ABSTRACT
The coffee industry generates approximately US$200 billion annual revenues, with more than 60 million people depending on it globally. However, coffee farmers in producing countries are operating at a loss due to selling at low prices to intermediaries who control the downstream channels. Recent studies highlighted the need to open channels for farmers to access the market of finished products (roasted coffee). However, most farmers do not have the skills and resources to create this alternative. In this chapter, the authors present a mixed-integer linear programming network model that determines the most cost-efficient supply chain network configuration, by considering farmers in Caldas, Colombia, to the Northeastern region of the U.S. We explore several candidate facilities, transportation modes, and coffee-processing technologies in our model. Our model also considers multiple periods, multiple echelons, single product, and weight and volume variations along the supply chain. We ran the model for different demand scenarios and the results show important improvement opportunities in terms of production and transportation costs for all the scenarios. Our model generates multiple recommendations for Café Botero. The first recommendation is to minimize the number of facilities in the supply chain and place them in Caldas, Colombia. We expect this action to generate cost savings due to (1) the lower costs of operating the facilities in Colombia compared to the U.S., (2) the reduction in the total number of facilities, and (3) the minimization of the total transported weight generated by processing coffee closer to the farms. The second recommendation is to leverage the benefits of the economies of scale to bring cost savings in the total supply chain. Finally, the third recommendation is to package the roasted coffee by utilizing controlled atmosphere technologies to prolong the shelf life and quality stability of the coffee, which will allow shipment opportunity by sea, and therefore generate savings in transportation.
