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Coffee Planet Strategic Management Report

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Updated: Sep 20th, 2019

Introduction

Coffee Planet is a United Arab Emirates (UAE) company that runs a roaster for coffee beans and sells coffee drinks and other beverage in its coffee shops located throughout the UAE. The business has all its operations in the UAE and operates from Dubai serving customers from different nationalities that are traveling to the country or living in it.

The company seeks to disrupt the status of the coffee shop business in the Middle East, starting with the UAE. Its mission is to make the coffee landscape exciting, beginning with the process of making coffee and then coming up with amazing blends that offer a new coffee enrichment value to customers (Coffee Planet para. 1-4).

The objective of the Coffee Planet’s coffee roaster is to ensure that coffee experts are in charge of the making coffee sold to customers. The business has to deliver its unique flavor to every customer buying its roasted coffee. Therefore, its operational objectives are to sustain the quality of the flavor of the roasted coffee, according to the secret formula used to define the Coffee Planet brand.

Another objective is to make sure that the coffee is delivered conveniently to customers in a simple to use and access way. Thus, the business has to manage a number of retail distribution networks to make sure that there is fresh, high-quality coffee on demand for customers at non-conventional coffee outlets, such as fuel stations and other places where people stop for refreshments.

Currently, the business is relying on a fresh milk coffee machine that allows it to mix the perfect blend of coffee, according to its secret formula. It enables the business to provide excellent gourmet coffee at all fuel stations in the Middle East, which has been the business model responsible for the growth of the company from its roots in Dubai, the UAE.

As for performance, there is a sales threshold that should be met daily and monthly by the individual fresh milk coffee machines. The advanced technology system used by the business must also support other operations, especially roasting to ensure that there is sufficient coffee inventory to meet fluctuations in demand in different regions.

At the same time, the customer relations handling in the business has to work correctly at ensuring that the Coffee Planet brand continues to grow the reputation of being unique and exciting. Coffee Planet supplies coffee to fuel stations located throughout the UAE using its special delivery machines. It also provides coffee to hotels, restaurants, and catering companies that are interested in delivering the exciting brand to their customers.

The company seeks to dominate the coffee business in Dubai and the rest of the UAE by having its coffee as the main input for many coffee drinks served at various locations. Other than the UAE, the company is also serving Oman, Malaysia, and Holland markets.

Typically, the company concentrates on delivering coffee on the go and is not in direct competition with businesses that sell their coffee through dedicated coffee shops. Currently, the company has more than 10,000 repeat customers in the UAE. The biggest deliverable for its operations is the quality of the coffee it sells to consumers.

5P Model for Coffee Planet

Product – the ground coffee delivered to various clients and outlets where the coffee is mixed with milk to provide coffee drinks to customers is the product sold by Coffee Planet. The convenience of getting gourmet coffee of the best quality is also a service that the company provides.

Promotion – the company relies on its brand visibility in many of its outlets located in fuel stations as one way of promoting the brand.

Price – the coffee is priced as premium coffee, which is competitive compared to the rival products of other businesses and in agreement with the prevailing costs of production.

Place – the coffee by Coffee Planets sells at fuel stations across the UAE, and in various airlines, restaurants and hotels. It also sells to other countries in the Middle East and North Africa region under the same distribution framework.

Process of conversion

Business processes for Coffee Planet include the sourcing of Arabica coffee from markets around the world where the bean grows. Coffee Planet proceeds to roast the beans after the purchase of sorted beans, according to desired quality grades. The primary inputs of operation include the beans being roasted as raw materials and other beans, roasted or partially roasted for use as part of the blending process.

Blending helps in introducing new flavors into the coffee production chain. Production moves to the quality analysis stage after the process. A sample of every production batch is taken for testing to ensure that it has a consistent taste, texture and feel, as specified in its brand qualities. After meeting the minimum thresholds of quality, the coffee is certified for brewing and enjoying.

Physical layout of the process flow

The process of coffee production begins with loading of coffee beans from bags to roaster machines. The machines are then set according to temperature, oxygen levels, and duration of roasting to start the roasting process. The roasted beans are delivered for sorting and selection for brewing or packing.

Brewing is done according to different flavor standards, which are then distributed to the dispensing machines located in fuel stations throughout the country and other markets. Besides the coffee, the business also sources cups that are branded with its logo used to take coffee from the point of sale machines.

With the roasting plant, there are separate rooms for storage and conveyance of the coffee to the loading area for roasting. The utility relies on tubular conveying systems from the loading point to the roast point. Beans are unloaded from sacks onto the roasting machine, where they are moved through centrifugal mixers to direct the flow of different beans at various roasting options.

There are flavoring stages located separately from the roasters, which help to avoid contamination and ensure high quality of beans and coffee output prevails. Grinding happens separately for flavoring. After flavoring, the packing parts of the plant handle the different flavors. Workers then move the packaged products for storage, awaiting sale and delivery to coffee outlets.

Business relies on dedicated packaging equipment to limit the time wasted when switching from one flavor to another. The plant layout is created in a way that ensures there is no contamination of flavors as different semi-processed and fully processed coffee products do not mix and are stored separately to avoid aroma contamination.

The warehousing section of packaged products is isolated and linked to transport outlets for movement through road transport. Overall, the physical parts of the roasting process layout are the green bean storage areas, roaster, cooling equipment area, blending area, packaging equipment area, and warehousing area.

Parameters followed in designing the layout include the need to keep beans in shape, need to prevent a mix of aromas and flavors, need to prevent pollution, and need to make sorting easy and production scheduling easy.

Nature of capacity of the operation

At the roasting stage, the volume of beans roasted and the time taken to roast beans to medium roast or other roast levels affect the overall duration of the process. Attention to detail is a requirement because any excessive roasting destroys a particular output. The output of roasting coffee beans is noted by the color of the roasted beans, and the roasting plant allows inspections to check the progress at every stage.

Coffee Planet has the largest premium UTZ-certified roastery in the UAE region. The company has a coffee expert tasked with the identification of the best quality coffee from various source markets around the world. The expert inspects coffee plantations, washing stations, and coffee mills to identify the supply chain processes that are responsible for delivering the best quality coffee beans to the Coffee Planet roastery in Dubai (Coffee Planet para. 1- 3).

With a talented roastmaster, Coffee Planet can ensure that its production process follows all delicate procedures with consistent checks done, including the cupping stage and the brewing phase. Besides, the company has a coffee laboratory that allows it to seek the best parameters for roasting and blending of different types of coffee beans sourced from suppliers around the world.

The laboratory ensures that all coffee types bought by the company eventually yield their preferred flavors and fragrances when roasted. Coffee Planet has a USD 2 million roastery in the Gulfood expo in Dubai that is capable of producing more than 160 tons of premium Arabica coffee monthly. Initially, the business was able to serve about 4 million cups of coffee annually.

The company is now able to serve 6 million cups annually, an indication that it meets a goal of serving coffee every five seconds. The local roasting process has been in existence since 2008 (“Coffee Planet Unveils $2m Roastery” para. 3-5).

Operation planning process

As the company grows to serve additional markets beyond the UAE and increases the number of its gourmet coffee dispensing machines within the UAE, it has to increase its capacity to roast and serve coffee. Therefore, one of the numbers used for planning is the forecast for the demand in various market sectors. The company has been able to grow its capacity of roasting gradually from five tons per month in 2008 to more than 45 tons per month currently.

Other than looking at the current demand for coffee, the company also considers the current global production capacity and the projected growth of coffee markets around the world. It uses the global figures to estimate the price of coffee and its impact on production efficiency. Currently, the company seeks to capitalize on the growth of coffee consumption throughout the Arabic region.

It uses the data to make decisions on boosting its capacity and surpassing quality coffee levels limits in various markets that it serves. The company is also actively looking for additional delivery channels that have significant traffic. For example, it now offers manned kiosks in events to supplement its automatic dispensing machines for gourmet coffee located at fuel stations around the country.

Scheduling of work

Roasting happens in batches, with employees overseeing each batch process. The loaders of coffee into coffee machines work in tandem with operators of coffee roasters to ensure a smooth production process. The machines are not left idle during the loading time as they are already roasting previously loaded beans.

Meanwhile, the packaging processes or brewing processes continue concurrently with the roasting. Operations continue throughout a working day with scheduled stops. Meanwhile, order processes consider the demand for different outlets belonging to Coffee Planet as well as orders from customers such as hotels and airlines.

There are also single-serve capsules produced by the company, and their production and stocking is similar to that of other coffee. However, the production follows demand such that production temporarily stops when stock inventory is full.

Inventory management

After packaging and warehousing, the company has to consider its daily demand for 15,000 cups of coffee and the expected growth of the demand. Therefore, inventory in its warehouse is more than the daily demand for servings, but only slightly. Dispensing machines also have a stock option that allows them to be refilled periodically.

The company runs regional stores for serving its outlets, and they have a capacity for holding stock enough for a full refill cycle of every store within the region. On the other hand, green beans are sourced and stored based on the monthly targets for roasting.

It is informed by the time needed to procure and transport beans from their respective harvest and auction areas to Dubai at the roasting facility. The ability to store beans and keep them fresh before roasting also informs the company of its preferred green beans inventory levels.

Procurement and delivery

All inputs in the coffee business follow good sustainable practices. With an UTZ certification, the company ensures that its sourced coffee has beneficial elements along the supply chain all the way to the coffee farmer. The business also uses the certification obligations as part of its quest to trace all the beans to their origin.

One of the minimum standards that suppliers must adhere to is the delivery of beans grown at altitudes of at least 1700 meters above sea level. The company relies on third-party transport solutions for delivery.

Analysis of Performance

The fundamental dimensions of manufacturing performance are available through a review of quality, delivery reliability, delivery speed, price or cost of production, and flexibility. Flexibility can refer to the ability of a form varying its production volume or the ability to introduce new products rapidly. The following are the operations output parameters that Coffee Planet seeks to achieve.

The output has to be of a higher quality than the non-ground coffee and must meet customer expectations of ground coffee. The products packaged or distributed in the wholesale, and retail markets must remain fresh for the entire time of distribution. The company requires the flexibility of increasing production to meet changes in demand in a short period and introduce new products.

The current volume must be able to meet its share of the local and regional market and provide a 10 to 15 percent room for growth. The roasting facility and packaging facilities have to work as scheduled to meet demand and ensure consistency of high-quality coffee.

Table 1: Table summarizing operations system performance of Coffee Planet

Industry Coffee Planet Remarks
150 concessions (in year 2011) Good
7,156 tons (current annual demand for ground coffee) 160-ton monthly roasting capacity Enough room for flexibility in production
10,000 cups (year 2013 daily retail servings) Good
25 % discount on internal brand prices for Coffee Planet wholesale market pricing Enough room for price flexibility
Increased awareness and demand of high quality ground coffee Consistency in quality of coffee and use of fair trade practices The strategy will ensure Coffee Planet sustains its market share and growth
13% (projected annual increase in total demand for ground coffee in UAE) Distribution joint venture with Ahmed Hassan Bilal Trading (Year 2015) Sufficient capacity and flexibility in meeting customer demand

Effectiveness of operations process

According to Divecha (para. 1), Coffee Planet has sufficient space at its production center at Gulfood, Dubai to expand and meet the growing demand. It shows that the company can achieve the flexibility required to introduce new products quickly or increase the volume of the production of the current product.

The roaster and central packaging area are located in an economic zone in Dubai. It allows the company to tap into other distribution resources for getting raw inputs and sending output to various destinations in the region.

The packaging options of the hotel enable it to serve single service machines that are usually in hotels, as well as the multiple serving machines used in hotels and its outlets. The flexibility produced by the different packaging options also improves the effectiveness of the company as it can use the same delivery and distribution channels to move various products to cater to single customers or groups of customers.

The company is relying on a joint venture partnership with Ahmed Hassan Bilal Trading for distribution to ensure that it sufficiently increases its brand presence throughout the region. Collaborating with a shipping expert company will ensure that Coffee Planet can concentrate more on delivering high-quality coffee to its clients. It will also ensure that there are no quality compromises, and customer satisfaction mistakes encountered in the course of distribution (Divecha para. 3-5).

The company has transitioned successfully from a local focus to a regional and international attention. The roasting capacity has increased due to investment in bigger and more efficient roasting equipment and accompanying packaging options. The company’s business model also allows it to embrace different distribution channels concurrently, which enables it to enjoy agility that makes its fast and responsive to market trend changes.

With a big distribution partnership, it is also to maintain a low cost of distribution and sustain its profit margins, which are essential for its growth. Coffee Planet can meet is production output goals because it has an elaborate network. It is also following market trends, where coffee consumers are showing increased signs of preference for a brew made from fresh-roasted beans.

Therefore, the ability of Coffee Planet to dominate the production chain, from roasting of green coffee beans to delivering brewed coffee in specialized serving machines to customers is a competitive advantage. The company succeeds because of its quality assurance program that ensures the consistency of coffee flavor is the same.

Therefore, part of the success comes from the process management at the company while another part is due to the growing demand and the limited number of suppliers. Overall, Coffee Planet is succeeding because of a concentration of future demand and present efficiency improvements.

Location targeting for its outlets and business partnerships with various big hotel and airline companies is also a strategy that helps ensure there is the consistent delivery of coffee to target clients and a sustainable growth of the enterprise. Coffee Planet can meet the local demand for coffee easily amid its growth with its production capacity of 160 tons of Arabica coffee monthly.

The demand was 7,156 tons in 2014, which was 11% higher than the demand for 2013. Sales of ground coffee in the market increased by 13% in the previous year, while the current distribution deal with Ahmed Hassan Bilal Trading and the roasting facility in Dubai will ensure Coffee Planet continues to exceed its demand without significantly investing in production and distribution capacity in the short-term (Jones para. 11-18).

Pricing of coffee is also another factor that helps ensure the business remains sustainable and can meet its output consistently. The company can charge premium practices and justify its fair trade practices along its coffee supply chain, as the biggest coffee roaster in the UAE with a business model catering to retail and wholesale markets.

The company can meet meticulous customer demands due to its attention to detail at every level of production and packaging. It has 150 concessions in petrol stations and can deliver more than 10,000 servings of coffee daily of the same quality by relying on its investment in technology. Consistency also ensures that customers continue trusting the brand and recommending it to other potential clients, which goes on to increase demand to match projections and production schedules by the company.

Lastly, the business succeeds because it does not rely on cost-saving strategies, but it works for the best quality delivery options available and meeting increasing demand. This procedure ensures that there are choices made regarding the capacity and quality of service or product delivery for every incremental investment in the business.

Eventually, large capacity in both production and distribution has allowed Coffee Planet to have an advantage in its pricing, where it offers a 25 percent discount on wholesale prices compared to international offerings. Overall, there are no areas where operations at Coffee Planet fail in delivery. The discussion above has highlighted the main reasons for success and areas where operations are succeeding (“Coffee Planet: The Sell – Becoming a Coffee Planet Franchisee” 2-7).

Recommendations

With the partnership for distribution with Ahmed Hassan Bilal Trading, Coffee Planet should to be prepared to handle overhead costs that arise out of the need to have additional control of its distribution quality to ensure that coffee delivered to customers is fresh. Besides the concessions at fuel stations, the company should consider drive in outlets that allow customers to have alternative ways of serving its customers.

The company should also continue with its training programs to ensure that workers can meet quality expectations and succeed in doing the business as a one-stop shop for coffee. The need for franchising will increase as the company grows, which will increase the complexities of operations.

Retaining the roasting process under the main company and the raw material and packaging processes within the parent company will be a good way to sustain the agility of its operations amid fluctuations in demand.

Works Cited

TradeArabia, 2011. Web.

Coffee Planet 2015. Web.

Coffee Planet: The Sell – Becoming a Coffee Planet Franchisee 2015. Web.

Divecha, D. “Hotelier Middle East, 2015. Web.

Jones, R. “.” The National Business, 2011. Web.

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