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Supply Chain of a Sandwich

According to an article from last year written by Nu.nl , an online newspaper, bread consumption among Dutch consumers was overall decreasing (I know, right?I think it is weird as well), but the consumption of the so-called Luxury bread had a positive trend. As many of you have noticed (the Dutch at least), bread is the country’s favorite pick for breakfast and mostly for lunch. The preference of this kind of meal is partly due to the efficiency that denote Dutch people: it is fast, clean, low effort in preparation and it can be consumed literally everywhere. A sandwich is light to carry, light to eat and creates little packaging waste as most of people pack in bulk, or just store them in a Tupperware.

Somehow this humble and basic meal still manages to have a twist, I invite you to close your eyes and visualize a sliced meat, cheese and spreads sections of any supermarket in the country. Yes, you got it. As sandwiches are really part of the eating culture, I would like to take a closer look at their supply chain. We will look at three important steps of any supply chain, the demand, the inventory and the supply.

The Demand

Simply speaking the biggest chunk of the demand that you will face originates from you. Yes, you will be hungry at a certain point in time on a normal day. Hence, as a good 2.0 customer you want your product, the sandwich indeed, ready whenever you desire it. For simplicity, I will leave out the possibility that you can buy a sandwich from a third party and I will take in account that only you prepare your beloved sandwiches.

There are different ways to bring a product to the customer. Let’s look at it this way, if you know that you will be spending your day at the University, most likely you will adopt a push strategy, aiming for efficiency and preparing your sandwich the evening before. Kind of a made to stock, if you will. So you will be preparing for when the demand (still you), will want it the morning after to conveniently store in the bag ready to be consumed later on. In the pleasant occasion that you got a free schedule, and you could spend your time at home doing your own things, then the strategy would switch into pull. To illustrate, the preparation of the sandwich would only be triggered by your will to eat. In this scenario, the operations would be responsive, all the ingredients kept in a neutral state ready to be assembled to your needs and extreme customization would be possible.

The Inventory

Now, the crucial part: your storing facilities. Again, I will assume that you do not outsource your fridge or kitchen space to a third party, instead you choose to have your facility with proximity to your final customer. After long, high level meetings with other departments managers, which happen to be still you (quite a career you got there!), you decide to locate it in your kitchen. Even better, you can exploit those synergies and just-in-time component deliveries by having the fridge and the storage of the bread a few centimeters of distance apart. Smart.

A rather important role is played by safety stock. This amount of ingredients has the purpose to help you hedge against uncertainties. Those uncertainties  can originate from downstream, e.g. you had a guest sleeping at your place last night and now he/she wants some lunch as well. Your demand has just doubled. Or it could be coming from upstream, you were very late at the supermarket yesterday evening and all the bread was already gone. Finally, your process could have some hiccups, for example your eye-hand coordination is rather inexistent and you drop all the ingredients on the ground (no, it never happened to me. Aehm). So, yes safety stock is not such a bad idea, be aware though that having too much is like having too little, it will leave you vulnerable to uncertainties.

Finally, the product variety. Intuitively you realize that the more stock keeping units (SKU’s) you have in your inventory, the higher is the portion of demand you may be able to satisfy. In this case the demand would be represented by your wildest dreams of ingredient combinations. A very well-known rule is the 80/20 rule from Pareto. Simply, Pareto states that 80% of your revenue is created by only 20% of your offer. This is true also for sandwiches. Revenues aside, 80% of the demand is satisfied by bread and cheese alone. Meanwhile all the other ingredients, which are the vast majority, are used much more sparingly. Under another lens, you could definitely say that bread and cheese are your A items and the rest would be your B items, such as butter or some sliced meat, while spreads (bit more rare but nice to have) would be your C items.

The Sourcing (or supply)

The other pillar of your supply chain is the sourcing of raw materials. Now, usually these activities are tailored to your kind of supply chain and you could purchase them efficiently, buying high volumes such as a big jar of peanut butter. Or you could source them in responsive matter, every evening you pass by your local supermarket and buy smaller quantities more often. While the former is a great way to keep a steady supply, the latter has an higher capability to cope with unpredictable demand, let’s say an unexpected craving or some eating trend (yes, I am talking about avocado!). Furthermore, you can also decide to adopt an hybrid sourcing strategy, buying some essentials in an efficient way, such as bread, and then be more flexible with the sourcing of the fillings. Finally, something to consider would be the relationship you have with your suppliers, are you treating them as partners? Or are you keeping them at arm-length? In the first case, you will be very serious on committing to a certain type of bread, no matter the price. The second case instead, would see you purchasing different brands, perhaps even going for whatever is on discount that week without a second thought.

Now, maybe you will look at your lunch in a different way, as you have managed these processes for years. Who could have imagined that you all are already savvy supply chain professionals!

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