• back
  • 6.1.1-E-COMMERCE AND SUPPLY CHAIN MANAGEMENT-DIFFERENT VIEWS AND USES

  • THE-COFFEE-GUIDE.gif 
  • Different views and uses

     
     

    In a sense e-commerce development ran away with itself in the late 1990s as companies rushed to establish industry standards. Internet trading sites were offered to people and organizations that were not comfortable working on the Internet, and it is no surprise that many such sites have since closed down. Nevertheless, coffee companies worldwide have learned the advantages of using computers to save costs and, possibly, give access to new markets.

    Growers and exporters looked  to Internet trading to gain better prices.  The hope was that by eliminating the 'coyotes', or middlemen, they would  get better prices from the major roasters but it was always  doubtful this would  happen for most of them. Following the marketing principle that you can eliminate the middleman but not his function, eliminating middlemen and the middle market for coffee might even have the opposite effect on prices. Buying power in the import market continues to be  hugely concentrated. The mainstream coffee market accounts for close to 90% of all coffee business, and the specialty or gourmet market by itself is still unable to drive prices. But origin will always try to gain ground and exporters may eventually find themselves on a more equal footing with the middlemen they are hoping e-commerce may eliminate. However, to date the signs are not encouraging.

    Importers saw the opportunity differently although, like exporters, they too hoped to save on back-office costs. Unlike exporters, who see coffee trading only once, that is from source to importer or roaster, importers also hoped the Internet would stimulate renewed interest in the second hand market. They imagined a cash market that operates with Internet efficiency and speed, where parcels of coffee might trade two, three, or more times between coffee merchants before finding a final buyer.

    Such secondary or second hand trades would be used by merchants to offset differential and market risk, and would link the speculative activity of the futures markets to the fundamental realities of the cash market. But this has not happened - as of end 2010 there were still no electronic market places that actively traded green coffee…

    Large companies, including roasters, are also looking to trim costs and back-office paper work. But, perhaps more importantly, they hoped the Internet might bring coffee market transparency and better purchase audit trails.