Running head: RESEARCH PAPER SUBMISSION 1

Global Supply Chain Problem at Chipotle

Iyanai Walter Chawheta

University of Zambia – Graduate School of Business

Global Supply Chain Problem at Chipotle

According to Cooper and Ellram (1993) supply chain management can be defined as

an integrating philosophy that helps manage the entire distribution process from suppliers to

customers. In todays globalized environment that is largely complex, supply chain

management plays a critical role in the integration and co-ordination of the elements in the

supply chain. It ensures and makes efficient the process flow starting from suppliers and

ultimately the consumers of the final products, at the same time ensuring adequate

information dissemination and financial management prudency. This in turn allows

organizations to maintain customer satisfaction that correlates with a positive bottom-line for

the company. The supply process needs holistic strategies beyond only efficient logistics

systems to enable companies to overcome the challenges they currently face. The challenges

in supply chain have become more and more complex due to increased customer demands on

prices and delivery times, increased competition, availability of resources etc.

Introduction to Chipotle
Chipotle Mexican Grill otherwise known Chipotle, is a company that operates fast

food restaurants in the United States, United Kingdom, Canada, France, and Germany. It has

in excess of 2000 locations in these countries that includes franchises which constitute the

majority. Chipotle is head-quartered in the USA where it is responsible for ensuring that all

its global operations maintain the same standards by providing training, licensing, oversight

etc. As can be expected, supply chain management is one of the key aspects in ensuring the

business runs smoothly internationally. In order to sustain customer satisfaction as well as

controlling costs, each and every node of the supply chain has to operate at desired optimum

levels and maintain the right balance. In so doing, it is key to ensure that when seeking

optimization, efficiency is maintained. Besides increasing customer satisfaction and reducing

costs, effective supply chain management goes a long way in increasing the bottom line as

well as the customer base (Gligor, 2016).

As stated above, Chipotle currently only operates in the countries stated. These are all

first world countries and for the purpose of this submission, i.e. embarking on an investment

in Zimbabwe, the venture presents a myriad of new challenges in so far as the supply chain is

concerned. However, all the tenets of maintaining the production processes focussed and

making decisions regarding contributors in the supply chain should remain the same.

Supply Chain Problem

Chipotle’s philosophy and its’ major driver in marketing for growth is based on

provision of healthy foods based on naturally grown ingredients i.e. they specifically exclude

genetically modified foods. “Every choice we make—about who we work with, what we

serve, and what we stand for—affects the bigger picture: the health of the planet. Nutrient-

rich soil reduces the need for pesticides and synthetic fertilizers, buying locally reduces

vehicle emissions from transportation, and humane animal husbandry means diminished

reliance on antibiotics. As we strive each day to be better, we keep in mind that everything is

connected” (Chipotle, 2019).

By having a rigid and restrictive set of ingredients for their restaurants, that also

means having a limited number of suppliers, put together with the increased operating

locations, presents a host of challenges in their supply chain; more-so as they try to expand to

Zimbabwe, which is a third world country. Not only are the standards in food monitoring

different in Zimbabwe, but there is a glaring possibility of supply shortages across the

restaurant chain in the new target market. Third world countries are currently affected by

crop and related agricultural product shortages due to drought and less sophisticated farming

method. This has bearing on Chipotle’s supply chain process which requires key ingredients

such as rice, fruits, animal products etc. supplied on a just-in time basis. In some ways, this
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shortage has been mitigated by adoption GMO foods in third world countries that Chipotle

currently shuns and as such will be very much exposed to supply chain failure as the

company seeks to maintain natural ingredients.

Additionally, Chipotle has remained committed to traditional means of food handling

e.g. cooking in its restaurants that some have considered to pose a higher risk for food-

contamination illness outbreaks than its competitors. This is made worse by insistence of

using fresh ingredients as opposed to frozen produce from its suppliers thereby increasing the

risk of using stale ingredients. In the countries that the company operates, there have been

reported cases of food poisoning that resulted in adverse reaction by the consumers towards

the food chain.

Specific Parts of the Global Supply Chain Problem to be Addressed

Supplier Base

O’Marah (2015) states that it key for food supply chains to eliminate the variability in

sourcing and production in-order to achieve low costs while maintaining quality. Chipotle,

avoids the wide-scale food supply chain to sustain its operating philosophy and ends up

needing to accommodate massive variability in its supply base. In European countries where

it operates, environmentally friendly farming methods can add value in their marketing

strategy, but in Zimbabwe (which is a third world country), the value is over-ridden by other

factors such as the need for low prices. It therefore follows that Chipotle looks more closely

at the new market with the intention of widening their supplier base by accepting the use of

technologically advanced productivity that come from genetical engineering. Added to this

the stated ethical treatment of animals at slaughter only comes about with an increased price

premium on their products that will ultimately push it out of reach of its customers. Critical
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assessments of the current operating philosophy need to be done with the view of making it

more adaptable to varying conditions and new markets.

Logistics

Logistics management is a crucial element of the supply chain process responsible for

planning, delivering, and managing the flow and storage of both raw materials and finished

goods efficiently, timely and cost effectively. Added to this, there is need for effective and

timely communication between the origin and of stored goods to manage the demand

seamlessly (Myerson, 2013). In the case of Chipotle, the most important raw materials to be

moved while ensuring freshness and maintaining temperature control are meat, fruit,

vegetables etc.

In the case of Zimbabwe, the intermittent shortages of raw materials need to be

carefully analysed with the possibility of factoring importation from South Africa for

example. This entails as necessary, the careful planning of the points of origin at supplier

nodes and destination points which in this case will be the restaurants. To ensure smooth

supply of raw materials intended for creating company’s product, it is essential to take all

logistics variables into account and to test them for effectiveness while developing the supply

chain. Going forward, each point in the supply chain should be analysed for its effectiveness

instead of treating the whole supply chain process as a unit. Effective communication,

understanding the complexities that come with importation, managing local suppliers etc. are

necessary to avoid delivery slack or over-supply (this mainly as a result of careful market

analysis).

Optimum Solution

Although optimizing logistics is a critical component of any supply chain in the

endeavour to penetrate into the Zimbabwean market in light of the already existing
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competitors, increasing the local supplier base in my opinion is the most important.

Indirectly, this eases the logistical issues as well since there are more local raw material

suppliers. To this end, Chipotle has to consider relaxation of their stringent raw material

requirements such as accepting GMO foods that have easily accessible local ingredients. This

in turn removes the need to import thereby reducing ultimately the cost of food in their

restaurants.

Avoiding Similar Supply Chain Problems in the Future

In this new technological age, it is important that Chipotle initiates the use of digital

tracking tools for monitoring the movement of raw materials along its supply chain. This

improves the tracing of products from source and improves on safety concerns. Automation

of its processes especially cooking need to be adopted, to ensure minimum human

contamination as well as improve the delivery process. Obtaining raw materials from a wider

range of farmers is key to lowering costs as well as ensuring consistent supply. From

sourcing to just-in time delivery of raw materials and product based on demand, the whole

supply chain process needs to be carefully linked together while the level of decentralisation

also needs to be established to ensure that each point of the supply chain is working at its full

capacity to deliver Chipotle’s value to its customers. Utilizing best practices in operations is

one of the most effective ways of ensuring effectiveness of an organizations model (Boyson,

1999).

For an organization like Chipotle with high inventory turnovers, it is critical to have a

carefully structured supply chain management system to maintain consumer satisfaction and

high service quality (Perez, 2013).

Conclusion
Carefully structured supply chain management systems are critical to all organizations

and more so those that operate in the fast food chain business where inventory turnover is

very high. Chipotle in its’ expansion endeavours needs to look critically at all the element

across its’ supply chain, from suppliers, logistics, food handling etc. Analysing each

consumer segment of its customers is crucial to any business e.g. Chipotle in coming up with

aligned price structures.

It is critically important for Chipotle to maintain competitiveness to look at their

current pursuit of natural ingredients with the view to widen their supplier base also taking

into consideration raw material availability. As such a holistic procurement framework has to

be put in place that takes into consideration the new target market requirement for third world

countries like Zimbabwe.

References

Boyson, S. (1999). Logistics and the extended enterprise: Benchmarks and best practices for
the manufacturing professional. New York: Wiley.
Chipotle Mexican Grill. (2019). Food with integrity. Retrieved from
https://www.chipotle.com/food-with-integrity
Cooper, M. C., & Ellram, L. M. (1993). Characteristics of supply chain management and the
implications for purchasing and logistics strategy. The International Journal of
Logistics Management, 4(2), 13-24.
Gligor, D. (2016). The Role of Supply Chain Agility in Achieving Supply Chain
Fit. Decision Sciences, 47(3), 524-553.
Myerson, P. (2013). Lean supply chain and logistics management (1st ed). New York:
McGraw-Hill Education.
O’Marah, K. (2015). Chipotle lessons: Supply chain visibility and higher prices. Retrieved
from https://ww.forbes.com/sites/kevinomarah/2015/12/16/chipotle-lessons-supply-

chain-visibility-and-higher-prices/#58a9b00f332b

Perez, H. (2013). Supply chain roadmap: Aligning supply chain with business strategy.
Createspace Independent Publishing Platform.