What general sourcing can learn from the coffee industry

Who do you think has the most to learn about the supply chain–modern factories in a Chinese megapolis OR a rural, generations-old coffee farm?

Though there is no simple answer, it may be surprising to learn how the two industries are similar and just how much modern factories can learn from coffee farming.

Due to a serious addiction to coffee (4-5 cups/day, thank you very much), as well as a love for the coffee-producing regions of the world, I’ve developed a coffee sourcing side hustle. It can be fascinating to notice the similarities between sourcing coffee and regular sourcing and how the lessons from the coffee industry can be applied to general sourcing.

There’s a great deal of innovation found in buying and sourcing in the coffee industry and it provides a good indicator of the future of sourcing. The biggest difference in coffee buying is the presence of a more direct supply chain that cuts out most of the middle men. When properly implemented, this allows more money to flow to the farmers, who are often living on subsistence wages.  

In the Coffee Industry Relationships Matter

In coffee, long term relationships with farmers/growers are key. It’s not uncommon for a buyer to spend years with the same farmer over multiple harvests. Coffee buyers will often start small with several farms, only investing in the ones the buyer believes are most meaningful or able to meet their demands. The buyer may even purchase equipment (such as a warehouse to store green beans or industrial washers to clean the cherries), or provide housing and other benefits for their farmers. These relationships take years to build and both buyer and farmer may not see the benefits for years to come.

For Cosmo’s larger industrial clients, the stability of multi-year relationships is crucial. In general sourcing, you’re not likely to find that perfect supplier–the one who can perfectly meet each of your requirements. As a result, you must choose the best fit and work together to make improvements. You work with them to obtain certain equipment, and train workers using new methodology.

For instance, we had a client who wanted a product made, however, a single supplier did not exist who could manufacture the product at the volume they wanted. The client also wanted to differentiate their product (for which they had a patent) from existing products, so they needed some new manufacturing methods. Cosmo Sourcing was able to find multiple suppliers for them. After buying initial orders from multiple factories to feel them out, the client chose the one they felt was most capable and Cosmo worked with them to get new equipment, certification to import to the US, and build several new assembly lines. The client gave the supplier a no-interest loan to make these upgrades.

In the Coffee Industry Product Origin Matters

Coffee was one of the first industries to emphasize the importance of product origin. As consumers grow more concerned with ethical purchasing, many industries are transitioning to a more transparent supply chain. The coffee industry is also changing the way we buy. Along with letting consumers know how the beans were bought, they include information detailing how a purchase benefits farmers.

Another recent innovation is the “Direct Trade Model” of coffee sourcing. In this model, buyers/roasters make a deal with farmers for a larger percentage of the final sale. As a result, farmers get paid more (but they do take on risk and have a longer payout time). With the current, more traditional sourcing model that dominates in China, the sourcing agent/company hides the names of the factories and handles all payments. The sourcing agent/company bases their pay on how much they can get from the customer and how little they can pay for the factory. Instead, at Cosmo, we changed our business model so that clients are paying the factories directly, and we charge its fees separately.

One of the biggest changes we’ve made at Cosmo Sourcing, inspired by coffee buying, is making the whole process transparent to the client. Clients are free to disclose or hide where their products are made as they see fit.

The direct trade model does not yet exist in the general sourcing community–though this is something we hope to try in the future. It may seem odd that a sourcing company, essentially considered a middle man, would want to cut this step out, but it follows our belief that sourcing should be honest and simple. Cosmo always strives to make connections directly with the factory and not resellers or trading companies. We

Good Coffee Requires Strict Supplier Vetting

There are many steps that a coffee buyer will undertake to determine the quality of a potential supplier. After doing their research, the first step is to visit the farm and conduct a rigorous inspection. This includes everything from looking at the quality of the plant and following strict standards to rate the quality of the coffee (using a process called “Cupping”), along with many other methods to verify the quality of a farmer’s product. Coffee is unique when compared to most products in that the majority is still produced by small lot farming, resulting in many more suppliers to sort through and vet. Each of these farms tends to have different attributes to qualify. 

While every project is unique, we at Cosmo do try to determine the best suppliers and make personal recommendations based on your needs as a company. This is a complex and qualitative process that involves many steps. After we research potential suppliers and factories, the next step is to contact and visit the factories. During this part of the process, we inspect everything from licensees, and past projects as well as the equipment, the competence of the workers. This is one of the key aspects of our company is making sure that you find the best supplier possible.

In the coffee industry every step in the supply chain matters

In coffee farming, it’s important that each and every step, from seed to cup is strictly controlled in order to ensure quality. There are dozens of variables that can affect the quality of coffee from the altitude, the amount of shade on site, the soil quality, to the type of bean and much more. If you want to make a quality cup of coffee every step must be well executed–any missteps may have a noticeably adverse effect.

With Cosmo, we know it’s more than just finding the right factory. There are often additional steps, such as finding the right materials and shipping from the factory to the US. Additionally, when you source from a factory who is making a product for the first time, it’s important to supervise, train and get the workers up to speed. Every step of the supply chain needs to be executed well in order to ensure clients are shipped the quality product they require. We constantly audit supply chains to find problems before they happen and react quickly when they do arise.

Due to varying consumer demands and geographical conditions, the coffee sourcing industry had to develop sourcing techniques fairly independently. Even though lessons from coffee cannot always be directly related to sourcing products from China, the direct trade model, greater transparency and more meaningful relationships are a few of the innovations that may help us build a better sourcing model. At Cosmo, we feel it’s a worthwhile endeavor to study the coffee sourcing process and apply the findings to improve our sourcing services. Ultimately it’s the consumer who drives the markets, and as consumers become savvier it’s important to improve your supply chain so that you can better promote your products and improve your brand's perception. At the end of the day these models seek to improve the lives of the workers, farmers, factory owners and consumers–and that’s something we can all agree on.

Further reading:

https://www.nytimes.com/2013/03/17/business/coffees-economics-rewritten-by-farmers.html 

https://www.thrivefarmers.com/why-thrive/

Want a professional to help? 

Cosmo has been helping Source products from China, Vietnam and more for years.  If you’re interested in hiring a sourcing company feel free to Contact Cosmo for all your sourcing needs at Info@cosmosourcing.com or visit our Product request page. Even if you do not need any sourcing service feel free to reach out to us and we will answer any sourcing questions that you may have. Thanks for reading! 


 

James KennemerComment