.

The dried beans are then passed through some intermediaries before arriving with the roaster and retailer, and this is where coffee supply chains can differentiate. These intermediaries involve all or some of the following: processors, exporters, government agencies, and dealers or brokers. All these entities require payment for their part in the chain, which of course, drives up the consumer price of coffee.

It is possible that some farmers possess their own processing equipment, which can be used for themselves or collectively. However if this facility is not available, then all intermediaries may in fact be located offshore.

The supply chain journey

This brings us to the point of a transportation network, which is a key component of the supply chain. Coffee beans are a very sensitive product requiring specific conditions when in transit. They must be stored in jute bags that allow breathability while retaining moisture at the surface of the bag so that only the most superficial layers of the beans are susceptible to rot. The humidity of the storage conditions must be controlled with even the moisture of the wooden floorboards of the ship being assessed. Storing your goods properly is one way to reduce freight costs.

Once the coffee is offloaded in the recipient country, it is transported to roasters where the bean is transformed from green to its brown, brittle counterpart. This starts the clock of consumption as roasted beans are best packaged or consumed within 48-72 hours due to the high level of surface-derived caffeol that promotes oxidation and spoiling.

The value of the first sip

It is this complex supply chain, comprised of extensive man-hours and machine-operated processes, which underpins the morning cup of coffee we know so well. But how should such a complex system be valued and how much is that first sip worth? Perhaps the answer is not enough in too many a case.

Assigning a value to each step in the supply chain to ensure every party is profitable is difficult particularly when there are multiple economies, currencies and cultures involved. And then there is the added task of marketing the value to the consumer to ensure the proper cost is met. Inventory management and logistics software is a worthwhile tool to have to keep track of all inventory stock and costs (such as labour, taxes and transportation) associated with it.

There is even a growing trend of decluttering the supply chain with more and more roasters approaching farmers and growers directly and outsourcing the intermediate steps. In doing so, the grower receives more income for their efforts and the roaster has more variety at his disposal, adding value to the end cup of brew.

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Melanie - Unleashed Software

Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.

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