Costco Supply Chain Case Study

1544 Words 7 Pages
The organic supply chain is different from the normal conventional supply chain. The organic chain has less intermediaries. There is more dependence on suppliers and suppliers have to be certified as organic. The suppliers should be located in places where crops can grow without being attacked by plagues and with the appropriate weather conditions. The organic food supply chain is more fragmented that the conventional one and also involves having to comply with the regulations and rules of being organic. (Canavari, 2007).
Organic supply chains have some difficulties according to (Tavella et al, 2011) such as finding the correct suppliers which have the appropriate skills and certifications in the production and processing of organic food.
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In simple terms, vertical integration is when the company starts buying parts of the supply chain it can be forward vertical integration which includes buying suppliers or backward which involves customers (Perry, 1989). For Costco, this can be a successful strategy in the long term because as said before, the process of changing from conventional farming to organic might take around 3 years. Costco is an example of how a company can manage the supply chain in order to meet customer demands for healthier products. As noticed in the text above, the demand for organic is increasing and even a big company such as Costco does not have enough supply to achieve this demand, but the company decided to work by the hand with farmers and implement a vertical forward integration strategy where they help farmers with money in order for them to produce organic. This strategy brings advantages to both, the suppliers and the company. By helping farmers, the company is increasing the supply for organic products but at the same time they are securing their own suppliers. This is an effective strategy taking into account that the soil and land to cultivate organic are scares and they can lead to overcome competition as they help their suppliers and in exchange they might request suppliers to have loyalty with them. Even though this idea might not have immediate good results because at the beginning …show more content…
Taking into account Whole Foods strategy of sourcing locally is an advantage to defeat food spoilage because food has more time before deterioration and this why the company loses less. On the other hand sourcing locally is supporting local farmers and in some way it has also a positive effect in customers because some will trust more in local food and will like the idea of supporting their customer. Finally sourcing locally as Whole food does is worthy because if one of the suppliers has any problem in providing the food to the shelves in any moment, they still have other farmers who supply without having to wait for long lead times. This company demonstrates that one of the main aspects of the supply chain which require attention is the selection of suppliers. They focus their target in local farmers which involve that they mainly do not import and they will have shorter distances when talking about distribution of the product from suppliers to buyers. When buying from local suppliers, companies also have the advantage of being more aware on the supplier’s working

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