How Café Coffee Day manages its supply chains

SCM = Supply Chain Management

Bangalore based bachelor boy B.S. Sathyananda, a veteran of six years at Café Coffee Day (CCD), has his job cut out for him. As General Manager – SCM & Maintenance, one of his job functions is to manage logistics and the supply chain to 252 CCD outlets in sixty cities across the country and one in Vienna, Austria. The number is expected to grow by another hundred outlets in India, and more on other shores over the next twelve months. Compound to this 6,000 plus coffee vending machines with franchisees and corporates, the 400 plus Coffee Express kiosks and the six Air Deccan (AD) depots that cater to almost 200 daily flights across Captain Gopinath’s ever expanding route map, well, Sathyananda is in an unenviable position.

CCD had just seven to eight outlets when Sathyananda joined them, a status quo that continued till 2000, the magical year when CCD started on its expansion drive and has now reached its current size with even bigger growth goals. Naresh Malhotra, CCD Managing Director has ambitions of making his brand popular globally and has earmarked the Beijing Olympics to showcase CCD. He has a target of around 50 CCD outlets in China before the Olympics, and this will only add to Sathyananda’s SCM responsibilities.

The CCD group’s SCM activities could be roughly split up into these basic segments – Export of around 20,000 tons of coffee (powder and beans), Coffee Day food and beverages in the CCD outlets, Take Away Coffee Day outlets, Coffee Express kiosks, Retail Fresh Ground Tailored Coffee through 400 plus franchisee models in South India, and retails coffee as FMCG products through Coffee n Shops, the last one has a seven day shelf life, which is taken back after expiry and replenished with fresh coffee.

CCD supply chain includes over six hundred perishable and/or limited shelf life CKD units (if you permit me to call the various food ingredients that go into CCD’s growing menu as CKD’s or CKU - completely knock down units). Food items account for around forty percent of their sales, coffee products for fifty percent and merchandise the balance ten percent. Sources of these units range from as far north as Gagurola in Harayana (around 50 tonnes milk powder per month) to bakeries that supply bread and bakery items in or near major cities such as Bangalore, Kolkota, Delhi, etc.

The purchases are centralized, deliveries decentralized, at centralized rates. At present, milk powder and coffee beans or powder are distributed from one centre each – Gagurola for the former and Chickmangalur in Karnataka’s Hassan district for the latter. CCD also plans to enter the bottling of distilled water, which is being outsourced currently. CCD sells around twenty to twenty five thousand numbers of distilled water bottles monthly, Sathyananda is confident that once CCD’s own plant goes on-stream the volumes will increase. This is another product that will come from a single source point in future. All other CKUs come from the vendors’ closest channel; however a certain amount of flexibility in sourcing from elsewhere is permitted, in case of failures or delays from any of the normal sources.

Customers’ menu item demands change with the season. Hot weather means a higher consumption of cold beverages that include cold tea, cold coffee and other drinks, wet and cold weather calls for and increased demand of hot items such as coffee, tea and other beverages. Accordingly, the supply chain has to be optimized to meet customer needs.

The challenge in CCD’s case is not one of plenty; on the contrary, it is the reverse, manage dispatch and supply of small quantities over the, shall we call it the last mile. This is sometimes not even a ‘carload’ through a network spread across the length and breadth of the country (and abroad). Mode of transport - in an extreme case – mules for the CCD outlet located around 8 kms from Katra on the torturous route to the Vaishno Devi shrine. Oversupply could mean unnecessary losses, undersupply – well loss of business, goodwill and what not. Imagine the chaos, if your office coffee machine doesn’t provide coffee for even a few hours!

Almost all the articles (excluding the brewed and the juice variety) have a shelf life of just a day or two and will have to be discarded as waste after that. Even the coffee powder and beans have a limited shelf life 30-60 days, though thankfully, not as short as the solid foods! But, to have the fresh taste, its ingredients have to be used within the set period of time.

Among others, CCD has regional warehouses at Bangalore, Mumbai, Delhi and Kolkota that refurbish the main city hubs in their region. CKU’s are distributed from these city hubs to the outlets, coffee vending machines and Coffee Express Kiosks that could even be located in Petrol stations on highways or in SME locations. Sathyananda maintains a fifteen-day inventory at these regional warehouses. A manual physical check to assess the requirement becomes necessary, especially at the vending machine level.

Wait, there is one more function in Sathyananda’s supply chain – to ensure that the unused units are picked up and destroyed after the prescribed expiry of the shelf life to prevent misuse and hence loss of goodwill and other unpleasant results.

To meet these challenges head-on, CCD makes use of current technology. One of the tools that CCD plan to use is Wi-Fi integrated POS (Point of Sale) hand held devices (Let’s call it POS) that they have developed with an Israeli company. Commonly, Wi-Fi is associated with wireless Internet access. This solution, which is the first of its kind for any retail industry all across the globe, had been launched in February 2005 at café’s in Chennai and soon this will be a part of CCD all over the world. All the CCD outlets in India are expected to be equipped with POS hand helds by March 2006, according to Sathyananada . On fructification of these initiatives the SCM will be further streamlined.

All team members (Stewards) at CCD will be provided a POS, which is inbuilt with a microprocessor, thermal printer and a smart card reader. This device is used for billing and can accept credit/debit cards. Also it is wirelessly connected to a central computer system and can communicate with similar devices anywhere in the world in real time. This system makes life of the café staff easier and also enables management to quickly capitalize on changing market situations all over the world to serve their customers better.

CCD has also launched a Café citizen loyalty program. A smart card is provided to the customer, which stores all-important customer information such as his profile, his likes and dislikes, his previous visit to any CCD outlet and so on. When this card is swiped on any of these POS devices anywhere in the world, all the vital information is displayed on the screen to enable the front-end café staff to serve him to the best of his satisfaction.

For every purchase the customer accumulates points on the card and he may use these points and redeem the same on his subsequent purchases. Also customers may register their complaints/queries at the outlets which are communicated instantly to the “Customer care” staff, who would immediately take the necessary steps.

Each order or transaction will be fed to the server in real time. (Not batched as in the case of the Petro cards offered by various Indian oil majors. In the case of oil cards in use currently, the change is made on the cards chip, but the oil company’s servers are updated batch-wise, the transactions until the server upload are stored on the hand held card reader, which in any case can read only the card provided by the oil company. For credit or debit cards, the petrol attendant swipes the card on another device, though this scenario may change – Karnataka State Transport Corporation is another organization that works with a similar POS hand held, but only for ticketing.

Because of its versatility, CCD’s POS has also helped eliminate one of the biggest customer irritants – the delay in billing. The POS prints the bill instantly on thermal paper.It also has the facility to receive signals from the kitchen order table (KOT) that inform the steward that the ordered item/s is/are ready and the customer receives his victuals at the right temperature. Even the heirachy of the serviced items is programmed so that eatables are followed by the hot or cold drinks, arriving at the just the right temperature at the customer’s table.

CCD’s servers are based in Chennai, and the system integrators for their POS hand helds’ are Pace Automation. The database is Oracle and CCD is working with SAP for their inventory management systems (SAP R3 for SME’s as per SAP’s definition). Sathyananda is eagerly awaiting the completion of integration so that POS becomes an important tool in his supply chain management.

CCD has tied up with Transport Corporation of India (TCI)and First Flight for delivery and storage space in the places where CCD’s main depots are located. Each of their transport vehicles used for transporting CCD’s goods have GPS, and TCI has enough standby storage space to provide the same on demand. Quicker deliveries by these two, of course, are the most important attribute.

CCD in partnership with their transporters has designed handling systems such as racks, pallets, ramps and other handling equipment so that even the loading and unloading of packages is easier, faster and safer. To achieve a degree of standardization, CCD offers a month long training at their warehouses to their logistic partners personnel. RFID is another tool that CCD could use in the future as per Sathyananda.

A core team of four to six persons in each of the distribution centres or depots helps Sathyananda ensure that each entity is kept supplied with the freshest of CKU’s so that the food articles or liquids you partake, the coffee that you drink at any of the CCD outlets or Coffee Express franchisees’ or vending machines are as fresh as ever.

Tarachand Wanvari looks after the South India desk of Indian Television Dot Com Pvt Ltd. He is a Consulting Correspondent forBusinessgyan. Feedback at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it

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