Question

Chipotle, the popular burrito chain known for serving highquality, fresh ingredients, has been experiencing a rough few years. The first of their troubles began in 2015 with a monthslong carnitas shortage. The company pulled pork off their menus when it was discovered that a supplier had failed to follow animal welfare standards. Then, they experienced a string of foodborne illnesses. They had a norovirus outbreak in Simi Valley, California in August 2015, cases of salmonella in Minnesota that were traced back to contaminated tomatoes, and in December, an E. coli outbreak in the Pacific Northwest. The chain had to close all 43 restaurants in Washington and Oregon for several days. “Having three outbreaks over the course of two to three months is highly unusual,” said food poisoning attorney Bill Marler. “I think corporate leadership needs to step back and look at their food safety culture.” A second wave of E. coli caused five additional illnesses in December. And then just a few weeks later, a case of norovirus caused an incident at a Chipotle in Boston that sickened more than 140 students at Boston College. Chipotle’s use of fresh meat and produce is one of the company’s greatest competitive advantages against other fast food chains, but it has also made it more vulnerable. “We may be at a higher risk for food-borne illness outbreaks than some competitors due to our use of fresh produce and meats rather than frozen, and our reliance on employees cooking with traditional methods rather than automation,” the company stated in their most recent annual report. “With the degree of in-store food preparation of all incoming items, I think it’s potentially much harder to control the consistency of good food handling and you’d be much more likely to be handling meat and poultry, as well as fresh produce, all in close proximity,” said Trevor Suslow, an extension research specialist in UC Davis’s plant sciences division. With several food contamination issues over the course of just a few months, many customers have been scared away, despite Chipotle’s efforts to make improvements. Early in 2016, Chipotle closed all restaurants for a full-day, all-staff food safety meeting. Then, in February, they invited customers to give Chipotle another chance by offering them a free burrito. This aggressive marketing campaign began a slow sales recovery. The company also announced the hiring of James Marsden in March 2016. He is an expert on E. coli and listeria in processed meats, and he was brought on as executive director of food safety. Chipotle pledges to become the “safest restaurant to eat at,” said Steve Ells, Chipotle co-CEO. It will be a long road for Chipotle to win back all of the customers lost due to food safety issues, an endeavor that will only succeed if Chipotle can maintain a clean health record for an extended period of time.

1.How does Chipotle’s implementation of supply chain management result in enhanced customer value?

2. How does Chipotle’s concept of supply chain integration result in better customer-related outcomes?

3. What are the possible outcomes of Chipotle’s failure to embrace one or more type of supply chain integration?

4. Sustainable supply chain management is a supply chain management philosophy that embraces the need for optimizing social and environmental costs in addition to financial costs. How does this apply to Chipotle?

Answer 1

1. Chipotle has been quite careful about the raw materials which it sources from suppliers. The company utilizes fresh produce for its outlets and this has emerged as the USP and distinct source of competitive advantage for the company. As the suppliers and vendors of the company are quite reliable, the quality of food served at Chipotle is never doubted. The proactiveness with which management of the company keeps a firm stance on quality is commendable. This policy of sourcing and procurement has enhanced the overall customer value and increased the trust factor between the customers and the company.

2. Customers value high quality in fast food restaurants. Supply chain integration with the business model of the company has helped Chipotle to serve fresh and high quality food to the customers. The company has been positioned in a way that the customers perceive only high quality products from Chipotle outlets. The supply chain integration facilitates the management of the company to keep a check on the quality of the produce being used to serve food for customers. This enhances the overall relationship between the customers and the brand as customers are able to trust the brand.

3. The possible outcomes of Chipotle’s failure to embrace one or more types of supply chain integration are:

• The quality of the products served at Chipotle may deteriorate
• The supplier company association may get affected
• Customers may start doubting the quality of food served at Chipotle
• Overall business of the brand may get impacted

4. Chipotle had to suffer because of the foodborne disease outbreak in the region. Several outlets of the company had to stop operations because of this. This affected the overall sales and business of the company. However if the company had accounted for sustainable practices in its supply chain management, it would have been able to account for any of the social or environmental costs affecting business quite easily. The loss due to store holidays because of foodborne illness outbreaks could have been easily accommodated in the revenue model of the company. Hence companies like Chipotle must always try to integrate sustainable measures in its supply chain management.