In Figure 1, hypothetical elements of a chocolate production and sale supply chain are presented. There are six particular stages that have to be completed in order to have raw materials turn into chocolate products and then sold to end consumers.
This particular supply chain functions on the basis of close relationships between the key input-output supply chain actors that are mediated by carefully outlined supply chain operations and supporting actors. The idea is that the supply chain is relatively short, with only the key actors being involved (Beg et al., 2017). This principle allows the organization to develop a supply chain that is organized in a way where all operations can be scaled over time.
Supply Chain Principles
A supply chain is a system of networks of organizations working together to convert raw materials into finished products and services while ensuring that it gets delivered to the customers. The availability of cocoa beans is an essential factor in producing chocolates. The farmers in West Africa plant cocoa beans, dry and prepare them for sale to suppliers. Famine and other natural disasters can negatively affect the production of cocoa beans leading to shortages. The farmers collect the cocoa, store it, and prepare to export to Australian cocoa factories. The suppliers export the cocoa beans hence deal with customs duties and regulations.
The factories buy cocoa beans from suppliers and process them to produce cocoa butter, the main ingredient for chocolate manufacturing. Chocolate factories use cocoa butter and other raw materials such as milk powder, sugar, and vanilla to produce chocolate. Some of the chocolate brands are Ola Pacifica and Nina’s chocolate. The factories make the chocolates in time, then take them to the warehouse. Sometimes, the production increases when the chocolate market demand goes up.
The chocolates are packaged and stored in the warehouse under proper storage facilities to keep them safe from any hazards. The right conditions, such as temperature, are considered. Chocolates are handled with care in distribution centers to maintain quality and ensure supermarkets and shops get deliveries on time. When transporting, distributors avoid high temperatures and humidity since they degrade the quality of chocolates. The supermarkets and shops then sell to the final consumers.
Chocolate Supply Chain Analysis
Managing a supply chain is essential as it helps maintain and improve channel member relationships. It seeks to improve a company’s competitive performance by linking the external business process with the internal business process. Each member within the chain ensures that a good relationship is maintained. The supplier relationship code gets strengthened with the upstream chain members, such as the manufacturing and the farmers (Camargo et al., 2019). Strategies used are outlining clear defining principles in segmenting suppliers by identifying the essential supplies to ensure continuity of supplies. Factories also need to maintain short-term relationships with suppliers to ensure flexible pricing and business agility. Secondly, the companies within the supply chain should review and strengthen contracts with both upstream and downstream chain members (Grafmüller et al., 2018; Shen, Choi and Minner, 2019). For example, the processing factories should ensure close partnerships and long-term contracts with the farmers and the distribution centers.
The third strategy is where the major companies like the processing factories and the distributors monitor the entire supply chain. Ensuring that the standard method of chocolate production gets used, getting quality cocoa beans from farmers will provide the most significant returns (Rueda, Garrett and Lambin, 2017). Monitoring also involves evaluating the risks. For example, by assessing the supply risk profile, the organization could learn if its prices were competitive enough. The supermarkets analyze the distributors to see if they can deal with their orders. Finally, technology makes relationship management simple. Mainly since the cocoa beans are imported from West Africa to Australian factories, investing in supplier’s management software is crucial. The software makes it easy to track purchase orders, and an example is the purchase order management software.
Chocolate Supply Chain Complexity
Several complexities are involved, from converting cocoa beans to a bar to getting to the end consumer. The chocolate factories face the challenge of ensuring quality; it is difficult to monitor the supply due to the presence of unregistered farmers, creating complexity in value creation. Prices and trade negotiations develop complexity within the supply chain. The fluctuating cocoa prices and unregistered farmers challenge monitoring the fair pay within the entire chain (LeBaron et al., 2018). The organizational structure is complex. Major companies, the distributors to the manufacturers, are flawed because there is a low level of monitoring of the upstream chains in the adherence to the sustainability standard. For example, the registered farmers will receive training concerning environmental impacts while unregistered would not. Hence, the processing firms cannot access the human and ecological implications of the production process.
The income of the local farmers is not stable due to fluctuating local prices and seasonality changes creating complexity in the economic business model within the supply chain. The fair-trade income strategy makes a policy where trade policies are shared equally between the farmers and the processing firms. Consequently, there are fair trade minimum prices to protect the farmers from lower cocoa prices or serious pricing fluctuations. This policy seeks to sort out the complexity of income gains as the manufacturing setup benefits more than the farmers who cannot meet their needs.
Beg, M.S., et al. (2017) ‘Status, supply chain, and processing of cocoa – a review’, Trends in Food Science & Technology, 66, 108-116.
Camargo, M.C. et al. (2019) ‘Greening the dark side of chocolate: a qualitative assessment to inform sustainable supply chains’, Environmental Conservation, 46(1), 9-16.
Grafmüller, L.K. et al. (2018) ‘Developing complex, mass-customized products in SME networks: perspectives from co-creation, solution space development, and information system design’, International Journal of Industrial Engineering and Management, 9(4), 215-227.
LeBaron, G. et al. (2018) ‘Confronting root causes: forced labor in global supply chains.’ Web.
Rueda, X., Garrett, R.D. and Lambin, E.F. (2017) ‘Corporate investments in supply chain sustainability: selecting instruments in the agri-food industry’, Journal of Cleaner Production, 142, 2480-2492.
Shen, B., Choi, T.M. and Minner, S. (2019) ‘A review on supply chain contracting with information considerations: information updating and information asymmetry’, International Journal of Production Research, 57(15-16), 4898-4936.