Chipotle’s Supply Chain: Major Components & Suppliers for Food with Integrity

Sec. 002 Team 1| GB 214 Operations Analysis: Chipotle Mexican Grill | Assignment 3: Supply Chain| | 1. Major Components/Inputs of the Product & Suppliers Chipotle uses several suppliers when ordering and receiving their food products. Chipotle’s main objective is to provide food with organic and naturally grown backgrounds. Because of these values, Chipotle prides itself in using suppliers that follow their guidelines of “food with integrity” structure, by meeting the requirements and goals for food safety, animal welfare, sustainability, and social accountability. Chipotle’s customer service manager, Shannon Kyllo, stated in her email that the company continuously changes its suppliers to source the best ingredients and also provided a list of their vegetable and dairy product suppliers. Calavo growers, Index Fresh and Mission Avacados supply Avacados to Chipotle, and their Romaine lettuce and cilantro suppliers are Taylor farms and Church Brothers. Daisy and Smith Dairy supply Chipotle with Sour Cream and the company gets its supply of cheese from Meister Cheese, Petaluma Cheese and Glanbia. Coca-Cola is Chipotle’s supplier for beverages and has had this contract since McDonalds were Chipotle’s main investors. 3 Also, the Mcilhenny Company supplies Tobasco as a condiment for Chipotle. 4 The industry leaders in Fast-food restaurant kitchen appliances are Southbend, Globe, Frymaster, Blodgett, Food Service Warehouse and Insigner. These companies are the top players who supply kitchen appliances to the major fast-food Chains, like Chipotle. 5 2. Type of Supply Chain and Services

Chipotle’s supply chain is unique from other fast casual restaurants and service firms, and does not have a set traditional supply chain. Of the four main supply chains, Chipotle’s supply chain resembles the Assemble-To-Order (ATO) supply chain the closest. This is because the customer has complete freedom of what ingredients go into their burrito/bowl/salad/etc. , but only with the ingredients that are behind the counter. So in that case, there is not complete freedom in designing a meal, but the customer can choose and amount of ingredients to be included in their food item.

However, this is not set in stone, for their supply chain also contains elements of other supply chain methods, such as the Build-To-Order (BTO) supply chain, for the customer has some opportunity in the customization of their product (meal), but are limited to the design parameters (set ingredients) set by the firm. The stages of Chipotle’s supply are fairly simple. It starts with the acquisition of the raw materials (ingredients) that are shipped to one of their 22 independently owned distribution centers. 6 These ingredients come from within a 350 mile radius of the distribution center.

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The ingredients are then shipped out to the restaurants, where all of the ingredients are prepared in-house with the exception of the barbacoa and the beans. Once the ingredients arrive at the restaurant, they are prepared and placed out ready to be made into burritos/bowls/salads/etc. When a customer comes to a Chipotle, they simply wait in line, then once at the counter, go down the assembly line of ingredients and chose which specific ones they want to include in their meal. When they are finished constructing their item, they pay the cashier and either take their meal to-go or have a seat in the dining area in the restaurant. 3. Supply Diagram (See Attachment 1) 4. Supple Chain/ Operations Strategy Chipotle believes that their unrelenting effort to revolutionize fast food through their unique way of production and people cultures will help them to move forward in building a valuable company for their stakeholders. 6 Chipotle focuses on its product differentiation, market segmentation, operational excellence, and customer intimacy. 6 The product assembler to customer stage in chipotle’s supply chain directly aligns with its focus on operational excellence and customer intimacy in its operations strategy. Chipotle explains their goal of operational excellence with its statement, “The natural flow of our restaurant layout, including the floor plan and the design of our serving line, are designed to make the food ordering process intuitive and, we believe, more efficient. ” The customers deal somewhat directly with the manufacturers of chipotle’s product in their stores with the assembly line. 6 Customers have limited choice in overall product but some choice in the specification (ingredients that go in their order) of the product. The assembly line allows customers to get their food fast and assemble then limitedly build their order. 6 All of this allows for a high degree of customer intimacy during the service. 6 The raw materials to distributor to product assembler stages reflect with chipotle’s focus on product differentiation and market segmentation. 6 Chipotle’s strategy is influenced by the fast and high quality food market. 6 Chipotle states, “Serving high quality food while still charging reasonable prices is critical to our vision to change the way people think about and eat fast food. 6 Chipotle serves “food with integrity” and part of the way they make this possible is with their supply chain. 6 The raw materials stage is the suppliers/outsourcers that provide the high quality ingredients that go into Chipotle’s product. 6 These go to distribution centers (distributor), which are all relatively close to the product assemblers (stores). 6 The food is then prepared by the product assemblers. 6 This allows Chipotle to have high quality, fresh food and makes them specialize in product differentiation. 6 5. Outsourced Activities

Chipotle mentions that it currently sources most of its key ingredients like chicken, pork and beef from a limited number of suppliers. 6 But at the same time chipotle ventured into local outsourcing in 2008 when they launched a pilot program to outsource all its organic pork products for its Charlottesville, Va. , location from a local supplier, Polyface farms. 8 They felt that using local organizations to outsource would help them have fresh ingredients and ensure that the respective source follows their “food with integrity” motto. After the initial success of Chipotle, the executives realized that they had to improve one of their products -- the shredded pork which they used in almost all their food items. 9 This is when Chipotle found an advertisement for the farmers of Niman Ranch, a pork supplying company. 9 Steve Ellis took interest in this supplier after he sampled some of its organically grown products. 9 Chipotle’s spokesman, Chris Arnold, stated after Ellis tried the pork: “What so impressed Ellis, in addition to the quality of Niman Ranch pork, was the way in which the Calif. based company raised its animals, from feeding practices to the land on which the hogs roamed. ”9 The Niman Ranch experience completely changed the way Chipotle selected from their food suppliers, them having contracts with ranches in the Midwest for pork and livestock helped them cover a larger geographic region and facilitate the demand for Chipotle Mexican Grill. 9 Along with Niman Ranch, Canadian suppliers and duBreton Farms also supply pork to Chipotle. “Most of the chicken on the menu is supplied by Bell & Evans of Fredericksburg, Pa. , which also supplies to natural and organic retailers like Whole Foods.

Chipotle gets its beef primarily from Loveland, Colo. -based Meyer Natural Angus and Golden, Colo. -based Coleman Natural Meats, in addition to smaller processors”. 9 6. Other Activities That Could Be Outsourced Chipotle produces several of their food products in house. After obtaining the necessary raw materials from outsourcing activities and suppliers, Chipotle then creates their signature salsa, guacamole, crispy tacos, and tortilla chips. 10 These items are produced at least twice a day (Harris). Chipotle chooses not to use a supplier or outsourcing partner to make each of these products for specific and different reasons.

For example, Chipotle's salsa is made internally to ensure a unique customization process (Harris). 11 Because Chipotle offers 4 different flavors and spiciness of salsa, Chipotle restaurants create their own salsa to offer customers a variety of choices that cannot be accurately duplicated by external outlets (Harris). 11 Guacamole is also prepared in house to provide Chipotles' customers with the best flavor possible. Chips and crispy tacos are internally created for the same reasons. 12 Chipotle takes pride in freshly preparing these signature items as well.

As noted by customer service agent, Shannon Kyllo, Chipotle creates these in house items because of CEO Ellis's background within the culinary field and Chipotle's strive to produce fresh food the way they see fit, stating, "We're perfectionists. . . he [Ellis] is first and foremost a chef and he wants to maintain a high standard. . . They [Chipotle] have a saying that if you want to do something right, you have do it yourself so that is what we do" (Kyllo). 13 Because of Chipotle's internal processes, the restaurant chain believes it is producing the best and most unique experience at every location (Kyllo). 3 See Attachment 1 Work Cited 1. http://www. chipotle. com/en-US/talk_to_us/supplier/supplier. aspx 2. Shannon Kyllo. “Supplier list”. Email to Shrivats Agarwal. 22 Feb. 2012. 3. http://academic. mintel. com/display/294296/? highlight=true#hit1 4. http://www. rehobothfoodie. com/index. php/Rehoboth-Beach-Reviews/Mexican/chipotle-mexican-grill. html 5. http://www. foodservicewarehouse. com/equipment/c3040. aspx 6. http://www. sec. gov/Archives/edgar/data/1058090/000119312511039010/d10k. htm 7. http://www. triplepundit. com/2011/06/chipotle-moves-local-sourcing/ 8. ttp://grist. org/sustainable-farming/protein-we-only-serve-white-meat-here-excerpt/ 9. Petrak, Lynn. "Food With Integrity. " National Provisioner 221. 9 (2007): 22-26. Business Source Premier. Web. 17 Feb. 2013. 10. http://angelagarbes. com/2011/03/01/food-with-integrity-short-on-humanity/ 11. Ronnette, Harris. "Reply from Chipotle . " Message to Cam Amoroso. 20 Feburary 2013. E-mail. 12. http://www. chipotle. com/en-US/menu/fresh_cooking/fresh_cooking. aspx 13. Shannon, Kyllo. "Reply from Chipotle . " Message to Cam Amoroso. 21 Feburary 2013. E-mail.

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