Universit della Svizzera Italiana Faculty of Communication Sciences Lugano

Supply chain management of a world leading food provider company.

Masters Thesis of Alessia Capoccia 08-989-444

Thesis Supervisor: Prof.ssa Annalisa Tunisini

Academic year 2011/2012 Handing date: February 2012

Table of contents.
Table of contents......................................................................................................... 2 Abstracts...................................................................................................................... 4 Introduction. ............................................................................................................... 5 1. Descriptions and characteristics of the supply chain management. .................. 8 1.1 Supply chain definition and activities. ................................................................... 8 1.2 Problems connected with supply chain management. .......................................... 10 1.3 The strategic vision and function of SCM............................................................ 10 1.4 Keys development in SCM attract companies..................................................... 12 1.5 History and evolution of SCM. ............................................................................ 15 1.6 The 1990s : the lean manufacturing and agile supply chain................................. 20 1.7 The development and integration process of SCM. ............................................. 24 1.8 Choices and characteristics of the supply chain on a global scale. ...................... 26 1.9 Global supply chain today. ................................................................................... 29 1.10 Global supply chain trends for the two year period 2010 2012....................... 36 1.11 The global food supply chain. ............................................................................ 38 2. How to find a good balance between good Customer Satisfaction and Supply Chain Efficiency?...................................................................................................... 42 2.1 Marketing and supply chain as drivers for the creation of the demand chain management................................................................................................................ 42 2.2 The demand chain management. .......................................................................... 44 2.3 How to design the Demand Chain Architecture? ............................................... 49 2.4 A global view of Demand Chain Management in the Food and Beverage sector.50 2.4.1 The consumer sensitivity to food ethic based on the product quality. .............. 50 2.4.2 The food and beverage markets......................................................................... 55 2

3. Supply Chain Responsibility: a factor to gain competitions. ........................... 58 3.3 The responsible, critical and ethical consumption. .............................................. 63 3.3.1 The choice of consumption: the instrument of ethical consumer...................... 64 3.3.2 The concept of sustainability............................................................................. 66 3.4 The Corporate Social Responsibility and ethical market. .................................... 68 3.4.1 The Corporate Social Responsibility in Europe ................................................ 68 3.4.2 CSR among corporate strategy. ......................................................................... 69 3.5 Supply Chain Responsibility. ............................................................................... 76 3.5.1 Corporate Social Responsibility in the Food Supply Chain. ............................. 77 3.6 Quality and sanitary inspection: selection, control and evaluation of raw materials. .................................................................................................................... 79 3.7 Nutritional information and traceability of product and ingredients.................. 82 3.8 Certifications, Standards of production and working conditions. ........................ 84 4. The coffee industry ............................................................................................... 88 4.1 The coffee Supply Chain ...................................................................................... 90 4.2 Trends in the coffee industry ................................................................................ 93 4.3 Sustainability in the coffee market. ...................................................................... 95 4.4 A leading provider in the coffee industry: the case of illyCaff business............ 97 4.4.1 Illycaff in numbers and history of the company. ............................................. 98 4.4.2 The concept of coffee by Illy............................................................................. 99 4.4.3 Companys mission, vision and values. ......................................................... 100 4.4.4 Analysis of Illy's brand .................................................................................... 101 4.4.5 Sustainability and quality of Illys coffee. ...................................................... 104 Conclusions ............................................................................................................. 109 Bibliography............................................................................................................ 113 Web sites links......................................................................................................... 119 3

Abstracts.
Today, in an international and globalized scenario, managing the development and the right functioning of a supply chain requires a strong risk propensity, a great ethical and responsible commitment towards stakeholders. Moreover essential are a complex use of resources, monitoring, inspections and certification throughout the supply chain. In particular, food business, management and control of the supply chain requires more attention. It 'is essential to continue along the chain a fair treatment and a correct preservation of raw materials to ensure the quality of products coming into the hands of the end user, tracking the production process, giving an identification and traceability to the finished product, and selecting accurately the players taking part in the chain. For the consumer it is important the nutritional aspect, and his health, then we must prevent the contamination with pesticides, hazardous substances and bacteria in the processed product along supply chain and ensure a certain level of nutrients to the final product. In addition to ensuring compliance with laws, standards of hygiene and nutritional characteristics, it is important to reassure consumers about the environmental impact that supply chain has on the ecosystem for the consumption of primary resources and pollution. In the coffee sector ethical and responsible aspects are fundamental, we find ourselves to manage a complex and difficult supply chain that must be faced with important trends such as: the problem in coffee prices, the livelihoods of coffee producers in the countries of origin and the level of quality and sustainability of the production. The final consumer is the starting point for organizing and managing a proper and functional Supply Chain. We must address the structure and organization of the supply chain based on individual need expressed by the consumer. If we can satisfy these needs, we are almost certain to hit our final objective: to have a fully satisfied customer and a company that can maximize their profits and maintain a wild and strong position over to the market.

Introduction.
The objective of this thesis is to present and discuss the important theme of Supply Chain Management from a perspective of sustainability, taking into account changes in sensibility of the final customer in the food sector. Subsequently, I analyze the supply chain management of a 'leader in the food sector, in this case in the coffee industry, which pays attention to ethical, sustainable, of its chain, which takes into consideration high quality standards, compliance with the regulations of the countries of production and distribution that focuses its activities and, as a starting point, the customer's needs. We analyze illycaff company. The main questions from which started my analysis were the following: how the choices of supply chain management are linked to consumer needs? How the company decides to organize its strategy of action taking into account the views of consumers, competition, institutions and media? In the management of Supply chain the topics of social marketing, green, ethics and responsibility how much influence they have?? These are the questions to which I started to analyze the supply chain management. In particular, in Chapter 1, I discussed how it is organized and structured a supply chain and its management, what are the challenges which need to meet in the management, its strategic vision and operation. Then, I introduced the salient points of the evolution and history of supply chain management, definitions of lean and agile supply chain, development and integration of the SCM process. Finally, I consider his organization, the choices and characteristics of SCM in international and global level and the main trends of reference. The final paragraph of the first chapter introduces the Food Supply Chain on a global scale. Once introduced into all the peculiarities and characteristics of management, in the 2chapter has started by the consumer as a starting point to determine decisions and choices of marketing and supply chain management; such as being able to achieve full customer satisfaction and maximum efficiency in the supply chain management.
In the 3 chapter we talk about how the Supply Chain Responsibility is a competitive

factor to maximize profit, visibility and image of a company in the eyes of stakeholders, of how the ethical and responsible consumption are driving factors for the public and

the consumer and how companies, to respect them, should therefore organize the supply chain management compliance standards, and certification criteria. In Chapter 4, I decided to analyze a company belonging to the coffee industry, the brand illycaff. This company was chosen because it is a leader in its industry, is recognized as a brand linked to the consumption of coffee quality, valuable and sustainable coffee. It was the first Italian company to receive certification for the management and sustainable supply chain process.
The supply chain of a leading food company its a complex network of linkages upstream and downstream and concern a lot of attention and focus to give in the hand of customers a good product responsive in the food processing, with ethical standard of cultivation and production and satisfactory for the need of customers.

In the era of globalization, many industries producing raw materials, components and finished products has moved from industrialized countries to developing countries, in order to contain production costs. In these countries the legislation is less stringent, and therefore the globalization of the supply chain increases the risks involved in social and environmental. The increasing use of outsourcing leads companies to outsource more and more significant share of their business processes. Often contractors rely on themselves to other parts of the processing companies, and not always the customer has full visibility into who make up its supply chain working conditions on them along the chain. Over the last years, consumers' views on social and environmental issues has increased significantly, thanks to the attention of the media. This attention has resulted in companies having to deal with the so-called "reputational risk". Potential violations of working conditions and respect of the rights of workers throughout the supply chain can cause damage to the image with a heavy impact on the market. The company is seen as responsible and guarantees the quality of working conditions throughout the supply chain. But how can we manage the risks along the supply chain and ensure compliance with all regulations, certifications and inspections? More and more frequently, large companies or brands feel the need to increase the knowledge of the supply chain to prevent risks and damage to image and reputation. 6

The common need is to identify tools to explore, select and monitor the supply chain. Become refined tools to detect social and environmental performance of their suppliers (questionnaires, audit). Looking for competitive prices is accompanied by the search for guarantees in terms of respecting the rights of workers and the environment, in the belief that only a supply chain that provides these guarantees is sustainable coffee over time.

1. Descriptions and characteristics of the supply chain management.

Supply chain management (SCM) can be defined as: the active management of supply chain activities to maximize customer value and achieve a sustainable competitive advantage ( Bozarth C., Handfield R., 2005 ). Supply chain encompass purchasing and supply management; physical distribution management; material handling, and logistics. In essence, Supply Chain Management integrates supply and demand management within and across companies. Supply Chain Management can also refer to Supply chain management software, tools or modules used in executing supply chain transactions, managing supplier relationships and controlling business processes. The main objective of Supply chain management is to maximize customer value and reach a sustainable competitive advantage. To reach these important objectives, its important to develop and run supply chains in the most effective and efficient ways possible.

1.1 Supply chain definition and activities.

The concept of Supply Chain Management is based on two main ideas; as we can see from the image below, every product that reaches an end consumers represents the cumulative effort of multiple organizations ( marketing, sourcing, operations, logistics, engineering). These organizations are referred to jointly as the supply chain. Supply chain activities include everything from product development, resources, production, logistics, and the importance of the information systems needed to organize these activities. The organizations that create the supply chain are linked together through physical and information flows. Physical flows involve the transformation, movement, and storage of goods and raw materials. They are the most visible piece of the supply chain. Information flows enable several supply chain partners to coordinate their long-term plans, and to control the day-by-day flow of goods and material upstream and downstream the supply chain. 8

Picture 1: A graphic description of supply chain activities.

The second idea is that while supply chains have existed for a long time but were ineffective. Few organizations understood the importance of a good management of supply chain and the means that the entire chain of activities ultimately delivered products to the end customer. The responsibility and authority for implementing SCM must be placed at the highest levels of an organization. Firms that attempt to consider SCM within a functional unit such as sourcing or logistic usually have limited success. SCM adds another layer of complexity to a firms strategy development efforts. Years ago, firms could succeed by being particularly good in one functional area, such as marketing or operations. Then firms recognized that in order to survive, they had to have sufficient capabilities across multiple functional areas. Now-a-days, much competition occurs between multi-firm supply chains, not just between individual firms; and managers verify how they will partner with other firms in order to compete. Firms strive to focus on their core competencies and becoming more flexible. They have reduced their ownership of raw materials and distribution channels, and outsourced these functions to other entities that can perform the activities better or more cost effectively. This procedure is doing in order to increase the number of companies involved in satisfying the end customer demand, and reducing management control of routine logistics operations. The concept of supply chain management is to reduce control on operations and improve trust and collaboration among supply chain partners. 9

1.2 Problems connected with supply chain management.

In the execution of supply chain we manage and coordinate the movement of raw materials, information and found; it can occur that SCM can address different problems. First of all, it can occur a problem in the configuration of the distribution network: we have to establish the number of supplier, their location and network missions, where disseminate production facilities, distribution centers and warehouses. A second problem could be how defining the distribution strategy; its important to define if the operating control its centralized in a unique unit or if its decentralized or shared. We have also to decide what is the delivery scheme, the mode of transportation and control this transportation. The logistical activities are so costly and can be a problem in developing an efficient and effective SCM strategy. In order to achieve the lowest logistic total cost, its necessary to well coordinate these logistical activities and to balance cost of all the activities. The Information could be a problem through the supply chain if we dont share important and valuable information along the supply chain: its important to share information about forecast about the market, inventory (quantity and number of products, about product processing and finished) and about transportation.

1.3 The strategic vision and function of SCM.

The strategic mission that organizations must to pursue to cope with competitors in the markets its first to be able to provide quality products or services in a timely, costeffective manner if they want to deal with broader supply chain issues. Therefore, key themes are Total Quality Management, Just-in-Time manufacturing, concurrent product development. The second thing to understand is that it often requires significant changes in the firms organizational structure. SCM issues cut across functional areas and even business entities. Third, SCM requires firms to focus on performance across the entire supply chain and not on individual units, because if individual units seek to maximize their performance without regard to the broader impact on the supply chain, it can cause problems.

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To avoid this circumstance its necessary to establish suitable information systems and metrics, to make intelligent decisions and presents a significant challenge to supply chain partners. The starting point for a firm is the development and execution of a long-term supply chain strategy. The strategy should have the aim of identify what kind of supply chain the firm want to take part, understand and explain to all the staff how the firm provide value to the supply chain and least but not last, doing a careful selection of supply chain partners, suppliers, transportation providers and distributors. Firms can begin to understand how they add value in a supply chain, what is needed to make the supply chain work in the most effective and efficient way possible. Its important to understand what kind of supply chains we compete in and what are the valuable assets in the supply chain, for this reason its often valuable to map the information and physical flows that make up the supply chains. The firms supply chain strategy must be consistent with both the overall business strategy and efforts within the enterprise as purchasing, logistics, manufacturing and marketing. In the creation of the vision of supply chain, we have to structure our supply chain on three different levels: strategic, tactical and operational level. On the Strategic level we have to consider all strategic points of view in the chain. We have to optimize the network with positioning the different location; decide number and size of store house and distribution center. In order to create appropriate communication channels and make easier any kind of interaction between all partners, create strategic partnership with suppliers, distributors and end customers. Its important to integrate in the supply chain all new and existing products, take make and buy decisions strategically and create commitment and align each strategy with the entire supply strategy. On the tactical level we manage contracts, purchasing and production decisions. We can plan processes, we decide about inventory: their quantity and quality standards; we take decisions about transportation, we create benchmark about actions of competitors and the most important, we focus on the customer demand. As tactical level, if an organization is going to be responsive to market changes, its important to manage effectively time-based competition (Christopher, 2005). 11

Time based competition has three dimensions: time to market: the speed at bringing a business opportunity to market; time to serve: the speed at meeting a customers order; time to react: the speed at adjusting output to volatile responses in demand.

We use these three dimensions to develop strategies for strategic lead-time management of supply chain, and we differentiate between horizontal and vertical time. Horizontal time is time spent on processes such as manufacture, assembly, in-transit or order processing. Vertical time is the time when nothing is happening, no value is added but only cost and products are standing as inventory. On the other hand, on Operational level we have the most practical and daily routine. We plan and schedule the distribution and production in the supply chain, we analyze the customer demand and we forecast about market demand. At the operational level we also consider the organization of all the activities of the supply chain: inbound logistic, production operations, outbound logistic, the fulfillment of all the order promising from production to supply level and assure that there are not financial or quality loss.

1.4 Keys development in SCM attract companies.

Supply chain management is a body of tools and techniques, view as much as a philosophical approach. However, between companies SCM requires a great deal of interaction and trust to work together. As we said before, organizations understood the importance of a good management of supply chain. The three major developments that have brought managements attention are: 1) The information revolution. 2) The increased competition and globalization in today's markets. 3) Relationship management.

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1)The Information Revolution. In the early 1960s when computers were first developed, a mainframe computer had a big dimensions and fill up an entire room. Subsequently, with the development of the integrated circuit, the cost and speed of computer power increased exponentially. Today, a laptop computer exceeds the storage and computing capacity of mainframe computers made only 15 years ago. The evolution and the mass culture of the personal computer, the Internet, and the low cost and availability of information resources allows easy linkages and eliminates information-related time delays in any supply chain network. In the last decade, a new concept known as e-commerce (electronic commerce) rise approval. In this virtual market, thousands of buyers and sellers were put in touch with one another and these create the opportunity of on-line trading communities. In this communities information transactions are automatically completed via Electronic Data Interchange (EDI), Electronic Funds Transfer (EFT) and Point of Sale (POS) devices. The old paper-type transactions are becoming increasingly obsolete. Moreover, the proliferation of new telecommunications and computer technology has made instantaneous communications a reality. 2) The increased competition and globalization in today's markets. The second major trend is increased competition and globalization of businesses. The rate of change in markets, products, and technology is increasing continuously. New foreign competitors are entering into markets that have traditionally been dominated by domestic companies, and companies must defend their domestic market. Today its important to increase market share on a global basis, rapidly expand our global presence and be prepared for rapid global expansion. Consumers demand products and services fitting with their individual needs, with a quicker delivery and state-of-the-art technology. Its important to be competitive in the market to survive. In some industries, the imposing challenges of todays competitive environment reduce product life cycles

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from years to a matter of two or three months. Its also important to put emphasis on improving their operations and, in particular, do the best in supply chain performance. We must position inventories strategically, in this way products are available when customers all over the world want them, in the right quantity, and at the right price. This level of performance is a constant challenge for companies, and can only occur when all parties in the supply chain are on the same tuning. 3) Relationship Management. The information revolution, the increasing consumer demands and global competition have given firms the incentive to improve the management of their operations and supply chain. Any efforts to improve the supply chain performance and operations are not enough without the interaction with other firms. Interaction means to focus on relationship management, cooperation and interdependence with other firms. Of all the activities supply chain managers perform, relationship management is perhaps the most difficult; a poor relationship within any link of the supply chain can have disastrous consequences for all other supply chain partners. To avoid such problems, firms must manage the relationships with their upstream suppliers as well as their downstream customers. It becomes more important to choose a few, select suppliers, thereby paving the way for informal interaction and information sharing.

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1.5 History and evolution of SCM.

During the years, supply chain got through different era, each one with their peculiarity in technologies, different characteristics in the structure and management of supply chain. In the evolution of supply chain management studies ( Lavassani, Kumar, 2009), we can observe six main movements: Creation era Integration era, Globalization era, Specialization Phases One and Two, SCM 2.0 era.1

In the creation era The term supply chain management was first coined in the early 1980s in the USA. The characteristics of this era of supply chain management include the need for large-scale changes, re-engineering and downsizing was driven by cost reduction programs and focus on the Japanese practice of management ( lean manufacturing). In the integration era we developed the first systems of electronic data interchange, continued to develop in the 21st century with the explosion of World Wide Web. This period was characterized by supply chain integration, with cost reduction and value adding to final customers. Globalization era was the third movement in the development of SCM. It can be characterized by global supplier relationships and the new international supply chain. Until the end of 1980s, a considerable number of organizations started to integrate global sources into their core business.

Lavassani, Movahedi, Kumar, 2009. Developments in Theories of Supply Chain Management: The

Case of B2B Electronic Marketplace Adoption. The International Journal of Knowledge, Culture and Change Management. Vol. 9, Issue 6, pp. 85-98.

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The final objectives of the globalization of supply chain management in organizations were to increase their competitive advantage, add value and reducing costs through global sourcing. In the phase one of specialization era, we are in the 1990s. Companies began to focus on their core competencies and to outsource non core activities to other companies. In this way, we create a specialization model of supply chain and we extend the single supply chain to supply chain partnerships. This specialization era create also distribution network, composed of multiple and individual supply chain each one with the final objective to work together to design, manufacture, distribute, market and sell products to their final customers. In the phase two of specialization era we consider supply chain management as a functional support. In the 1980s supply chain rise a specialization; SCM before was mean as a transformation and distribution from raw materials to finished good and a warehouse management. During this period began related with logistic, supply planning and performance management. Continuous changes are on the agenda, it is required to a SCM to have a flexible structure capable to adjust in relation with market needs. Specialization enables to improve personal competencies and to get a great influence on the overall value chain performance and efficiency. SCM is a functional support in the way it offers the possibilities to create a specialized value chain with a great product in the hand of the final customer In the era of SCM 2.0 supply chain change itself and by the evolution of processes and tools of the new era, with the use of World Wide Web. This era was made up globalization and specialization era. Web 2.0 is a trend that increases information sharing and collaboration between partners; it also helps to found all information available on the web. With the SCM 2.0 companies reach their results quickly and speed of supply chain increase, due to international competition, price variation and short product life cycle.

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The roots of supply chain management are often attributed to Peter Drucker ( Drucker, 2006).2 The evolution of the purchasing function goes through from a formal activity, to one that makes a strategic contribution to company performance in order to achieving strategic goals. During the 1940s-1960s the role of purchasing was purely as logistic function, especially in military practice. In the 1950s logistic began to receive attention as a business discipline and focused on improving productivity in the single firm. But we understood quickly that logistic is not an independent function in the firm organizations, and it is necessary a collaboration within all the department. Now a day when we talk about logistic we speak about the process of material and products moving into, through and out of the company. Materials received from suppliers and physical goods are known as inbound logistic, the physical distributions of finished goods to the end of the production line and to the end customers are outbound logistics. During the 1970s we recognize the importance of purchasing as an administrative function, more than a strategic function. This department operated in an isolated environment, and this avoids the optimization of the enterprise wide supply chain. Purchasing was a service provider to other function within the company, such as: buying goods and services required from suppliers, making sure about the levels of quality and performance, follow schedules and apply competitive price. Then, and through the next two decades, the supply chain was still viewed as a series of disparate functions. During the 1980s companies began to understand the potential contribution of purchasing to the bottom line. In this period Porter emphasized in his five force models

www.en.wikipedia.org/wiki/Peter_Drucker Drucker Peter, 2007. Management Challenges for the 21st Century. Elsevier.

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the importance of purchasing as a firm competitive advantage, that creates value in the end of the final customer.

Picture2: Porters value chain

The value chain, or value chain analysis, is a concept from business management first described by Michael Porter in 1985. Its a key concept for obtaining a competitive advantage through managing the supply chain. The value-chain concept has been extended beyond individual firms, and it can apply to whole supply chains and distribution networks. The delivery of a mix of products and services to the end customer will mobilize different economic factors, and each one managing its own value chain. The synchronized interactions of local value chain create an extended value chain. The value chain is a powerful analysis tool for strategic planning, and Capturing the value generated along the chain is the new objective of strategies. The value chain activity is to categorize the generic value-adding activities of an organization. The primary activities of value chain include: inbound logistics, production, outbound logistics, marketing and sales, and services. The support activities include: administrative infrastructure management, human resource management, technology (R&D), and procurement. Slowly, we began to use the term supply chain management from the consultants and from the academic community, and the supply chain management began to take part in the corporate strategies. 18

We have a slowly shift from a push to a pull system, consisting in a supply chain driven by the demand of consumers, because they gain more power decision in the marketing channel. A primary role in this shift, is doing to an empowered role of information systems that allow gaining better control of the supply chain and the elimination of unnecessary inventory in the supply chain. Firms also decide to focus on core capabilities and outsourcing to specialists the non-core activities. To achieve maximum effectiveness of supply chains, it became clear that integration, of previously separated activities was required. Companies have had therefore to review their internal organization to remove duplication and ensure that total costs can be reduced, rather than allow separate functions to control their costs in a sub-optimal manner. Also, supply chain integration can be achieved by establishing ongoing relationships with trading partners throughout the supply chain. In industrial markets supply chain integration focused upon the changes promulgated by the processes involved in improving efficiencies in manufacturing. In the 1980s Japanese competition was intense, total quality management, business optimization and continuous improvement brought Japanese business thinking to western manufacturing operations. The implementation of these practices was popularised by Womack, Jones and Roos (1990) 3which they focused on supply systems and buyerseller relationships in car manufacturing.

Womack, Jones, Roos, 1990. The Machine That Changed the World : The Story of Lean Production.

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1.6 The 1990s : the lean manufacturing and agile supply chain.
During the 1990s the supply chain management (SCM) moved away from functions of logistics, purchasing and physical distribution. In the 1990s we exploited the concepts of lean manufacturing and agile supply chain. Lean manufacturing is a generic process management philosophy identified as Lean, knew for its focus on reduced waste to improve end customer value. Lean manufacturing is a change way on the theme of efficiency. Lean system has the final goals to improve quality and offer first time quality, because to be competitive in the market its important to understand customer needs and meet their expectation and requirements. Other important goals are to eliminate waste , reduce time to market, reduce total costs, minimize overproduction and inventories and building long term relationships with suppliers. Above, we say that the lean thinking focus on eliminate waste to improve the end customer value, we identify seven different possible type of waste ( Womac, Daniel, 2003 )4: Transport waste: when we move products not required in this moment to perform a process. Inventory waste: when we have a surplus of finished products not being processed. Motion waste: people or equipment moving more than is required to perform a process. Waiting waste: when we have a slowdown in the process and we waiting for the next production step. Overproduction waste: production exceed demand of end customers Over Processing waste: resulting from poor tool or product design creating activity. Defects waste: products or service not satisfy quality standard and we have to put more effort in inspecting for and fixing defects.

4 Womack, James P., Daniel T. Jones ,2003. Lean Thinking. Free Press

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Lean and agile supply chain concepts differ; lean have an over reliance on efficiency, agility on an innovative responses. LEAN: efficient/function PRIMARY OBJECTIVE INVENTORY STRATEGY LEAD TIME FOCUS APPROACH TO SUPPLIER SELECTION Supply predictable demand ( real data) AGILE: Innovative/responsive

Respond quickly to unpredictable demand ( forecast). Generate high turns and Deploy significant buffer stock of minimize inventory parts Shorten lead time as long as it Invest aggressively in ways to doesnt increase cost reduce lead time Select primarily for cost and quality Select primarily for speed, flexibility and quality

Table 1: A comparison between the alternative Supply Chain Processes: Agile and Lean. Source: Womack, James P., Daniel T. Jones ,2003. Lean Thinking. Free Press.

A convenient interpretation of both paradigms is due to Naylor5 ( Nailor, Naim, Berry, 1997) as follows: Agility means using market knowledge and a virtual corporation to exploit profitable opportunities in a volatile marketplace. Leanness means developing a value stream to eliminate all waste, including time, and to enable a level schedule.

5 Naylor, Naim, Berry, 1997. Leagility: interfacing the lean and agile manufacturing paradigm in the total supply chain. International Journal of Production Economics, Vol. 62, pp. 107-18

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Lean concept was linked with the Japanese business thinking in 1980s, illustrated above. The agility concept was developed in response to this Japanese success in lean production. The lean and agile concepts may be selected according to the specific marketplace. In the lean supply chain the winner in the market is cost; in the second case the market winner is availability. Agile supply chains6( Harrison, Christopher, 1999 ) are required to be market sensitive and highly responsive to market demand; reading and responding to real customer demand (demand-driven market), forced to focus on past sales and convert these forecast into inventory available. The development in the last decade of efficient information technology systems create the possibilities to capture real data directly from the demand in the point of sale, to respond directly to the needs of the market and create a virtual supply chain between trading partners. Virtual supply chain are information-based rather than inventory-based. When information are shared, process integration between partners takes place and each one focus on their core competencies. The final link in the agile supply chain is the network where a confederation of partners structure, coordinate and manage relationships to meet customer needs ( Aldrige, Harrison, 2000 ).7

Harrison, A., Christopher, M. and van Hoek, R. (1999). Creating the agile supply chain. School of Management Working Paper, Cranfield University, Cranfield Aldridge, Harrison, 2000. Implementing agile methods in retail supply chains: a scenario for the future. International Journal of Agile Manufacturing, n 3, pp. 3744.
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Picture 3: The Agile Supply Chain. Source: Christopher, 2005. Logisitc and supply chain management: creating value adding networks.

Both approaches of course have their proponents. However, there is no reason why supply systems may not be a combination of both lean and agile approaches. In either case, emphasis today is placed on the demands of supply chain management. Now a day, when we talk about SCM we mean: demand chain management, supply chain network and value integration. Organization realize that the strategic management of supply chain create value for money, and they focus on create collaborative and long term relationships with fewer supplier. Supply management concern on running process of goods and products, maintain a level of competitive price, focus on improving cycle times and products innovation and on reduce time to market.

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1.7 The development and integration process of SCM.

Now a day, if a SCM want to be successful it requires to integrating all the activity into key strategic supply chain processes. The supply chain process integration requires collaborative work between buyers and suppliers, common systems and information sharing. Integrated a supply chain require a continued information flow, but its not sufficient if we cannot implementing a process. In the integration of supply chain critical key processes are ( Lambert, Douglas, 2008 )8: Customer service management Procurement Product development and commercialization Manufacturing flow management/support Physical distribution Outsourcing/partnerships Performance measurement

Customer Relationship Management concerns the management of relationship between the organization and its customers. Source of real- time information for customers is the Customer service. It also provides information on scheduling, product availability through interfaces interconnected with company's production and distribution operations. To build profitable customer relationships its important to satisfy the need of our customers and to reach goals of the companies, but the most difficult is to create trust in the relationships and customer loyalty.

Lambert, Douglas, 2008. Supply Chain Management: Processes, Partnerships, Performance, 3rd edition.

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In a strategic vision of supply chain, its important to collaborate with suppliers in the management of the process and when the operations extend globally, supply chain should be managed on a global point of view. Procurement process means to find all the resources and establish the basis for create a win relationship where both parties benefits.9 To reduce time to market and be competitive, its important to develop and launch a product with shorter time schedules. According with Lambert and Cooper ( 2008 )10, Product development and commercialization process must recognize the specific needs of each customers, select materials and supplier together with the procurement process and develop technology in manufacturing processes; for the best final results of the supply chain. In the manufacturing process we produce and supplies products to the distribution network, all based on forecast about an analysis of data of past periods. It must to respond to the market changes and to customer needs, with a small lot of size and just in time for the market. In the manufacturing flow management process its important to reduce manufacturing flow process to a shorter cycle time, this means to improve efficiency and responsiveness in satisfy customers demand. Availability of the product and service is a vital part of a marketing effort, and its through the physical distribution process that customer service become part of marketing. Physical distribution is the movement of finished product to consumers, because customers are the final destination of the marketing channel. In the last decades, a new trend grows and captured the attention of companies. Firms decide to focus on those activities in the value chain where they have competitive advantage and to outsource all the others activities traditionally been provided in house.

Activities related to obtaining products and materials from outside suppliers involve resource planning, supply sourcing, negotiation, order placement, inbound transportation, storage, handling and quality assurance, many of which include the responsibility to coordinate with suppliers on matters of scheduling, supply continuity, hedging, and research into new sources or programs. 10 Lambert, Douglas, 2008. Supply Chain Management: Processes, Partnerships, Performance, 3rd edition.

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We found a strong correlation between supplier, customer integration and profitability of a company. A long term supply chain is correlated with firm performance. We have different internal measures that represent performance: cost, customer service, quality and productivity. External performance is analyzed through customer perception measures and benchmarking.

1.8 Choices and characteristics of the supply chain on a global scale.

Supply chains in the last ten years are increasingly global and complex. Integration and partnership processes create the possibilities for companies to expand globally in their business; with the possibilities to enter in new market, reduce costs and to increase speed to fulfill customer needs. To meet the challenge of simultaneously reducing cost and satisfying customer, it is necessary a different approach to responds to market demand and to create an agile supply chain on a global scale. Global supply chain and process of globalization has reduced agility; companies searched for lower costs of production and moved offshore their manufacturing process, mainly for low labor costs. Actually, companies reverse this process and they bring production closer to the main markets. To reduce loss of agility by expanded supply chain globally, its necessary for companies to remove barriers into the organization. The supply chain must be manage on an integral and constant basis, with teams cross functional and communicating each other in order to manage the pipeline responsible from resources to the end customer. Its also important to think of supply chain as a value chain that creates value for the final customers, if a companies is thinking globally make sense to localized final decisions closer with the market demand. The first aim is to focus on create values to the end customers, but it is important to remind that cost, quality and performance are three pillar in the field of a good and efficient supply chain management. Some authors (Chopra, Meindl, 2001) argue that the supply chains performances are influenced by four major drivers:

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Inventory: we consider all raw materials and finished good within an organization. The level of inventories influences the delivery lead time and the cost associated with this delivery.

Transportation: it consists on moving inventory from point to point in the supply chain. Each transportation involves performance characteristics.

Facilities: the function of facilities has significant impact on supply chains performance. They are places along the supply chain where inventories are stored and fabricated. Two major types of facilities are production site and distribution centers.

Information: It is the most important drivers of performance. Information is the key element along the supply chain regarding inventory, transportation, facilities and customers.

To determine a supply chain responsiveness and efficiency, these four drivers are the starting point. Reducing inventory level is the main focus, because costs are minimized and we reach a high level of quality. The most important problems to achieve in a global supply chain is to consider and focus on real customer demands; not forecast and reorder quantities based on past sales and inventories. As Christopher (2000)11 said, in a global supply chain environment its necessary to shift the de-coupling point. The decoupling point is the point upstream in a supply chain, where penetrates real demand.

11 Christopher, 2000. Managing the global supply chain in an uncertain world.

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Picture 4: decoupling point and strategic inventory. Source: Christopher, 2000. Managing the global supply chain in an uncertain world.

In the picture 4 we can see decoupling point circumscribe. These decoupling points also tend to dictate the form in which inventory is controlled. In the first line of the picture we can see demand penetrates right to the decoupling point of production, inventory in this case is held in the form of raw materials. In the lower line of the picture, we can see that demand is visible only at the end of the chain; inventory is the finished product. The decoupling point allows all processes in supply chain to work to the same information and to reduce dependence by forecasting. The aim of a global supply chain is to have inventory in a generic form not as we can see above in the picture in the form of raw materials or finished product; in this way is possible to have a semi-finished product inventory. This is a solution for postpone the final configuration of inventory. If we elaborate information on a real customer demand, the supply chain work rapidly and inventory can be in a generic configuration. In the immediate future, the organization that become globally and want to gain leadership in the market, must prove greater agility than competitors.

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1.9 Global supply chain today.

Companies used numerous strategies to manage their supply chain on a global basis. A survey of PRMTs (2008)12 identified and analyzed the ten major trends that today drive innovative supply chain design and configuration. Critical areas in the supply chain today are: Trend 1 Globalization is accelerating; manufacturing and assembly functions are outsourced for 51% to low cost countries such as China and India. R&D, IT and Technology developments are kept at companies headquarter. Trend 2. Supply chain cost and efficiency are at the top of the management agenda. Primary objectives are to reduce materials and labor costs, increase access to local markets maintaining quality and safety of products ensure supply chain flexibility and high performance; designing a future configuration of the supply chain, considering the future and continuous globalization process.

Graph 1: Trend 2, Drivers of Globalization. Source: PRTMs sixth annual survey: Global Supply Chain Trends 2008-2010

12

PRTMs sixth annual survey: Global Supply Chain Trends 2008-2010

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Trend 3 Globalization initiative focus on average cost reduction, labor cost and local material procurement reduction. Potential benefits expected from globalization are achieved only for a third of companies. Trend 4 The major target regions were globalization investments are considerable are China and India. China is the low cost manufacturing destination, India is the destination for IT and R&D investments. North America and Western Europe remain major destination for supply chain coordination. Trend 5 The most critical concerns if we want to expand the supply chain globally are product quality and safety, and supply chain delivery and security. If we want to become global, many risks occurred: to ensure green supply chain, on time delivery, product quality, product safety, product availability, violation of corporate social responsibility rules. Trend 6 Lack of internal competency and limited supply chain flexibility are barriers to globalization. Its important to maximize flexibility and the concept of just in time, in order to ensure an efficient flow of product and on time delivery. The lack of competence lead to a lack of an appropriate partner in the selection phase of a long term strategic partners.

Graph 2: Trend 6, Barriers to Globalization. Source: PRTMs sixth annual survey: Global Supply Chain Trends 2008-2010

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Trend 7 Environmental sustainability is a key theme in the agenda of companies, first of all because two major drivers, customers and government regulations, keep attention on this trend. Promote a green supply chain and environmental sustainability is a strategic factor in the globalization strategy of a company; its suggest a strong companys image and lead to a competitive differentiation. Trend 8 Supply chain is evolved and reached a maturity level. Supply chain maturity was enabled by advanced supply chain practices, appears to have reached stability. Supply chain performances are hinder to a rapid expansion across the globe. Trend 9 The main objective to reach in the next years is the maximum supply chain flexibility. Flexibility13 is due to a tactical supply chain strategy focus on product quality and customer service as the major drivers. In order to improve and achieve supply chain flexibility it is important to focus on delivery performance, strengthen service level and focus on demand and supply forecasting. Trend 10 Across regions and countries the top priority of CEO agenda will be supply chain flexibility, delivery performance and acceleration of globalization. These priorities are almost the same in the different industries. To reach these points in the agenda is important to reduce inventories and inefficiencies, introduce innovative management tools and prepare companies, partners, suppliers and employees to a change of strategy. In the future excellence and leadership in the market will be only for the companies that best deal and manage with the issue of Globalization.

13

The importance given to respondent in the survey is to +60 % of flexibility needed in the next two

years period

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The graphs below shows the results of a survey edited by McKinsey (2008)14, and explain when supply chain become global, what are the related challenges for companies. The priorities and goals (Graph 3) of a company thinking globally are to reduce costs, improve customer service and to launch in the market new products faster. The most important challenges faced by company (Graph 4) are total resourced required managing supply chain, integration of Information technologies between all organization and the requirement of local and central management.

Graph 3: strategic goals of global supply chain. Source: McKinsey Global Survey Results, 2008. Managing global supply chains. Percentage of Respondents n= 273.

14

McKinsey Global Survey Results, 2008. Managing global supply chains.

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Graph 4: the challenges of becoming global. Source: McKinsey Global Survey Results, 2008. Managing global supply chains. Percentage of Respondents n= 185.

Global Supply chain face more risks than a local supply chain, and supply chain risks raising sharply. Different business trends contributing in the last decade to the growing awareness of supply chain management risks: the lean management with the aim to saving money, driving inventory out of the supply chain; globalization allowed to sourcing supply from all around the world higher customer expectations, complexity of the supply base, variability of demand. In the last years many terrorist attacks, earthquake, epidemic diseases, environmental calamity and financial instability ask to focus on risk assessment and mitigation; its important to identify risks in the supply chain and to be able to developing strategies to circumscribe risks. Companies need to be able to react quickly to the situations. The reaction time is the most important factor; it cover the speed which we detected the event, we identified consequences and we evaluated responsible solutions.

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We manage risk in the right manner if we were prepared to understand risks where they occur, we gave the right priority to the specific risk and if we take action in the less time its possible. Risks refer to different categories: natural calamity, diseases, economic, political or due to an unstable market trends. In the last five years risk faced by companies increased significantly. Among all risks, the availability (43%), cost (36%), and quality of labor (33%) are the principals.

Graph 5: main supply chain risks. Source: McKinsey Global Survey Results, 2008. Managing global supply chains. Percentage of Respondents n= 3,309.

In order to minimize potential risks of supply chain, a company takes different actions: contracts with supplier to increase performance (54%), alerting customers about potential risks (38%), increasing price passing by customers (35%) and with a vertical integration (29%).

Graph 6: action to reduce potential supply chain risks. Source: McKinsey Global Survey Results, 2008. Managing global supply chains..

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Each company has capabilities to face and solve their potential risks, but only 53% is somewhat capable to face and mitigate risks.

Graph 7: capability to faces supply chain risks. Source: McKinsey Global Survey Results, 2008. Managing global supply chains.

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1.10 Global supply chain trends for the two year period 2010 2012.
A study conducted by PRTM (2010)15 analyzes the results of a survey concerning the new trends for the next two year period 2010 - 2012. There is spread optimism about the economic recovery amongst the supply chain, but if supply chain cannot accommodate increasing demand and volatility, it is not possible for companies to take advantages to benefits of recovery. For the next period appeared as new trends and main points in the agenda of supply chain leaders: Improve customer access and accuracy of supply chain planning Increase flexibility upstream and downstream supply chain Focus on total supply chain cost reduction Implement end-to-end supply chain risk management Integrate and invest to empower supply chain organization

Supply chain volatility and uncertainty permanently increased; supply chain flexibility is confirmed as one of the most important trend. Despite expectations for growth, companies work hard to achieve supply chain performance. Continued demand volatility and poor forecast accuracy will be the primary challenges to Flexibility. Adjustment of demand planning activities will be a key strategy to advance demand in new volatile markets. Several strategies to reduce volatility and improve customers access of supply chain planning are: real time planning strategy, demand sensing and planning with key customers or data capture strategy at point of sale. Increased complexity requires truly global customers and global supplier networks; Quality and safety remain key supply chain drivers, but we have new cost focus about cost-optimized and supply chain configurations. Total supply chain costs are optimized.

15

PRTM, Global Supply Chain Trends 2010-2012. Are we ready for recovery?, October 2010

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Cycle time and complexity in the supply chain must be managed and reduced to improve flexibility. Some possible strategies to reduce time cycle focus on improve logistics and configuration, standardize and decrease product complexity, outsource non-core functions and optimized total supply chain costs and process. Forecasts must be update frequently and supply chain must be managed and configured regionally. Finally, it is important to ensure the supplier ecosystem of the company and manage risk with an end- to -end supply chain perspective; and empowered organizational expectations, because existing supply chain organizations are not truly integrated.

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1.11 The global food supply chain.

A global food supply chain start with input come from importation countries to farm supplier in producing countries, and to end customer globally by exportation. The Logistic agricultural function spread different product to manufacturing or to home markets, and manufacturing processes products ready to be distributed in different channels. Final products arrive in the hand of final customers by retailer.

Picture 5: The food supply chain. Source: www.eafl.org.uk/downloads/LocalLinksAppendix4.pdf

Food supply chains are dynamic and important for the development of countries. In last years, private companies fulfill a process of internationalization and try to create a competitive connection in the global food supply chain. 38

Today, many actors in the global food supply chain are multinational or international companies that provide inputs to farmer, manufacturing, retail and food services. At the top of food supply chain we have farm sector: farm supplier and farm. They are two players in a sector with a fragmented structure and base on the national production. In each country we have different food supply chain, with differences in product subject to season and weather. The mission of a food supply chain is to transform the simple supply chain in a responsible value chain, with the aim to respect all the international standard and to offer in the hand of final customer a product with quality and sanitary characteristics. It is also important to offer to end customers nutritionals information and traceability about the ingredients of their consumption products; and provide good work conditions for workers and employee and respect to security standards of labor. Supplier is the starting point. An effective food safety supply chain is due to successful interactions between all parties in the chain, especially is important to find and engage suppliers capable of providing a companys food safety goals. Food industry put emphasis and wariness on preventive measures for food defense and food safety: we improve food protection along all the food supply chain. A complete safety and protection is built from the beginning of supply chain, with close interaction with the supplier, growers, manufacturers, distributors and service providers. Prior to starting business with a supplier is desirable to perform a supplier assessment and a food safety programs review. Assessment should provide knowledge effective and operating to ensure food safety, quality and regulatory compliance. Suppliers, in order to ensure the result of a successful and safe supply chain, have to monitor and pay attention on these preventive measures: Food safety and sanitation standard Control changes in some ingredients or procedures through the process Enclose all the documentation ( letter of guarantee, certificate of analysis ) of the products Supplier regulatory compliance 39

Food safety Training employee about food safety programs Monitoring environment Control foreign and external materials Control label and consumer packaging Tracking product and ingredients Test products and release non conforming products Consider consumer and market complaints.

To ensure food safety and sanitation we employ sanitation standard, regulation and certification. Some sanitation instruments are evaluation of hazard, material control with screens, filters and magnets, allergen control programs and environmental monitoring programs. The aim of a food player in a global supply chain is to try to find the conceptual bases where we lean the mission and the strategic vision to cope with international market. Important Conceptual bases are to do a perfect market research about who is our supply chain target of reference, what are the needs and wants to satisfy in the short term. Its important to cope in the international market with a clear and focus strategy, ready to react in advance of competitors. In a business strategy is important to establish where take market investment decisions and if we compete on a value preposition, on competencies or on functional areas or programs. If we have the advantages of having a well defined business scope, we win competition in the market. Now a day, we live in a multi ethnic society and its important to consider as part of the target of reference immigrants. Multi-culture can be one of the most important issues during next years: if we take in advance of competitors, and we fulfill needs of immigrants with specific food and meal solutions agree with their dietary habits; we can take a win strategy in the long term. Besides multi culture issue, its important to pay attention on the market of reference, because opinion leader and non-governmental organization (NGO) create a lot of clamor and attention about environmental, social issues and sustainable trade. 40

A global supply chain operating legally and trusty have to face with all these issues, each one important for create a valuable, sustainable and long term supply chain food.

PRINCIPAL CHARACTERISTICS OF A GOOD SUPPLY CHAIN

CREATE A RESPONSIBLE VALUE CHAIN

RESPECT ALL THE INTERNATIONAL STANDARD

OPERATING LEGALLY AND TRUSTY

OFFER TO THE FINAL CUSTOMER PRODUCTS WITH QUALITY AND SANITARY CHARACTERISTICS

OFFER NUTRITIONALS INFORMATION

TRACEABILITY OF PRODUCTION PROCESS AND INGREDIENTS

Picture 6: Main criteria of a good Global Supply Chain

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2. How to find a good balance between good Customer Satisfaction and Supply Chain Efficiency?
Supply chain management is a critical arena in which companies try to find cost reduction opportunities, but is not the only objective. Superior management of supply chain facilitate marketing strategy and drive to superior customer value and satisfaction. In a global supply chain management, we can find challenges relate to customer value understanding and delivery: understand what are customer values, understand change in environment through supply chain, deliver value in new level of market and create ad hoc decision making processes to address these issues to customers. Today is important to consider customer as the starting point of our supply chain planning and strategy. A customer value orientation to marketing strategy concerns to understanding complexity of customer value perceptions, processes and monitoring value. Our objective is to reach the market demand through an efficient supply chain. What are the instruments necessary to achieve this strategy and what are their role in this process?

2.1 Marketing and supply chain as drivers for the creation of the demand chain management.
Marketing and supply chain competencies joint together, with the aim to create value in the marketplace, create a new business model know as Demand chain management. Demand chain design consist of understanding market demand and effectively meet and understand different customer needs. Demand chain management concern managing integration between demand and supply processes, managing the structure between processes and customer segment and managing the relationship between marketing and supply chain management. The recently approach of demand chain management capture the synergies between supply chain management and marketing: starting from the point of view of customer, the objective is to design the chain to satisfy customer needs ( Heikkila, 2002). The synergies between marketing and supply chain management are demonstrates. Supply chain management focus on match together supply and demand but is not capable to identify what customer consider as valuable and how they translate this 42

values in their customer values propositions. Supply chain efficiency itself will not create customer value and satisfaction. Today we have a customer value orientation; customer have an active role and values coincide with customer perceived preference. Its also important to understand what are the drivers behind the changing of perceptions, what are the forces who affect the way customers perceive values in order to segment customers, customized product and service and market the product in relation with the customer value proposition. It is important to integrate marketing orientation into the supply chain management as said in the Literature by Cooper et al.16 They point out attention on three marketing related processes: customer relationship management, customer service management and demand management. The demand management process might balance customers requirement with company availability and capabilities; also use key customer information to reduce uncertainty and improve efficiency in the supply chain. It is important for a supply chain to start from the customer, and is just the end user who drives the supply chain. A supply chain coordination is not possible without an adequate understanding of customer demand. We co-ordinate the whole demand chain, starting from the end customer and working backward to raw material suppliers. To reach an adequate efficiency and supply chain excellence it is important to compete not only on price as major driver of competitive advantage, but we have to differentiate the demand by products and services in order to respond to different needs of customers. If a company is able to link together its customers with supply chain operations and management, surely gain a competitive advantage and differentiate the delivery process to the final customer.

16

Cooper, Lambert, Pagh, 1997. Supply Chain Management: More Than a New Name for Logistics.

International Journal of Logistics Management, Vol. 8.

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2.2 The demand chain management.

The main goal of demand chain management is to develop a customer centric supply chain, it exist to serve the end consumer. Demand chain combines supply chain information with the analysis of customer interactions, transactions and demand for good/service to make market demand forecast. Demand chain management is defined by Selen and Solliman (2002)17 as follow: a set of practices aimed at managing and co-ordinating the whole demand chain ,starting from the end customer and working backward to raw material supplier Demand chain management consist of a an understanding of current and future customer expectations and market characteristics; and requires to turning the supply chain and take the consumer at the starting point. It merges the demand and supply chain aspects, Some authors (Kumar De Treville et al., 2004) criticise these view and the term demand chain, because they consider these term as a replace of the term supply chain. They also suggest, that in a responsive demand chains with an innovative demand, efficiency in supply chain is a trade off for customer. They consider important to maintain a distinction between demand chain and supply chain: they are two distinct entities and they propose as a unique concept that comprise both entities the definition Value chain. In the supply chain efficiency is the most important pillar to gain a competitive advantage. Supply and demand should be linked together, they overlapping but they should be two entities distinguished.

17

Selen W., Soliman F., 2002. Operations in todays demand chain management framework. Journal

of Operations Management, No.20, pp. 667-673.

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Christopher and Payne (1994) suggest that demand chain management is a concept with the aim to integrate demand and supply chain processes. For the demand process we consider all procedures at customer interface, who respond to the customer demand through a value creation process. Moreover they suggest to consider demand chain management as a superior level which includes all the activities that a company take in consideration to create and deliver a customer value propositions based on customer needs. In the article Demand chain management integrating marketing and supply chain management(2007) Christopher analyzed a conceptual framework for demand chain management, based on the literature reviews.

Picture 8: conceptual framework of Demand Chain Management.

We identified three themes in this conceptual framework: process, configuration, social interaction. Process manage the integration between demand chain and supply chain. Process is driven by business culture and in the process coordination IT and marketing play an important role. To provide a good level of product availability and low cost, customer relationship management and supply chain management could be integrated.

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Configuration is a dimension referred to the supply chain design, the need to manage the demand chain configuration. It is important to find the right configuration and think with a strategic point of view; the main objective are to align the customer needs with supply chain responses. Today one of the most issues related with configuration dimension of demand chain management is the responsive supply chains. Customers today consider important environmental sustainability and if the configuration of the supply chain pay attention on this issues, gain a competitive advantage from the point of view of customers. The main challenges to reach are: balancing customer satisfaction with efficiency in supply chain and to develop new customer value propositions into structural requirement of supply chain. Social Interactions consider and describe an exchange of information and communication essential to survive. A shared understanding of information and the ability to act and manage on the same information is fundamental from Marketing to Supply chain Management. It is important to know what are possible new customers, products opportunities, defined customer segments and last but not least share and focus on feedback in order to improve quality, performance and value for customers. Cooperation and interactions create a positive effect in customer value perceptions; manage customers between Marketing and SCM create incentives for all the parties. Khan and Mentzer investigated integration and cooperation between marketing, manufacturing and R&D and find that Integrations has two frames: interaction and collaboration. Interaction stressed the importance of information exchange and collaboration implies a common understanding, vision and objectives. Collaboration is directly related with a positive performance. A mutually relationship satisfying Marketing and SCM include firstly a level of basic exchange of information and communication essential for collaboration. A perfect level of collaboration is possible when Marketing and SCM implies a common understanding and final objectives and where we share only essential information and knowledge for a perfect communication.

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In all the literature anyone say something about how processes can be integrated. Rainbird (2004) suggest a model to join together and integrate demand and supply chain. Integration is possible only if processes can be reached through specific management characteristics, capabilities and technologies. Rainbird consider a integration process based on three layers: customer Buying cycle, demand process, supply process. In the Customer Buying cycle the first step, awareness, show the customer recognition of a need. In the demand process the first step is to create a segmentation of the market, define the target market and start with a market analysis. In the supply network we supervise the market information coming from the demand process. The second step is the evaluation phase. Customer evaluate the different options and the demand process forecast and segment customer on the base of different needs and requirements. This segmentation and these ideal customer value segmentation permit to the supply chain to offer a supply chain model tailored with the customer needs and request. The next steps are decision and purchasing, these phase are fundamental to check the supply and demand integration. Customer decide to buy a product/service and in this moment it is important to respect quality and availability of product but also to respect time to market. Demand chain consider as primary objective to maintain loyalty and profitable customers, to sell product/service with a clear understanding of customer need and want and not to make only sales. The last step in the customer buying cycle is the customer consumption of final product/service. In this moment the Demand Process offer in addition to the physical product the value preposition and possible post sale and cross selling activities. They collect important information, data and feedback to offer better customized product and package to customer with help of Supply chain process and inventory based on an actual and realistic analysis of the market. The process integration is fundamental as suggested by the literature, and Marketing role is to facilitate this integration: Marketing and Demand Chain Management facilitate integration by spread customer and market information and consider the total effects of marketing activities from an integrated perspective. 47

Picture 9: Demand and Supply process Integration.

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2.3 How to design the Demand Chain Architecture?

The burning question for supplier is How we design a perfect demand chain architecture? It is a difficult question mark, because we have to consider all different customer needs, characteristics and situations. Also, it include to understand the nature of demand and develop a modular demand chain structure. First of all is important to improve demand chain efficiency, reduce delays in information and material flow, and reduce inventories. All these issues if not considered in the right manner results in a chain inefficiencies. Coordination of marketing and SCM can create a superior customer value. Marketing needs the knowledge of other departments and redefine its responsibilities with the demand chain and supply process. Supply chain improvement start from the end customer and the concept of Supply Chain Management change into Demand Chain Management. Demand chain management combines marketing and SCM strengths and shift the focus to the customer and it designing customer centred supply chain. It understand the needs of customers for a good customer-supplier relationship and reliable information flows in order to reach an high level of efficiency. Demand chain management lead to gain competitive advantage, companies increase their profitability through product availability, delivery accuracy, flexibility and responsiveness by linking together customer and supply initiatives. Understanding customer needs with the right demand chain structure enable co-operation, demand chain efficiency and customer satisfaction.

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2.4 A global view of Demand Chain Management in the Food and Beverage sector.
To design a perfect demand chain, we have to consider all different customers needs and characteristics, understanding the nature of demand by linking together customer and supply initiatives. Understand customers and offer to them a convenient demand chain structure, create a good relationship and a final customer satisfaction. But today in the food and beverage sector, what are the most important customer needs? Now a day customer stress the importance of a good and healthy diet, also they want to know the origin of ingredients and raw materials and to be sure about the traceability of the production process. Customers are frightened about the possibilities to become sick and contract virus, diseases and infections through the contamination of food. It is important to direct customers toward purchasing quality and healthy products.

2.4.1 The consumer sensitivity to food ethic based on the product quality.
In the two thousand era, people consider important quality and not quantity. The attention to quality, security and to environmental impact increase. In the post modern society, wealth and consumption, as it were, hold an important role in people's lives: we see emerging of a new awareness of the social duties of each consumer. A feeling of interdependence, or a sense of responsibility towards others, supports the pursuit of pleasure or the satisfaction of individual needs that are the major drivers to consume . A growing number of consumers in making their purchasing decisions pay attention to the effects their choices can have on the welfare of others: producers, workers, consumers, animals or the environment. The choice of what to produce or the method of production can affect positively or negatively, on other countries, or on persons' or environment itself.

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Responsible behavior must take account of the influence that can have their consumption on these aspects. For example, purchases of fair products could be interpreted as searching by consumers to express greater social responsibility. Responsible consumption practices have to be related with the growing awareness by consumers of the great power of firms, increasingly large and increasingly present on a global scale. Companies have the power to determine the balance of the market through their strong focus and a strong market power: they have the ability to influence the training of the system of rules through lobbying and political pressure and power to influence consumer choices through advertising and promotion activities. Customers have the possibilities to influence, with its choice and behaviour, the market. They ask to have a clear information about product characteristics: origin of raw materials, quality, farming methods, security and environmental and social costs supported. Consumers feel powerless, and try to react on the market through choices and behaviors targeted and selective, we are talking now of powersumer (S. McGregor, 2005), but also outside the markets, and is an example of the considerable development over the past decade of nonprofit and nongovernmental organizations (NGOs). It outlines the role of consommacteur well as the French say, a consumer who is not satisfied by choices based only on value for money but also pay attention to the way a product is produced and distributed and the phases of post-consumer. The consommacteur18, activates a process of analysis through the 'entire economic chain, which leads him to choose between different possible forms of consumption.

18

This expression begins to be used in Italy and is translated with the word "consumattore". This

definition defines a person sensitive to their food consumption and in his choice goes beyond the simple purchase of a product. Furthermore, this type of consumer is also concerned about what happens to the product once it becomes waste (http://fr.wikipedia.org/wiki/Consommacteur). So the word consumattore compared the consumer to the three different aspects of responsible consumption that is the critical consumption, and responsible alternative.

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He becomes a responsible consumer because it includes in its considerations, the assessment of the effects that their consumption choices have on others people later.

TYPE OF CHOSEN CONSUMPTION

TYPES OF PRODUCTS AND CHOICES RELATED TO CONSUMER Products contained in the prevailing ecological and environmental (green products): - Organic products - Non-polluting products - Pack a low environmental impact Products with predominantly social content and / or cultural - Products Trade Fair - Typical products - Ethnic Products Products (goods and services) variously connected to the previous size: - Products related to a good cause (Cause Related Marketing) - Ethical Investments Boycott (collective choice) Products / brands unwelcome (individual choice)

NON CONSUMPTION OTHERS CHOICHE

Overall reduction in the level of consumption - Reuse of assets - Recycling of materials consumption

Table 2: patterns of responsible consumption, ( De Luca, 2006).

Globalization create an heterogeneous system of values and behavior in the food and beverage sector. People start to pay attention and caution about what they eat and drink, they start to consider important the values intrinsic to a good feeding. Security and genuineness are essential objectives, this is the reason because a large segment of consumers now a day prefer to feed with product organic and protected, biological and fair trade. 52

In the last years, due to the proliferation of diseases and epidemic infection in food and agricultural production, the food have adopted an important position in the mind of consumer, more for the point of view of food security. Food products must answer to market and consumer rules: on one hand in terms of hygiene, transparency and traceability, on the other side in terms of origin, cultivation methods, production processes, packaging and distribution, nutritional properties, new trends and values (ecological, ethical, cultural, social, etc..). Talking about traceability, all European Union Member States can rely on a unitary disciplinary system, organized on principles and objectives, able to assure to European consumers high levels of protection and safe food products throughout the process "by farm to table ". The characteristic features of the system, in which the European Food Safety Authority (EFSA) plays a key role, are: controls along the supply chain; manufacturer accountability , the traceability of food, feed and food ingredients; warning systems on food hazards and consumer information. Each consumer gives importance to all of these different aspects, according to the evaluations of each one, buying behavior will be different. The importance that consumer gives from the consequences of their consumption choices of third parties, may translate into different behaviors (Brinkmann, 2004): A choice of "good buying" by buying products that pursue some specific objectives, the products of fair trade or organic products, or produced without the use of child labor or without compromising the safety of workers; A"negative" choice and avoid buying products which are not meet the characteristics of ethical consumer; A choice to boycott products of companies that are engaged in manufacturing or trading policies not shared ethical;

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Keeping an attitude more complex, and takes into account all three approaches discussed above.

A different perspective, but complementary to this is proposed by Gesualdi (2004), according to which responsible consumption is express by three main types: critical consumption, alternative consumption sustainable consumption.

Consume in a critical manner means not choose only according to price and quality, but depending on the choices of producers. An asset might be in economically convenient with a perfect quality, and respect all existing standards, but the consumer may not appreciate it if evaluate incorrect the behavior of the company that produced it. You can have an excellent product but the company that produces it could make polluting activities or exploit workers. These are behaviors that consumers can not appreciate and do not want to support. During purchasing, we evaluate the company behavior: we reward companies that behave well and we punish others. Firms understand what are the behavior appreciated by consumers and they adapt to new social and environmental choices. In the handbook of critical consumption, critical consumption is defined as a behavior of choice that we carry out each time we purchase an asset. Each time we go to the supermarket, we decide what products we want to buy and what products to dismiss: in this way we highlight to the firms what behaviors we appreciate and those to sentence. The alternative consumption is defined as a form of consumption organized outside the traditional economic circuit, with the objective to contribute to state equity and solidarity with coherent standard of choice and values. The sustainable consumption consider as primary objective the environmental causes: today the current rate of consumption is not sustainable, we have an human health. 54 excessive use of non renewable resources in a short time, that cause pollution and damage to

To reach a sustainable consumption would be better to: reduce consumption and take care of the essentials, recovering the same object until it is deployable and recycle everything that can be regenerated, repair assets and do not throw them at the first damage, and finally respect other people's work and the environment.

2.4.2 The food and beverage markets.

Analyzing a Censis/Coldiretti research, based on Istat data (Censis/Coldiretti, 2010) about customer habits on food consumption in Italy, the behavior of consumers bind with their taste, heterogeneous and changeable, and with the characteristics of point of sales and options to choice. Today, they not consider in their options of purchasing only chance of buying, durability of products, packaging. Its behavior led to try to investigate about quality, ecology, ethics, respect of right of labor, pleasure, health and diet. In a food product consumer try to find satisfaction to multiple needs: he point out attention to food security, in particular to sanitary and nutritional characteristics, to environmental sustainability and employment of local and renewable resources. Employment of natural products and procedures that respect the life conditions and animals farming, valorization of rural production area and the local mores. We have analyzed a significant consumption of DOP and IGP products and a growing of biological segment: this means that customer pay attention to the production process of product that consume, to their origin and nutritional and value contents. Now a day consumer appreciate life style that avoid waste and sustain environment. They privilege brand product, because they know and they are sure if this company provide attention of social and ethic issues and they entrust in the quality of a brand (Fabris, 2010). The international economic crises of these three years period doesnt contain consumption and consumers never give up to quality food product. They spend less but they spend better: the rule is respecting the others and the environment but not give up to quality (Istat,2010a). The present consumer profile have complex and varied needs and requirements; is a person selective, exigent, curious and competent, that pay attention to quality. 55

He is available to pay a premium price for a quality product that respect environment and right of worker ( Fabris, 2009). Consumers today demand quality and typical product. The quality is perceived through the external information from advertising or word of mouth, and through a series of indicators intrinsic (taste, appearance, health) and extrinsic (brand, product origin) and, above all through all those attractive elements, such as convenience, shelf life and ease of use. (Giuca, 2010a). Typical food is important for consumers, they associate different meanings to a link between product and territory: this link can refer to geographical origin of raw materials, in the location of processing activities, storage or processing methods of the tradition and in the culture of the areas of origin (Nomisma, 2001; Pencarelli, Forlani, 2006). The territory is synonymous of identity and security, and allows the shortening of the chain, with products processed and marketed to local structures (shops, restaurants, schools). Today the global market offers to us impersonal products, with indicative labels of generic products (such as 100% Italian), short of a typical identity certified and traceable. The consumer is particularly sensitive to ethics in the food industry, especially on product quality, strong of recovery of traditions related to the territorial origins or identified in the certification or inherited from a tradition of production (Fonseca, Ruggieri, 2009). The attention of companies and marketing about the area of origin of a product, has been growing with the legal recognition of DOP and IGP designations of origin. The recognition of geographical indications and designations of origin for agricultural products is occurred with the CEE Regulation 2081/92, repealed and replaced by CE Regulation 510/2006. The products of protected origin are perceived as elements of high quality and very attractive for consumer: their natural method of production, the environmental value, the absence of genetically modified organisms (OGMs), the absence of residues of harmful substances and the absence of food coloring and chemical compound packaged goods. 56 in

The market trend for protected products is driven by the desire to look at the cultural food and wine origins, to the importance of healthy and environment and to all those requirements with a strong ethical and social component as enhance and promote local resources. The consumption of these products testify the willingness of consumers aware of and sensitive, to spend less but to looking for quality.

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3. Supply Chain Responsibility: a factor to gain competitions.

A global supply chain operating legally and trusty for create a valuable, sustainable and long term supply chain food is required to: respect international standard, offer to the customers products with quality and sanitary controls, offer nutritionals information and traceability of production process and ingredients, ensure good working conditions, security and respects of standards of labor. Companies are submit to strict controls and regulations especially in the food sector, because is strongly correlated with health care of consumers. They have to respect standard of security, regulations and sustain strict analysis to pass Control and Certification allowed by local authority certify . Moreover now a day, Consumers pay attention to Supply chain responsibility and basic theme such as environmental, ethical issues and implementation of corporate social responsibility and green supply chain. Customers use these issues and basic theme as parameters to evaluate company action and procedure and to establish if they respect environment, social and ethic causes important for their personal moral and ethic point of view.

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3.1 The responsible consumption.

With the spreading of responsible consumption behaviors and the request to the companies by consumers of the environmental compliance of which we spoke in chapter two, grew the interest of economists, sociologists, scholars of marketing for the responsible consumption. The ethical consumer is defined as a socially responsible consumers whose purchases of goods takes into consideration various aspects such as the degree of utility, environmental impact and social background (Chiarini & Associates). The consumer is looking for a social content in the products, buying a good check mode of production in which attention is given to environmental protection, respect for human rights, the exclusion of child labor. The FAO, in its definition of responsible behavior, refers to moral principles or rules that lead to actions believed to be correct and fair. A less general definition that we consider is that the ethical consumer (or responsible) is who buying, among other reasons, research also the moral satisfaction, defined on the basis of a subjective set of values.

3.2 The responsible consumer.

The social value embedded in a product to be marketed, can play an important role in purchase decisions, and for certain consumers the presence of this attribute may also be sufficient to recognize a price premium. A company could leverage a social process of production to meet consumer demand sensitive to these issues, or in other cases to justify a higher price than its competitors, in order to be able to cover any increased costs of production, related the particular nature of a production process. The responsible consumer by his choices and he decides what buy, or what not to buy, while taking into account a multitude of aspects. The purchasing decisions tend to involve more and more specific attributes of the goods and responsible consumption fits fully in this trend, helping to create a category as possible to differentiate the products. Taking advantage of this trend, we refer to Lancaster (1966) who proposed a new approach to demand analysis focused on the features of goods in the 60s '. 59

According to the approach of Lancaster is appropriate to consider the product as a set of characteristics that may be present of varying intensity, or none at all. And 'by the utility that the individual consumer assigns to these characteristics that determine the value of this asset. The product itself is not important, but are the features that it owns and that are evaluated according to the scheme of formation of subjective preferences of each. The consumer who must make choices or want to purchase on markets characterized by high differentiation of the offer should acquire a wealth of information and this leads to the acquisition of this information, the costs of its development and to cope with uncertainty resulting from lack of information on the market. These aspects of product differentiation are also relevant in the case of responsible consumers, evaluating ethical attributes of a product. The problems related to information of the product and determine the consequences on the markets is helpful to reflect on the contribution of Nelson (1970) that distinguishes the goods into three types: - Search goods - Experience goods - Credence goods The classification of Nelson refers to the individual's ability to recognize the quality of goods. The quality of some products can be detected by consumers prior to purchase and this is called search goods, if the quality is known only after the goods were purchased and consumed once they are experience goods, and finally if the quality cannot be determined even after consumption, this is the case of credence goods. To make your choice in the food industry, the consumer must know the varieties on the market and make a selection. For experience goods shall be determined a primary form of asymmetry information which may give rise to moral hazard behavior and situations of adverse selection and, in some cases lead to market failure. Since the consumer can determine the quality with the use of the property, you can remedy a moral hazard by implementing behaviors that "reward" and appreciated the products exclude those unpleasant, considered unsuitable or evaluated negatively. 60

The asymmetric information more insidious and difficult to remove the attribute relates to the consumer confidence that remains unknown even after using the product. The consumer cannot trust possible information, assurances or guarantees provided by the manufacturer. The only forms of possible remedies in these cases are based into public intervention that may take different forms, ranging from imposing restrictions or obligations in following rules or in give production or not certain characteristics to the products, the establishment of minimum quality standards , the determination of forms of certification, which may be optional or mandatory depending on the relevance of the attributes concerned, but in any case must be associated with a system of controls. The ethical attributes belong to attributes that concern as much as trust the finished product itself affect the process by which the product was produced, and specifications of the production process. The finished product can be ethically indistinguishable from other products entirely equivalent, if not for the ethical nature of the production process that generated them. The ethical consumer, in addition to collecting numerous and complex information must also assess the degree of reliability and trust of this information. As demonstrated by several studies, the lack of specific information about ethical products is one of the main causes that prevent the growth of ethical consumption in terms of interest shown by consumers (Harrison, Irving, Rayner, 2002). Greater information on 'ethics and the relationship between ethics and economics would increase consumer awareness to that directing the sense of their purchases (McGregor, 2005). The deeper social consciousness of the consumer, the more it has access to information on production methods and origin of products, more preference for ethical products ( Lyon, 2006). The information itself is not enough: ensure that the "ethical dimension" of a product can influence consumers, must be properly presented and credible, understandable, and accompanied by guarantees, in which consumers can store complete trust (Auger P., et al., 2003) . If companies are increasingly looking to communicate outside of their social responsibility consumers, although interested in the ethical aspects the attitude of the company as a result of wanting to make a purchase, but easy to perceive the risk of a deception (Fernholm J., 2005). 61

In this regard worth to recall what was stated in the document Green Paper (European Commission, 2001), where the European Union draws attention to the need for the forms of communication, of social and ecological attributes of products are certified, and provide audit continuous according to agreed standards. With the Communication of 2 July 2002, The Commission also recognizes the utility of corporate social responsibility (CSR) as a tool to support the community development, but keeps his distance from several instruments, such as management standards, labeling and certification, due to market distortions. The great amount of information to be acquired, and its complexity, the presence of various forms of information partly overlapping, the different degree of reliability of different sources where information itself is coming from and / or is ensured. Typically a good reporting process, in order to ensure the consumer, should provide four phases (Codron et al., 2005):

definition of a standard; implementation of the standard, which includes monitoring and inspections; control requirements; communication of the observance of standards to consumers.

As regards, generally, the ethical market does not already exist in Europe a ad hoc legislation to regulate the marketing of products obtained according to ethical standards, most companies claim spontaneously or self-certify compliance with certain standard. Belgium was the first country in 2002 to set up labeling for goods produced according to international standards set by the ILO that provide for the checking compliance of these standards by government agencies. In 1997, the U.S., has been formed of 800010 SA, an international standard that certifies compliance with the rights of workers, following the criterion of third-party certification bodies. In September 2005, the number of certified companies in the world resulted to be 880 and Italy with 36.8% represented the country leaders.

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This

over

information

and

the

difficulty

in

establishing

relationships

trust between customer and supplier are unusual in today's markets: product differentiation extremely driven and productive chains with the participation of many stakeholders in scattered localization increases the opacity of the production process and the true nature of the good that results. However, if a 'business-oriented society, and is recognized as such by consumer is willing to place a high degree of confidence thanks to its nature of business that pursues not only the profit or individual interest (Borzaga, Sanctuaries, 2000). If consumer-oriented companies responsible for activating effective communication strategies, consumers tend to place in these companies a greater degree of confidence than the others and this can become a more competitive element that plays in favor of the company.

3.3 The responsible, critical and ethical consumption.

The recent literature on the range of consumption defines a consumer like a mature, responsible, demanding and critical individual. The critical nature of the consumer is a major discontinuity with the past. Being critical in consumption means taking care in choosing the product or brand or to issues that go far beyond a mere enjoyment, the ability to cause immediate satisfaction. Individualism is the mainstream of society, which is embodied in a continuous search for new forms of sociability and a growing sensitivity to the world of ethics and duty. Altruism and social sensitivity are one of the most important phenomenon of social change in modern society. The emergence of critical and ethical consumption entirely take part in this new social trend. The theme of Social Responsibility of the producer takes on significant importance. The critical consumer, in fact, requires an ethic of production that takes the form of eco-friendliness, attention to economic issues and social development of third countries that provide the raw materials or the occurrence of the production relocation, respect and attention for the possibility of reuse, recovery, recycling and energy saving. Purchase and consumption cannot exhaust the relationship with the producer, but represent two moments of a process far more extensive and complex, a relationship that 63

substantially affect, in the present, the quality of life and, in future, the existence of many subjects. Responsible and critical consumer at the time of his choice of consumption, the dimension of accountability is accompanied by the traditional quality and price dimensions: the product can not only be ethical but must maintain a good quality and competitive prices.

3.3.1 The choice of consumption: the instrument of ethical consumer.

The trend of responsible, critical and ethical consumption, reached a massive degree attracting even more the attention of businesses, political institutions and the media. For the food industry this new trend of consumption has a significant importance. The ethical consumer we call critical, responsible, or involved has a substantial weapon against manufacturers and distributors: his consumption choices. With these choices he sends signals, either positive or negative, to businesses. The act of purchase, to this end, considered a vote and the value of choice and participation. The company is, therefore, have to do its part by adopting a system of social values that regulate the choices and actions on markets and ethical conduct in the management of business relationships. With the development of the phenomenon of globalization arises also the need for this system of values and code of conduct is more consistently and uniformly implemented in all areas of the world where the company carries out its industrial activities. The ethical consumption leads to a sustainable supply chain, it is important to ensure the quality for the consumer, ensure health and hygiene standards, respect for the health of individuals, respect the environment and our eco system. An ethical and responsible supply chain is needed to keep pace with consumer behavior and choices, and to support the image and the performance of companies in the eyes of stakeholders. The ethical consumer performs its consumer choices based on certain criteria and guiding principles, which must be respected and taken into account throughout the supply chain:

64

 reduce the consumption and purchase a product only if it is really useful; preference for products produced using techniques with low environmental impact and energy consumption; carefully read the label, preferring to equal price, the product with more information; find out if the product is manufactured exploiting workers or minors; preference for local products and handicrafts; inform you about the behavior of the producer. While the points in environmentally preferable products and read labels on products derived from the environmental sensitivity and the need to reduce the information asymmetry that characterize the consumer-company relationship, reduce consumption only in case of need is a side of the peculiar ethical choices. The ethical consumer prefers products that can be reused, with containers made of recycled materials or that may be an opportunity to enable local employment. Prefer local produce and artisan is peculiarity stems from the ethical consumer and to enhance individual and ethnic differences, the rediscovery of the traditions that allow differentiation and not to close compared to other communities. In the food system, there are peculiarities in the application of ethical principles Because food satisfies a basic need and is more perishable than others, food is culture and has a high symbolic value. The food scandals (Flour to feed chickens to antibiotics, etc..) have made risky food consumption and the consumer is interested in the living conditions of farm animals. The use of biotechnologies, particularly OGMs for food purposes have raised ethical questions about the legitimacy to intervene by force on genetic heritage of a living being. The operational tools that the ethical consumer have at his disposal to achieve its goals of ethical consumption can be: boycotting. The critical consumption allows the consumer to achieve through its purchasing decisions the objective of more balanced and equitable redistribution of wealth in society and among developed and less developed countries. The other tool is that of purchasing groups, which are sets of individuals who decide to come together to buy wholesale foods and of common use to be redistributed between 65 critical consumption, the purchasing groups and

them. The main peculiarity of these groups are in constant contact with manufacturers and purchase direct brokerage firm that prevents fair and realizes an economic benefit for the producer and the consumer. The last available alternative is that of the boycotting which can be consciousness and strategic. The first responds to the individual need to make purchasing choices consistent with their ethical principles. The boycott strategy was undertaken by organized groups of consumers that the company suffers a decline in sales hit 2 to 5% as this percentage is sufficient to influence the behavior of companies. In some situations, the limitations imposed by the level of personal wealth could force consumers to make act of buying the ethical appropriateness of the price. The attitude of the ethical consumer faced with the choice of different categories of product and service that have an ethical connotation have two possible alternatives: a consumer fundamentalist that consistently chooses types of ethical products independently of that which is the situation of the price; providing a pragmatic choices of consumption and savings which also vary in relation to the product price and income of which consumer has. On goods such as food, the probability is greater ethical reasons prevail, and therefore more substitutable in the context of brands, it becomes important the information on the behavior of firms.

3.3.2 The concept of sustainability.

Another important concept linked with Supply Chain is sustainability. The term Sustainable Development is analyzed for the first time in the report Our Common Future which is a document issued in 1987 by the World Commission on Environment and Development, this committee and was desired by the United Nations in 1983 in order to respond to a growing concern about the accelerated deterioration of the human environment and natural resources, as well as the consequences on economic and social development. It was defined as: "Sustainable Development and development that meets present needs without compromising the ability of future generations to meet their own needs." This document from the late 80's then puts the responsibility in light of present generations towards future generations as the primary ethical principle. 66

Following this initiative, the United Nations General Assembly establish in 1992 the Commission on Sustainable Development, as a functional member of Economic and Social Council of the United Nations. Thereby giving the sign that the Development is important for the sustainable future of the planet. We have three different types of sustainability: - Environmental sustainability - Social sustainability - Economic sustainability. For Environmental Sustainability we refers to a behavior to maintain quality and reproducibility of natural resources, therefore the company must develop keeping within the loading capacity of ecosystems. The utilization rate of renewable resources should not be higher than their regeneration rate, and that the removal of non-renewable resources should be compensated by the production of equal amounts of renewable resources can replace them. Careful management of natural resources and necessary: preserving non-renewable resources and maintaining the integrity of sensitive ecosystems such as rainforests, deserts and oceans and preserving endangered species. The Social Sustainability is understood as the capacity to ensure welfare conditions then safety, health and education equally distributed in the population. This theme then binds the Corporate Social Responsibility. A major social problem, for example, are the food resources, which are not well allocated compared to a world population continues to grow. A large proportion of people living without adequate nutrition. The food shortages in developing countries is a complex problem due to agricultural , climatic, economic, political and cultural factors. Moreover, a large amount of food produced are thrown due to the inefficient allocation. Sustainable Development would like you did before this imbalance in food distribution. The Economic Sustainability and understood as the capacity of an economy to support a certain production level indefinitely.

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3.4 The Corporate Social Responsibility and ethical market.

The growing interest extended to ethical aspects by consumers, resulting in some cases and under certain conditions in a concrete application market for these attributes, capable of shifting the criteria of competition between firms. In some market segments, including food, is advantageous for companies to act on this lever. The CSR is especially interesting because it shows how companies are alert to changing demands of consumers and of society towards issues such as sustainable development, and critical consumption. In 'the EU social inclusion and corporate social responsibility is a topic that is generating growing interest and attention.

3.4.1 The Corporate Social Responsibility in Europe

The comparison about the European Corporate Social Responsibility begins in 1993, thanks to the call of the Commission President Delors to companies to participate in the fight against social exclusion. The debate has been slow to take off later in the early 90's, but with new vigor within the EU in coincidence with the extraordinary Council in Lisbon in 2000. The Council on that day outlining a new strategic goal for the Union in order to strengthen employment, economic reform and social cohesion in the context of knowledge-based economy. Among many aspects taken into account is considered the theme of social reform in the context of a positive strategy that could combine competitiveness and social cohesion. The text of the document encounter in Lisbon meeting says "The Union is now set itself a new strategic goal for the next decade: to become the knowledge-based economy in the world, capable of a sustainable economic growth with more and better jobs and greater social cohesion ". Among the strategies to reach this goal we find to modernize the European social model, investing in people and struggle social exclusion. The European Council, finally address a special appeal to the sense of corporate social responsibility regarding best practices on learning throughout life, work organization, equal opportunities, social inclusion and sustainable development.

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The Green Paper presented by the Commission July 18, 2001, indicates that a greater number of European companies are promoting strategies of social responsibility in reply to a variety of social, environmental and economic pressure. The purpose is to send a signal to the various stakeholders with whom they interact, in this way, companies are investing in the future hoping that their voluntary commitment could contribute to increasing their profitability. In the Green Paper is made explicit and clearly defined the concept of Social responsibility as "the voluntary integration of social concerns and ecological concerns in their business operations and in their relations with stakeholders ". Despite the responsibility and the main objective of a company remains to generate profits, social responsibility becomes as well as policies for the quality not only a cost but an investment, so "we need to encourage companies to integrate in a active manner the sustainable development activities both within the European Union and worldwide". It is difficult to assess exactly what determines financial returns of a company and what role have the socially responsible behavior. Research (Industry Week, January 15, 2001) show that 50% of the average performance of socially responsible companies can be attributed to their social commitment, while the other half is explained by the performance of their sector. As mentioned earlier, consumers are placing more trust in companies committed to social responsibility. At the same conditions (product and price offered) we can expect that a socially responsible company registers higher benefits because its attitude to environmental and social issues can be a credible measure of management quality.

3.4.2 CSR among corporate strategy.

Today it is important to identify a model of company management that creates, in addition to economic value even social values through the adoption of ethical and social responsibility instruments. As noted Hinna (2005), the orientation toward CSR is different depending on whether you refer to profit-oriented companies, to nonprofit organizations or a public institution. In Profit-oriented structures the direction to CSR

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responds to the need to present themselves to consumers and investors as a socially responsible company with respect to environmental issues, sustainable development and ethics. In a nonprofit structure and in a public structure goal are different. A nonprofit organizations was established with the goal of being useful, but it is important to let us know what you realize how socially useful and , how useful for this purpose are CSR instruments starting with the social budget, which allow it to collect consensus among the community of reference. CSR, however, regardless of the type of structure in question, fulfills a common function which is "to improve the management of consensus among stakeholders within and external to the structure" (Hinna L., 2005). The tools used to move towards a more socially responsible management are varied and continuously evolving. The main tools are: Paper of corporate values; Codes of ethics; Social Balance and environmental balance; Social certification SA 8000; Cause-related marketing.

The Paper of Values is the first tools of social responsibility which endows company to publishing guidelines of its own corporate vision. It represents the public commitment of the company to "pursue ethical goals in the fulfillment of the mission "(Hinna L., 2005). For example, the charter of values proposed by the European Institute for the Social Balance (IBS) sets out some principles / values that the company must follow in his work. The nine points of the IBS papers are: 1. the centrality of the person, respect for their physical and cultural diversity and respect for the values of interrelation with the other; 2. the enhancement of human resources through tracks of professional growth and participation in professional business purposes; 70

3. respect and protection of the environment; 4. attention to the needs and legitimate expectations of internal and external stakeholders to improve the climate of membership and the degree of satisfaction; 5. the reliability of systems and management procedures for the highest security of our employees, our communities, the environment; 6. efficiency, effectiveness and cost management systems to improve levels of profitability and competitiveness; 7. the constant effort in research and development to facilitate and drive, in pursuit of the strategic plan, the maximum degree of innovation; 8. fairness and transparency of management systems in accordance with standards and conventions in force in respect of the internal components and external to the enterprise; 9. the interrelationship with the community and its representative components aimed at improving the quality of life. The charter of values for each firm is a set of "commandments" that become an integral part of the role and objectives of the company, directing the behavior. The code of ethics is a document prepared on a voluntary basis where they are clarified "the mission of the company, the ethical principles that must appeal to this, the basic rules in the relations between the company and its stakeholders, the ethical standards of conduct and penalties applicable to infringements of ethical principles" ( Mariano, 2005). The task of the code is to establish rules of conduct for employees and the company, both in their mutual relations and in those with external stakeholders. There is a further feature of the code of ethics: the "moral legitimacy of the company, or the support of his reputation in the eyes of stakeholders" (Colle, Sacconi, 2005). The code of ethics is generally structured in five levels (Mariano, 2005): 1. The ethical and social principles that interpret the role of and indicate the correct ways to implement it; 2. ethical standards that must be the basis of the reports with the various stakeholders; 71

3. ethical standards of conduct; 4. The penalties provided for violation of the Code; 5. The activation tools. An analysis conducted by the OCSE in 2000 on a sample of 236 International codes shows that the major themes covered in the code of ethics are working conditions, in 60% of the codes examined, environmental protection (59%), the relationships with suppliers and consumers (47%), corruption (22%), competition (20%) and transparency of information (18%) (OCSE, 2001). The social balance is a document that companies, both in in the field's of profit and nonprofit organizations, draw on a voluntary basis "to account for their behavior stakeholders, entertain which report the results The and effects of relationships differs from with that them" (Vermiglio, 2005). social report

wishes to point out the economic value created by the investment business also in terms of social responsibility. The instrument represent a measure of ethical enterprise, and legitimizes the role, especially in moral terms, in the eyes of communities, to affirm the concept of enterprise as a subject pursuing their economic interests while contributing to improve the quality of life of members of the society in which it is inserted. So companies use them "to communicate, to be accountable, but also to plan and manage social relations ... they see it as a means contributes to enhance an intangible asset of primary importance: the reputation, which arise from consent, trust and legitimacy "( Vermiglio, 2005). In particular, the Social Report should (Casotti , 2005): enable the firm to understand its role through their activities in civil society, an instrument that comparing what has been achieved with the existing social needs. Provides information on the achievement of social objectives, demonstrate that the objective of the firm, not only to create profit, but also to provide added value to the community and finally to reflect on the company to improve the quality product and 72

service, the relationship with consumers, safety in the workplace and the environment. The environmental balance, however, is the instrument through which they are describes the main relationships between the company and the environment in which they are quantified using specific indicators of the effects on the territory of their own activities. This last has in common with social balance the fact to address to stakeholders (Mariano, 2005): politicians (national and international legislators); internal public (management, employees, shareholders); the market (competitors, customers, suppliers, consumers' organizations); financial and public subjects (local people, organizations environmental association, labor organizations, media, scientific institutions, insurance companies and banks). The ethical and social commitment of an enterprise as well as being demonstrated by its Code of Ethics and / or Social balance, may also be certified. The SA 800019 is an international certification standard of social responsibility and was founded in 1997 by the CEPA20, to provide investors and consumer information tools to analyze the social performance of companies. Also in this case you join on a voluntary basis but the implementation of the SA 8000 standard is very different from codes of ethics developed by companies, in fact provides a external audit performed by an accredited third party that checks compliance with the standards. This certification concerns the respect of the Universal Declaration of Human Rights human conventions of the International Labour Organization (ILO), the United Nations

19

SA 8000: SA it means Social Accountability.

20 CEPA means Council on Economic Priorities Accreditation Agency. Web site: www.cepaa.org.

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Convention on the rights of children and aims to ensure that no discrimination against women are implemented. More specifically, the SA 8000 provides for compliance by the company of 8 social requirements: 1. child labor is prohibited, and if the company they had relied in past must commit to providing children the opportunity to repair the participate in rehabilitation programs; 2. there shall be no forced labor, that is obtained under duress or but not voluntarily offered; 3. the work environment must be safe and healthy; 4. must be guaranteed the right to freedom of association and collective bargaining; 5. you do not have to implement forms of discrimination as to race, class, nationality, religion, disability, age, sex, sexual orientation, trade union, political opinion); 6. are forbidden the disciplinary procedures which provide corporal punishment, mental and physical coercion, verbal abuse); 7. the company shall comply with the work required by the laws; 8. salaries must meet the minimum wage. Certification by an independent organization "shows that the organization satisfy the standard of social responsibility, through a mechanism similar to that of the quality management systems ISO 9000 and ISO 14000 for the environment "( Mariano, 2005) we discussed in the paragraph above. This standard presents a high degree of innovation compared to other standards, as the involvement of third parties does not end with the certification bodies, but continues with the "NGOs (nongovernmental organizations), independent bodies, rooted in the area and able making judgments on respect for self and values of individuals in the company "( Lepore, D'Alesio, 2004). Another important aspect is that compared to other standards, in this case, verification does not occur solely through examination of documentation and records, but "through 74

the questionnaires, interviews, focus groups, especially in considering the difficulty in obtaining precise answers only by examination of the documentation. Conformity to standards of SA 8000, finally not only affect internal organization of the company but also upstream of it. The mechanism of selection of suppliers is intended to enforce the ethical and social requirements principles throughout all the supply chain. Although suppliers are required to be certified must work to meet the requirements of SA 8000. After this excursus on some of the most important instruments of corporate social responsibility we can close the speech with the words of Hinna: "With the CSR ideally has the possibility to increase the budget surplus with an intangible assets that is the consensus and the confidence of the people. An item that is highlighted and to account only when the negative is lost "(Hinna., 2005). The last instrument that here we deal is Cause related Marketing (CRM) defined by Varadarajan e Menon (1988 ) as CRM is the process of formulating and implementing marketing activities that are characterized by an offer from the firm to contribute a specified amount to a designated cause when customers engage in revenue providing exchanges that satisfy organizational and individual objectives. This definition is now internationally recognized and identifies in the CRM a business activity to support a social cause in which the donation by company, is conditional to the purchase of a product or service by the the consumer. The distinctive elements of CRM are then summarized as follows: the donation is subject to the purchase of a product or service by the consumer, is to use marketing techniques to support a social cause; between promoter and non-profit organization there is a formal agreement, aimed at achieving increased sales. The basic elements that characterize the definitions of CRM concerning the contribution to a social cause and the pursuit of commercial objectives. The Cause Related Marketing is proving ever more a strategy of successful marketing for businesses of any size and a valuable tool growth for nonprofit organizations. CRM success is due to the ever greater demands of consumers for a direct involvement of enterprises in, which is awarded with a series of important advantages: a better image and greater reputation among customers, suppliers and the financial world. 75

CRM is not only an opportunity for businesses, use to improve its business performance, but also the way to establish lasting ties with nonprofit organizations derive from this partnership will benefit valid to make socially useful projects.

3.5 Supply Chain Responsibility.

Supply Chain Responsibility refers to a responsible source to manage their long term relationships with suppliers in a responsible way. To develop this constructively influence is possible to use several incentives. Companies need to integrate Supply Chain Responsibility in their regular purchasing practices and involving management and employees to build a social and environmental performance objective. Supply Chain Responsibility is a topic of growing importance for business: in food industry production is largely outsourced, and often takes place in developing countries. In these countries legislation may be poor or ineffective and we have to ensure acceptable standards of quality and working conditions. Companies in their supply chain want to reach greater efficiency, and they have to deal with rising costs of raw materials and pressures on prices to consumers. In order to develop sourcing strategies and efficiency, is in the companys interest to include and evaluate: product quality and safety, continuity in delivery, long term efficiency and to ensure protection of intellectual property. If in the supply chain persist low standards of business, companys overall efforts to manage its tasks in a responsible way can be disparaged. In all these processes is important the role and the shape of government. To ensure that responsible business practices must be respected through the global supply chains, the presence of government is important and fundamental. The involvement of governments ensure that local laws and working conditions are respected. The most important role is always and anyway of the company: they have to manage their supply chain responsibly, working on a collaborative manner with suppliers to improve social and environmental performance. A close cooperation with suppliers may cover different tools: training on management system, on-site visits, assessment of suppliers practices. 76

3.5.1 Corporate Social Responsibility in the Food Supply Chain.

Companies applies CSR issues in their supply chain and integrate their standards in their daily operations. From a supply chain perspective, CSR is not only synonymous of a ethic business, but cover dimensions such as safety, working conditions, human rights and the environment (Carter and Jennings,2004). Companies achieves CSR for a variety of reasons: to provide leadership, for react to threats due to brand, marketing, advertising and innovation. In the last decades globalization and sustainable development have enhanced the development of CSR. Talking about a Corporations Supply Chain we mean a series of actors ( suppliers, customers, logistic provider). The implementation of CSR in the field of Supply Chain has been evolved in the last fifteen years and have a great importance in the decision making process. Especially in the food sector, CSR rise importance due to the complexity nature of a food supply chains. The eight major trends are: health and safety; labor and human rights; procurement; fair trade; community; environment; animal welfare; biotechnology.

In the food industry we struggle with safety and health challenges. Every day we have to take care about a fear of disease and terrorist attack. The only instrument available to avoid these challenges is food traceability: it helps to avoid problems in the industry and to take security and sanitary controls. Healthy lifestyle nowadays is another important issues in communities and in the CSR supply chain: companies must support healthier 77

eating by offering new food with suitable and detailed labeling, and a range of healthy food, full of nutritional and biological ingredients and principals. Labor conditions, child and forced labor, health and safety on working place, discrimination, discipline and compensation are issues related with labor and human rights in the food supply chain. Food supplies involve manual, laborious and dangerous labor work; often features by labor oversupply, poor working conditions, low salary and labor migration. Labor problems in the food industry it is not characterized by unauthorized workforce and child workers; but we are dealing with slave labor. It is also required that workers must aware and training about pesticide, poisoning, operation of the equipments and sanitation programs. Problems and impropriety in the procurement process can create problems in the final mission of CSR policy. Favoritism, preferential treatment are not permitted in the procurement process; its not allowed to influence buying decisions and corrupt suppliers. The institute for Supply Management in 2005, defined a standard about ethics area of Social Responsibility about supplies. They establish the use of confidential information, conflict of interests, impropriety, influence, responsibility of employer, conduct and professional competence. In the last five years has taken hold in the public opinion the fair trade topic. Fair trade is a movement that take care about organic products and responsible practices. Fair trade labeling nowadays are in a powerful stage: food retailers lead effort to promote and support fair trade products, but organic products clash with the objectives of food industry to reduce costs. Coffee cultivation represents the most important example of fair trade. Communities aspect of CSR is not the major elements in the CSR Supply Chain; but support to community have a potential influence on the public opinion. We have a broad range of activities to support and sustain local community: economic development, educational support, job training, health care, medical support and childcare.

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Food industry retailers are not trained and prepared to offer environmentally products to consumers, try to redress demonstrating responsible behavior towards the environment in their practices along their supply chain. Food companies have different impacts on the environment: water pollution, deforestation, global warming, chemicals pesticides and fertilizers, packages and waste. The best solution could be the production of organic products, characterized by using sustainable production with the prohibition use of chemicals. Nowadays the market of Organic product is a small segment due to: high product prices, short shelf live, a difficult availability of ingredients, a limited supply base and high costs of production. Generally Food Supply Chain must respect topic of a responsible supply chain logistics: companies take responsibility for waste disposal, water and energy conservation, recycling, animal welfare practices and reject suppliers without procedures and environmental awareness. Food industry members must actively practicing CSR Supply Chain Standards as a source of a competitive advantage and awareness; and they must pay attention to stakeholder complaints. In the next paragraph we want to analyze the most important practices that actors in different layers in the food supply chain must to respect and pursuit to reach a perfect Responsible and Ethics Food Supply Chain.

3.6 Quality and sanitary inspection: selection, control and evaluation of raw materials.
A 'food company must not accept raw materials or ingredients whether they are contaminated, or are suspected of to be contaminated with parasites, toxic microorganisms or foreign substances that, after normal preliminary procedures performed in hygienic conditions are not suitable for human consumption. It is necessary to select suppliers of raw materials, proceeding with an' approval and qualification, ask the supplier assurance procedures (HACCP plan and other additional documentation such as the Quality Manual) and documented plan of controls. Food safety and sanitation procedures have the aim to control and monitoring ingredients and raw materials and to keep under control supplier procedures.

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They have the responsibility to identify non conforming manufacturing practices, monitoring environment and possible allergen and epidemic disease. To assure a strictly control process, a documentation is required. We define clearly responsibilities and authorities to specific individuals. Any kind of changes in the supply chain must be assessed before the implementation and notified to consumers. Documentation is required to validate food safety and quality, suppliers periodically review program documentation and approved certification, to assure consistently current practices to end user. Suppliers documentation to issues information to customers includes: to meet customer requirements. Letters of guarantee are required before to start doing a business with a customer. Supplier must meet all governmental requirements and write a clear explanation of labeling safety, general wholesomeness and sanitary conditions under which the product were produced. A certificate of analysis is required before the product arrives at customers establishment. Certificate of compliance state if a product were produced and manufactured in accordance with regulations and if prerequisites programs were satisfied. Information of supplier should includes: full descriptions of commodity, name of supplier, lot number and date of production, date of shipping, method of analysis used, results of chemical, physical and microbiological analysis and specification to be met. Regularly we monitor and asses suppliers with Internal Audit Program: they are regularly scheduled and they asses quality and food safety system, reliability of the documentation systems and plant inspections. A suppliers regulatory compliance programs is necessary to demonstrate that supplier respect all governmental and local requirements for the food markets, and they should be able to demonstrate whit appropriate documentation their fairness. Compliance programs include Sanitation Programs and Food safety issues. Sanitation programs assure that food are processed in sanitary conditions and quality and shelf life is enhance. The European Union has established a specific regulations for 80 letters of guarantee, certificate of analysis and certificate of compliance. Suppliers may be asked

food processors, likewise in the others countries around the world they have specific regulations. Sanitations does not means to keep cleaning equipment were products are produced. A comprehensive sanitation programs include: ask for the certificate to certify the quality of supplies; periodically inspect the usual suppliers to verify the persistence of their suitability; check the raw materials inbound according to a prescribed test plan and record the results. The business plan of analysis and control of raw materials is a periodic program check on a sample prepared keeping in mind the following guidelines: type and danger of material, reliability of supplier, trading volume and rotation of the raw material. It must be defined for each raw material type and number of samples, analytical parameters and monitoring frequencies and critical limits. The control plan is revisited and revised annually by the company. Raw materials and ingredients stored in the establishment must properly maintained, to prevent harmful deterioration and contamination. Raw materials and ingredients should be used as soon as possible and kept in rooms sorted, clean, dry and not contaminated. For raw materials and ingredients should be stored in special conditions of temperature and humidity is necessary to take all appropriate measures to ensure compliance with such conditions. All food are handled, stored, packaged, displayed and transported shall be protected against any contamination likely to make them unfit for consumption, injurious to health or contaminated in such a way that it cannot reasonably be consumed in that state. In particular, food must be located or protected so as to minimize any risk of contamination. It is important to avoid contact between raw materials, semi finished and finished products to periodically monitor the level of sanitation of work surfaces. Dangerous and inedible substances, including foods for animals, must be properly labeled and stored in separate and secure containers. The raw materials found not to conform to the control of receipt must be segregated and subjected to further evaluation to determine the return to supplier or the eventual elimination. 81

3.7 Nutritional information ingredients.

and traceability of product and

Traceability is the key word in the food sector, a word which includes all together new type of hygiene and health parameters become mandatory by recent legislation, requests for food safety by consumers, the need for companies to innovate to be competitive. To meet all these requirements, companies are required to record and document the process that follows the product information from upstream to downstream in the chain food, then they must be able to move from downstream to upstream to the same information distributed along the chain. European Commission Regulation No. 178/2002 of the European Parliament and Council, in force since January 1, 2005, which regulates food traceability defines: Traceability is therefore the task of leaving a trace (for example, by appropriate labeling). Traceability is the capacity to regain the track. By law is placed at all stages of production, processing and distribution to the traceability of food, feed and food producing animals. The business operator shall be able to identify who provided him a food, a feed, a foodproducing animal. Operators must have systems and procedures to identify those firms which have supplied their products, and make this information available to authorities on demand. Food or feed which is placed on the market must be adequately labeled or identified to facilitate traceability. Traceability helps you find the list of purchasers of the final product thus facilitating the withdrawal of the product from the market, if it is established the presence of unexpected risk to health or the environment; it also facilitates the identification, among operators in the industry , responsible for damage caused by a bad power supply. Previously was used printed traceability, which consisted of flows of information on the manufacturing process, through the use of paper documents. This technique is rather limited, which poses problems with respect to the time of traceability data interchange with other industry players. To meet the needs of a modern food system, specific computer software are suitable for an efficient exchange of data. If properly designed, allow to trace the history of each 82

product. The objectives that you pursue a computer tracking system are: handle emergencies in order to conduct targeted and accurate withdrawals when food safety is in danger. Managerial objectives: to eliminate waste along the supply chain through process control, streamline inventory and distribution, empower better players in the sector, monitor suppliers, monitor reports. Positioning and marketing objectives: a traceability system certified according to UNI / ENI / ISO mean for a company, the ability to achieve the highest level of quality can be shown to customers. Also in the current context, the demand for information products is so high that you cannot pick it up in a label. The label is by its static nature, difficult to update, and can contain only very summary information such as date or so. A tracking software makes it possible to avoid the burdens and judicial business through the preventive withdrawal or by following the withdrawal of the single batch only really interested in the event of an emergency food. A label should provide a good set of data that allow us to know the history of each food. It 'important to always read the labels: the ingredients are listed in descending order by weight, the expiration date is the date by which the product is consumed, the date of minimum durability shall be the date until which the product retains its properties . Choose products that have a few chemical additives such as preservatives, dyes, give priority to those who use an 'additional voluntary labeling and prefer packages with reduced packaging and recyclable material. Regarding the nutritional characteristics of foods, there is a clear separation between the large industrial and handmade production. Sometimes in the big industry, the quality of the elements used and the increasingly massive use of chemical additives, dyes, thickeners, make very precarious nutritional security. We need more detailed information on diet, the quality of products and ingredients. Should always know the results of all checks and have more information on that part of 83

the population most at risk such as pregnant women, infants, elderly, people with food intolerances, allergies or sensitivity to some ingredients. The organoleptic characteristics: the appearance, taste, smell, color and consistency are essential elements for the quality of a product. These qualities are also present in industrial products, very attractive, but with little nutritional value, making it difficult to distinguish. A need to do more food traditions, discover the popular cooking and enhance diversity. It is important to follow a balanced and varied diet. The diet should provide the body with protein, fats, carbohydrates and other essential nutrients such as water, vitamins and minerals. The diet must also provide us with specific amino acids and some polyunsaturated fatty acids. These substances, in fact, as well as vitamins and minerals, are called essential because the body is able to build them alone, then we must ensure the food through. It 'important to remember however that doesnt exist, as a natural product or as a transformed, a complete or perfect food that contains all the substances indicated in the right quantities and is therefore able to meet our nutritional needs alone. The easiest and safest way to ensure, as appropriate, the supply of all essential nutrients, is to vary as much as possible decisions and appropriately combine different foods. To diversify the choices ensures greater protection of health, not only because it promotes a more complete supply of vitamins and minerals, but also a sufficient intake of certain natural substances that perform a protective function in various ways for the body.

3.8 Certifications, Standards of production and working conditions.

In addition to ensuring a check on production and raw materials, their traceability and their nutritional characteristics, we require a reference model unique and valid for all participants in the supply chain. The answer to our need is a standard or a certification. If we know that the company achieves certification and membership to a standard, this assures us the quality and transparency.

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Standard is a norm. A standard is a norm accepted fact, a reference model to which one conforms to be repeated later; something set up and established by authority as a rule for the measure of quantity, weight, extent, value, or quality. The International Organization for Standardization ISO (International Organization for Standardization in English) is the leading global organization for the definition of technical standards. Members of ISO are national standards bodies of 162 countries worldwide. Even if the ISO defines itself as a nongovernmental organization, its ability to establish standards that become laws through agreements and treaties makes it much more powerful than most NGOs (nongovernmental organizations). In our field of analysis we are interesting about specific Standards and Certifications: Standard of quality management ( ISO 9000); Standard of food safety management system ( ISO 22000 ); Standard of initiatives for sustainable development ( ISO 14001 ); HACCP ( System for food hygiene ); Certification of corporate commitment in the proactively protection about health and safety of its workforce ( OHSAS 18001 ). Once acquired the standard, the company decided to be certified by an international accredited agency. There are also national standards or even only company internal standard. The ISO 9001 belongs to a set of standards for quality management systems. Is the standard recognized worldwide for the quality management of any organization regardless of size or industry you are intending to respond to growing competition in the markets through: - Improving customer satisfaction and customer loyalty, The streamlining of internal processes, Reduction of waste and inefficiency.

The last edition of 2008 promotes the adaptability of the same standard to all business sectors.

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The ISO 22000 ensure safe food supply chains worldwide and is the first in the family on food safety management systems. Specifies requirements in the management of a food chain. This standard has been developed by ISO experts in cooperation with Codex Alimentary Commission and FAO. This standard make easier to implement HACCP code, because its not vary with food product concerned. This standard has become indispensable because in the supply chain we link different organizations, is enough a weak link and can result in a whole unsafe supply chain and in unsafe food dangerous to health. With this standard is possible to avoid hazard to consumers and preserve food chain to serious costs due to hazard and contaminations. Food safety is required at any stages in the food chain, with adequate control and communications between all parties. The ISO 14001 is an international standard for voluntary compliance, applicable to any type of public or private organization, which specifies the requirements for an environmental management system. Will help integrate the environmental management systems of companies that trade with each other in all corners of the world. This standard, as well as having the advantage of being easily integrated with other management systems conform to specific standards ( ISO 9000:00, OHSAS 18001 ). The HACCP (Hazard Analysis and Critical Control Point) is a system of self-control exercises in public hygiene and food industries. Provides that the company guarantees that the food preparation, processing, packaging, storage, transport, distribution, sale or supply of food, are carried out in a hygienic way. This methodology is now the most widely used to evaluate the risks and hazards related to the hygienic safety of products and processes and to establish appropriate control measures. The method is based on the HACCP approach to food security preventive, systematic and documented. The focus of this methodology: the identification of critical control points (CCP), their monitoring and management as reported in the HACCP Manual. The 'identification of appropriate indicators, critical limits of intervention, levels of security and the preparation of corrective action. OHSAS 18001 is a standard designed to help companies to establish goals and policies of the Safety and Health of Workers, according to the regulations and based on the potential hazards and risks present in the workplace. It is the gold standard recognized worldwide for this area and is applicable to any type of organization. OHSAS 18001 has 86

many points of agreement with ISO 14001 and is based on two fundamental concepts: continuous improvement and compliance with the standard. An efficient management system for health and safety should be based on: proper and consistent policy of safety and health of workers that includes Program continuous improvement, hazard identification, risk assessment, monitoring system performance management of health and safety and continuous review and evaluation to optimize the system.

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4. The coffee industry

Coffee is the worlds most valuable agricultural commodity. The coffee industry offer to consumers around the world the possibility to try different types of coffee such as, cappuccino, espresso, mocha instead of simply caffeinated and decaffeinated coffee. On three centuries, coffee has captured over 90% of the adult population worldwide, and ranked third among the most drunk beverage, after water and wine. Over the last fifteen years the coffee market has reached a significant size that position as a major commodity of international trade. There are two main species of coffee: Arabica and Robusta. Arabica is the highest quality valuable and is native of Arabia; grains produces green-copper which results in a rich coffee aroma and tasty. The Robusta species, native of the Congo, requires lower installation costs and is particularly resistant to disease, which is why the production of this second type of coffee is increasingly growing to the detriment of the first. The coffee industry is global to all effects: it is characterized by the presence of a few multinational companies in the roasting and retailing, and many small local businesses. In the last ten years is going a gradual concentration of the industry. The so-called "Big", or Nestle, Phillips-Morris/Kraft, Sara Lee and Procter & Gamble control the activity of roasting up to 90% of global production of instant coffee. Other multinationals of less size operate on the main domestic markets of Western Europe, as in Italy Lavazza and Tchibo in Germany. Almost all of the coffee production is concentrated in developing countries, consumption instead happens in almost all Western countries where the coffee is exported. The coffee is grown in four different areas: South America, (Brazil, Venezuela, Colombia, Peru and Ecuador), Central America and the Caribbean, Africa and Asia (especially India and Indonesia). The largest producer of coffee remains Brazil, which together with Colombia and Vietnam, covering about 60% of all world production. The majority of producers operate on farms that are less than 10 acres in size and in very remote locations.

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This can make it increasingly difficult to operate an efficient supply chain.21 Consumer demand is ever increasing, consumers drink more coffee, and quality and value become more important. One of the options of enhance the quality and value of coffees around the world is to integrate and improve the already existing supply chains.

Picture 10: The Main Coffee Producing Countries. Source: http://www.thetimes100.co.uk

21

Source: http://www.thetimes100.co.uk

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4.1 The coffee Supply Chain

An high priority is to have a first class supply chain, with high quality linkages from where the coffee is grown in the field, to the way in which it reaches the consumer. The function of any single supply chain is to successfully and efficiently manage the steps from the production process as raw materials are turned into a finished product, and ultimately sold to consumers. The supply chain in the coffee industry can be very complex and difficult to manage. The main connections in the coffee supply chain include: Growers Intermediaries Processors Government agencies Exporters Dealers/Brokers Roasters Retailers

These connections through the supply chain are not exclusive and forced, different organizations can perform a variety or only a single function. In each countries the functions management it varies and we have some differences. Coffee grows best in warm and humid climates with a relatively stable temperature of about 27 C all year round. The majority of coffee plantation grown between the Tropic of Cancer and the Tropic of Capricorn, where the climate is ideal for coffee production. Coffee growers usually produce coffee beans on very small plots of land, often in remote locations. Coffee producers also might perform some value adding activity to the coffee: someone dry and haul the coffee themselves.

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We have individual growers otherwise growers who come together and form growers cooperatives.22 Many producers around the world forming growers cooperatives: producers collaborate within their communities to help each others to better negotiate coffee prices and improve the quality of their live in their communities. Buyers often set coffee prices because the producers are often small unorganized. Cooperatives in Columbia, Mexico and Chapas allow coffee growers more negotiating power when it comes the time to setting coffee prices. Also, cooperatives within these communities work to improve the standard of living of their members. The integration of technology and knowledge sharing programs allow producers to be more efficient and effective when producing and marketing their products. The intermediary link in the coffee supply chain can be very complex and complicated. They can be involved with many of the different connections in the chain. Intermediaries may buy the coffee cherries and green beans directly from the growers and sell them to others processors or dealers. They often do some of the primary processing to the coffee, but do not necessarily have to. Intermediaries often buy the coffee from many different individual farmers, and then transport them to members higher up in the supply chain; to a dealer or a processors. Processors convert coffee cherries into green bean, ready to be sold for export. Processing can be done by the growers themselves or by another independent level of

22

Example of growers cooperative, source www.globalexchange.com : Mut Vitz is a coffee producers

cooperative located in the Northern Highlands of Chiapas. The cooperative includes over 1,000 producers within the surrounding communities. Production estimates for the cooperative are over 15,000 100-pound bags of high altitude coffee. The cooperative is now seeking to gain an export license for the government. Members of the cooperative are also moving to produce coffee that is certified organic, which will allow them to enter a new, up and coming, market niche. Members are also participating in a knowledgesharing program, where technology and know-how are transferred between members. They have also worked together to establish a strong organizational structure within the cooperative

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the supply chain. Processing does required machinery to perform the needed tasks. Often cooperatives can perform some of the converting processes if relationships amongst growers have been established. Coffee processing involves six steps: Picking Drying and hauling Sorting, grading, and packing Bulking Blending Roasting

The coffee growing and producing industry is very large and require an intensive labor. It is estimated that 60 million people earn some or all of their income from coffee, which is 1% of the world's population. In some countries the government controls the coffee industry. Governments often buy coffee cherries from producers or from processors for a set price and then sell the coffee to exporters or brokers. Exporter often buys coffee from cooperatives in various countries and then ships the beans to the desired location. Exporters must have an excellent knowledge of where coffee is grown and the quality of the coffee produced. They are looked upon to guarantee the quality of the coffee sold to brokers. Coffee brokers simply supply the coffee beans to the roasters in the right location at the right time, in a right quantity and at an acceptable price for seller. Dealers must establish and support excellent relationships with exporters. Their business is dependent on the quality of the beans sold to roasters. Roasters are responsible to turn the green coffee beans into marketable products. They can also add value to their products through marketing, branding, and packaging. Retailers can perform the roasting process or it can be its own distinct process in the supply chain. Finally, retailers sell the final coffee product to the final consumer in supermarkets, hotel, catering organizations or small independent retailers. 92

The supply chain is only as strong as its links. The coffee chain is very long and can be very complex: different organizations handle the coffee at different times, and we have complication in the communication between its members. Communication, and the establishment of relationships, are key principles if we want to manage a supply chain in a successfully manner. A strong relationship is based on trust and honesty. To develop a relationships it take a long time but it takes equally a lot of work to maintain.

4.2 Trends in the coffee industry

Today many current trends are affecting the coffee industry. The first important is price. Price of coffee has fallen to historic lows, this is the cause of a coffee crisis around the world, especially in developing countries that are so dependent on the coffee industry . It can be also very difficult in countries in the Horn of Africa that derive as much as half of its export revenues from coffee. If the trend continuous, will hurt producers tremendously. There are currently over 25 million coffee growers around the world, each one hurt significantly by lower prices. Coffee is such a large portion of developing countries income, to be spent on medicine and education. In the industry they are working together to develop new markets around the world, to increase coffee demand and consumption and consequently increase profits. This decline in coffee price is being caused by an imbalance of coffee supply and coffee demand around the world. Demand for coffee is at estimated level of 106 million 60kilo bags and the supply is at an estimated 113 million 60-kilo bags. Prices are likely to continue to fall as production is increasing at 3.6% a year and demand is only increasing by 1.5% a year.23 The second trend still related to increasing coffee consumption is the development of the specialty coffee segment, which are coffees that are beyond the traditional coffee blends, with a strong attention to quality for coffee producers and much collaborative effort has been made to increase also the quality of coffee worldwide.

23

Source: www.ico.org

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The International Coffee Council is seeking to increase the coffee consumption in the world that does not consume coffee. The Chinese and Russian markets are the two major markets where conduct promotion and marketing campaign. The International Coffee Council will look to increase coffee consumption by holding coffee festivals and associated coffee with cultural events. The main objectives of the Coffee Council are to develop, through education, promotion and media coverage, a coffee culture that would enhance the image of coffee drinking all over the world. Imports of coffee into China have more than doubled and imports into Russia have gone up 75% since promotional activities began. 24 The specialty coffee market is rapidly increasing. The specialty coffees include lattes, mochas, espresso, and cappuccinos. The organic coffee industry is also expanding. Different growing techniques must be used to produce organic coffee so growers must be aware of shifts in demand. Retailers or brokers must communicate with suppliers as demand fluctuates to increase the production of specialty coffee. This is done by paying premiums over standard coffee prices to get cooperatives and other producers to increase production. In 2001, the International Coffee Council adopted a resolution to improve quality of coffee. They encouraging countries to take measures to deflect defective coffees from the market: implement measures designed to improve the quality of coffee on the global market through restricting exports of coffee below a minimum accepted quality level and deflect low grade coffee. They decide to issue a quality management program that consist of a minimum standards for exportable coffee. A quality program need to improve the balance between supply and demand of coffee and to actuate a better overall standard of quality to the coffee market. The last but not least trend of the coffee industry is the dealing with coffee growers. In many countries growers are unable to support their families with the income from their coffee farms. There has been a great movement to start selling fair trade coffee

24

Source: www.ico.org

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at the retail level. Fair trade coffee guarantees that growers being paid a livable wage for their coffee. Fair trade coffee is a consumer-based movement that works to improve the treatment and living conditions of growers around the world. Consumers try to establish programs that form, equitable and fair partnerships between consumers in North America and producers in Asia, Africa, Latin America, and the Caribbean. Fair trade coffee guarantees producers profit for coffee produced. Consumers have demanded fair prices for producers around the world. The supply chain is complex, and for this reason farmers, that are at the basis of the chain, are often hurt the most by falling coffee prices. Fair trade movement help to overcome the stages between the beginning and final stages in the supply chain.25

4.3 Sustainability in the coffee market.

The issue of sustainability plays a significant level of criticality in relation to the coffee market, as it does not recognize, much less internalize in the trading prices, the real social and environmental costs associated with the production of raw materials marketed. The sustainability of the coffee is a concept differently declinable in terms of economic viability for farmers, environmental protection and social responsibility. Some varieties of coffee are sold as certified coffee, for example, organic coffee and fair trade coffee. Other varieties are marketed through sustainable projects designed by private companies. The entire coffee industry is benefiting from a number of initiatives that are attempting to define and implement standards for sustainability, but the road ahead is still long and efforts are being directed to more effective implementation of sustainable production practices for implementation of fair Trade coffee, organic and environmentally friendly and meet the economic, social and environmental costs of coffee growers. Today, a producer who sells coffee that has a certificate have the ability to market a product by applying twice the asking price compared to a coffee-free certification.

25

Source: www.globalexchange.com

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In addition to economic benefits, sustainable coffee farmers, having to meet specific production procedures, may benefit from additional positive externalities: the improved management of natural resources and conservation of biodiversity, the resistance of crops to weather and climate risks; organizational development and community and the greater use of rural labor; children health risks associated with the use of improper chemicals.

Some standards also provide benefits in terms of product traceability and process management, through which small producers can learn to compete in modern commerce. The labeling of fair trade coffee (fair-trade labeling) can be considered as well as a valid solution to the lack of information along the supply chain, a medium which can boost trade in less developed countries, threatened by globalization. It represents an alternative institutional arrangement that ensures the adequacy of the remuneration due to the small farmers and the possibility for them, to organize new networks aimed at increasing the bargaining power against intermediaries, to improve access to credit. These innovations may operate on different levels of the coffee supply chain, both horizontally (consider, for example, farmers who come together in a collective manner to the coffee market), both vertically (for example, the association of farmers engage in new trade agreements with private operators). Through labeling of solidarity, therefore, has made possible the pursuit of a strategy of differentiation of the ethical coffee. The biggest innovation was the establishment of the Fair Trade Labelling Organizations International (FLO), an organization that has built partnerships with a large number of coffee producing countries in developing and certifying the adjustment to standard ethics throughout the supply chain. Although the consumption of fair trade coffee has recorded a increasing, it remains a niche segment of the market, reaching only 0.03% of world trade in coffee. The sustainable coffee (which includes the Fair Trade coffee, the coffee ecological and biological) represents, on average, less than 2% of consumption in developed markets, although with significant differences from one market to another. 96

There are various origins of the various types of sustainable coffee: coffee fair is the one with dual certification (fair and biological) are mostly imported from countries such as Mexico, Nicaragua, Guatemala, Costa Rica, the Dominican Republic, the 'Honduras and Colombia, in order of importance, while the organic coffee is imported from Mexico, Guatemala, Bolivia, Peru, Thailand, Indonesia and Brazil. Only recently sustainable coffee has begun to know a significant increase enough to be marketed through the supermarket distribution channel, which first had no access. In the past, this type of coffee was widely distributed in natural food stores, specialty food, and those in small grocery stores.

4.4 A leading provider in the coffee industry: the case of illyCaff business.
Today illy coffee was founded in 1933 by Francesco illy in Trieste. It is currently run by the third generation of the family. This company is known and appreciated in the five continents for high quality and distinctive velvety taste of his coffee, a unique blend of nine types of pure Arabica coffee that delights millions of people every day in homes, offices, hotels , restaurants and cafes. Around the pleasure of a perfect cup of coffee the company has built a world of intelligence, experience, taste, science and art. Today illy's offering also includes equipments for the preparation, cups and accessories. Today extends to Espressamente Illy, the coffee franchise chain of authentic Italian and the international network of excellent bartenders who can claim the title of Artists of Taste. He founded the University of coffee to promote and spread in Italy and worldwide culture of quality coffee. They can also interacts with the art world. Giving rise to innovative products: Method Iperespresso, covered by five patents, Illy-issimo, coffee "ready to drink" distributed around the world thanks to a joint venture to 50% between illycaff and The Coca Cola Company, the capsules machines for office manufactured by Mitac, the result of a joint venture company 50% owned by illycaff. But not only: the passion for excellence involves illycaff producers in South and Central America, India and Africa, and improves their lives. 97

They expresses itself in a special attention to respect for the environment and people, which led the company, first in the world, to get from DNV (Det Norske Veritas) Certification "Responsible Supply Chain Process," which certifies the sustainability the entire chain, from farmer to consumer.

4.4.1 Illycaff in numbers and history of the company.

illy has become present and today marketed in 140 countries worldwide touching all 5 continents, with 50,000 or more, public establishments. Served in over 100,000 public exercises, illy around the world means more than 6 million cups of coffee in a day. More than 700 people working, 305 million euros, the turnover for the year 2010, of which 56% was due to exports. Today the Espressamente Illy in the world has more than 200 , and are 1400 the Artists of Taste in the world. He created more than 20 locations of the University of Coffee, 4 specialized laboratories and also have 4 radical innovations resulting from the research illy and 4 certifications for quality and 1 certification to sustainability.26 In the mid of the 60 'is opened the first factory of Illy in Trieste, that today is still the only production plant. In the 80 'comes an innovative approach to marketing, distribution and opening to new markets. They patent the digital system for the selection of the beans, in order to choose every single grain of coffee that is perfect. The early 90 's they set up the "prize brazil for the quality of espresso, with the aim of attracting the best growers in Brazil. In the middle of 90's it triggers the urge to expand internationally and to think about a 'business process innovation. At the beginning of the new millennium created the first university of coffee, they with the objective of promoting the culture of coffee and they appeal to farmers, professionals, enthusiasts with its several locations around the world.

26

Source: www.illy.com

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In 2003 was born Espressamente Illy , nothing less than a franchised chain of bars with the aim to offer all over the world the Italian coffee experience. In '2007 debuted for the first time in the coffee market of waffles with the method Iperespresso , a system of exclusive waffles Espressamente Illy in the world. In collaboration with Coca-Cola Company and trying to meet the trends of consumption and customer needs -born Illyissimo . The consumer needs immediate consumption of food and drink to be consumed outside home and in a simple and fast way. This drink provides the pleasure of coffee on the go, is a "ready to drink" in a cans. In 2011 illy has been certified as "Responsible Supply Chain Process" by DNV: it was the first company worldwide to receive this certification, which certifies the quality and sustainability throughout the supply chain from grain to get to the cup in hands of the final consumer.

4.4.2 The concept of coffee by Illy

The ideal coffee should be unique and unmistakable. Illy offers to connoisseurs and coffee lovers ideal coffee receipt: the best that nature can offer, with a perfect finish complemented by better technology and the experience of nearly eighty years of business. The taste is recognized illy: a velvety tactile sensation, a perception of sweetness and a balance between sour and bitter, flowery and fruity, caramel, chocolate. The illy blend expresses an ideal of balance and perfection. Her secrets are nine different ingredients of Arabica, selected from the best harvests of the world, purchased directly from growers, mixing before roasting and cooling air, and the perfect conservation of flavors due to the pressurized packs. The end result is a richness and emotion that no single quality of Arabica alone could give. With the same processing, roasting and extraction, the same Arabica grown in different environments produces very different results in the cup. This is the area to give the coffee an important part of his identity. In Ethiopia we have an Arabica that balance so often memorable bitterness, acidity, sweetness. Features floral notes of jasmine, fruity notes of ripe melon, go up to the full range of citrus. Really fascinating.

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In Colombia, the Arabica has to do with elegance: a balance between bitterness and acidity, sweetness of taste. Stand on a classic aromas of chocolate, citrus, jasmine, red fruits and ripe. Sweet and catchy. Costa Rica Arabica is crisp and balanced, you know balancing sweetness and acidity. It offers enticing bouquet of flowers, but you do remember the sweet notes of chocolate and caramel. In Brazil we have a coffee manful. Sweet, but with a bitter-acidity ratio balanced. The rich body makes it the indispensable basis of any espresso. Full-bodied, it offers a true tactile pleasure to the taste. Finally we have an Arabica in India often with spicy notes of tobacco, nutmeg, caramel or chocolate. Full-bodied, rich, has a pleasant bitterness that is his hallmark.

4.4.3 Companys mission, vision and values.

Illy's mission is to introduce and propose, to experts and all those who appreciate the finest coffee the best coffee that nature has to offer, from the cultivation and processing methods most appropriate and sustainable. Enhance the pleasure offered by illycaff with the cultural and emotional experience that comes from the pursuit of beauty, of good, well done. Being an innovative company, proud of its history, rooted in the contemporary, and future-oriented. Combining art, science, experience, to offer the best products and the best tools and places of consumption. Become, in the world, the point of reference of culture and quality of the coffee, the first choice of excellent professionals, the leading top of the range coffee. This is the vision of the company. Passion for excellence, pursuit of perfection, ethics: that is, sustainability, transparency, enhancement of individual talents and teamwork. Power to improve the lives of stakeholders. Attention to people and the environment. These are the values we believe illycaff and that promotes with energy every day, for nearly eighty years in Italy and worldwide.

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4.4.4 Analysis of Illy's brand

Picture 11: the illys logo

The brand analysis is useful, because the value that express the brand becomes the "perceived value by consumers in addition to the category". (Semprini, 2006). The Illy brand represents the set of features tangible and intangible that make it a unique product, and the customer is willing to pay a premium price. It 'a brand that wants to raise the quality of its products to create a niche as the level of luxury, which differentiate from competitors products. The brand Illy is a strong brand, with an high-definition and distinctive and authentic characteristics, with a strong personality (Lombardi, 2006). Illy offers a unique offering of its product, everything have the same price, packaging and communication strategy, it becomes a product with a highly differentiated market positioning than they acquire a certain reputation and visibility. It has a strong brand image, a high-end product that is given an added value, a brand full of charm and expression of Italian style. The key dimensions of brand strength are: Brand identity ; Brand image; Brand equity. The brand identity is "all the elements of expression used by the company to convey the brand values" (Lombardi). Identity is the sense that the brand wants to convey to consumers itself, contains the essence of the brand and values. Kapferer's model becomes one of the possible illustrations of the brand identity, it defines an ideal prism representing the different facets of the brand. Kapferer consider the personality of the brand as one of the faces of the brand. 101

Illy's identity is formed by the selection of the best qualities of Arabic, by unique systems of improvement of taste and aroma and the achievement of your pleasure.

Figure 12: Model Kapferer

The brand is a "physical place": illy is the black and red box, which corresponds to the characteristics of packaging and features that will stay long in the mind of the consumer. The brand is "personality": illy becomes authoritative technical leadership for quality and price and topical cultural, corresponds to the mode of expression of the character of the brand. The brand is "cultural universe": illy coffee culture allows consumers to appreciate the superior quality of the product, is the system that expresses the brand values such as excellence in quality. The brand is "mental representation" is the internal representation of the brand, how consumers feels through the use of the brand; Illy every customer feel a connoisseur in taste and in the flavoring, is a true expert and enthusiast. The brand is a "reflection", the external image of their ideal user. The illys customers pursues excellence in all things true, and is notable for some very specific things like the search for beauty and the ' aestheticism. The brand is ultimately "relationship", a transaction between persons; explains how to recognize a good Illy coffee and aggregates all true lovers and fans of the product. 102

The brand image is expressed in the way the target perceives the brand, identifying the perception that the consumer of the brand as a result of a subjective interpretation of all information obtained on the brand (Aaker, 1996). Aaker describes the concept of brand image by using the terms "Brand Awareness, Perceived Quality and brand associations". The image that transmits Illy coffee is mostly a niche for true connoisseurs who is consumed mainly in bars. The brand Illy as the fundamental character of the specialist authority, modern and popular, which is a leader and authority on the technical / cultural because it explains how to evaluate properly the quality coffee, and expresses a category of a premium quality coffee . The factors of the image (Lombardi, 2006) are essentially two: the potential of a brand (what it can do), his character and vitality (diversity, relevance) and the size and stature, what he did (estimate and familiarity). The brand illy through these four dimensions consolidate in the target the brand image. The brand is born and grows its own distinctive character, makes it relevant to the environment in which they live, then the environment has become increasingly successful and respected and at the same time so familiar and part to the entire system. Illy is a brand with an excellent growth potential, in fact, besides a very high diversity and importance, typical of qualitatively different product than its competitors, it also shows that it has reached a good level of esteem by consumers, oversized compared to the familiar , following a profile of a premium brand niche. The brand value (brand equity) is considered "the set of resources linked to the brand name and symbol that add to the value that a good or service provides to the customer" (Lombardi, 2006), is the added value of the brand to the product, the contribution of the brand name value of the offer. Illy has based its equity on a product strategy focused on excellence, quality and innovation, designed to convey the high positioning of an asset traditionally perceived as a commodity. In fact, putting the customer at the center of all its strategies, its equity based on what the consumer has learned and perceived brand. The brand equity is then essential to multiply the value of the assets of the company to product performance.

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The universe of meanings that are linked fundamentally Italianness Illy expresses the style and elegance.. The brand is not built itself on its own, but are consumers of the brand in the world that give a real existence. In terms of expression, illy maintains a certain continuity between the values of the brand in the world and this reassures consumers that become increasingly more and more faithful appreciate the quality of the product. The brand Illy becomes the repository of a culture and provides its expertise available to the buyers, allowing coffee drinkers to become a true connoisseur. It seeks to educate its customers and turn them into true connoisseurs of coffee in the awareness that creating a culture of coffee is to expand the consumption of its products.

4.4.5 Sustainability and quality of Illys coffee.

Illy coffee is always been a company founded on ethics and with the aims to improve the quality of life. The concept of "quality" is central to the philosophy of the company: research and innovation create value for all of the actors of the supply chain, starting from the coffee farmer to final consumer. Quality and sustainability for the company are an inseparable binomial: an excellent product should be sustainable. The definition of sustainability is understood by the company in all three of its levels of meaning: economic, social and environmental. Economic sustainability is pursued, in fact, through the creation of value by farmers to the end user. Social sustainability is based on the concept of individual growth. Environmental sustainability is based on respect for the planet through recycling practices and low impact. Sustainable development for Illy coffee is synonymous with a continuous balance between innovation and accountability to the people and the environment. The sustainability of illy is certified. It was the first company in the world, in March 2011, to be awarded by DNV (Det Norske Veritas) Certification "Responsible Supply Chain Process" which certifies the sustainability throughout the supply chain and, in particular, in good relations with their suppliers: the coffee farmers.

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Picture 13: Dnv logo for illy Responsible Supply Chain Process. Source: www.dnv.com

To obtain the best coffee that nature can give, illy looking for is the most valuable Arabica in the lands where coffee grows and establishes a direct, personal and lasting relationship with the growers, in a virtuous logic of cooperation which is based on four principles: Selection: In each of the land where grows the coffee farmers identify the best technicians. The selection of suppliers is done in different ways, depending on the realities of the countries. In Brazil, for example, is done by the Ernesto illy Prize por la Qualidade do Caf para Espresso . Training: The agronomists illy coffee and the University of transfer business experience. It is an exchange for excellence and respect for the environment. Recognition: To recognize the quality, favorable price guarantee. The only way to make truly sustainable an excellent production is to reward farmers. At a price listing based on the international market, the company adds a fair margin, taking account of production costs and a fee is to encourage the farmer to get more effort devoted to quality. Construction: Building a community and a culture of excellence. In 2000, Brazil created the Clube do illy Caf, which currently includes more than 600 growers. Through it, illycaff establishes a direct relationship with them based on knowledge exchange and growth.

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To achieve a sustainable supply chain process and ensure the quality of the product, it is important to support the growth of the local community, with full cooperation between the company and the best coffee producers in the world to ensure that farmers are able to provide the highest quality coffee, introduced in Brazil in 1991 illy Prize Ernesto illy por la para Qualidade do Caf Espresso, which cash reward farmers for funding. Since the prize was established twenty years ago, over ten thousand coffee growers took part in the competition and have been dished out more than $ 2 million. The award has also contributed to the development of entire regions of Brazil. For example, in 1998, illycaff begins in Ethiopia to work with Share Our Strength (SOS) - a nonprofit organization that wants to fight hunger in the world - by donating, in over ten years, more than $ 1.5 million to the cause. By partnering with the organization, the company introduced in 2004, the project Cup of Kindness. The program, in recent years, has found the funds to build and support a school in the time of the Ethiopian region hit by a severe drought. We have testimonies of 'illy commitment to the farmers for the development of the local community: Edio Anacleto Miranda won the prize for the best quality of illy coffee in 2007. Thirty thousand dollars reinvested most of the plantation: "I bought a mechanical dryer, something I gave to my wife for the house, and my two sons because they have to study, I have only the third grade." Edio has created a lake using spring water and reuses waste processing natural fertilizers. The brothers and Walter Dutra Ednilson studied agronomy at the University illy Vicosa and attended St. Paul. They are part of the Coffee Association of Minas Gerais. Today Wagner, their wallet, he is becoming a bit 'of land. In a few years will have his ranch. "The more we are, the more we defend the quality," says Wagner, "the demand for quality grows each year by 10%." Ecosystem conservation and environmental practices in support illycaff are an integral part of sustainable research excellence. In addition to promoting and developing cultivation practices in the plantations, the company has sought to reduce the impact on the ecosystem of the entire production process. The commitment begins in producing countries, after the coffee has been harvested through farming techniques with low environmental impact: the reduction of water use in washing the coffee and the best of wastewater treatment systems, the introduction of ' 106

shade coffee plants with native trees, restricting the use of synthetic products. In 'headquarters in Trieste, where the world's best Arabica illy blend is processed in inequality, the company has made investments to minimize the environmental impact of processing. The roasting plant, for example, ensures that emissions are less than one twentieth of the extent permitted by law. In addition a project has just been completed for the recovery of heat developed during the roasting process and its transformation into hot water for the heating business. For all these aspects of environmental policy, illy has obtained important recognitions and certifications. The quality certification 'and sustainability' recognized to illycaff are as follows: Responsible Supply Chain Process In 2011, illy is the first company worldwide to be awarded certification by DNV "responsible supply chain process", which demonstrates the capacity of the corporate structure to implement a sustainable approach in the processes and relationships with stakeholders throughout the supply chain , particularly along the supply chain. An innovative model in that assigns a crucial role in the quality and value creation. ISO 9001 First, in the coffee industry in Italy and Europe, illy has achieved ISO 9001 certification in 1996, which shall compare the production system to certain quality requirements. ISO 14001 In 2003, illy has achieved ISO 14001 certification, an international standard, applicable to all types of enterprises, able to certify that the company has an appropriate management system to monitor the environmental impacts of its activities, seeking systematically to improve in a coherent, effective and above all sustainable.

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 EMAS registration In 2004 the company obtained the EMAS registration, an instrument of environmental policy and industrial voluntary, designed to promote continual improvements in the environmental impact of industrial activities. In 2005 he won the EMAS Award for its commitment to improving the environmental aspects of production.

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Conclusions
The aim of the thesis was to present and discuss the important theme of Supply Chain Management from a perspective view of sustainability, taking into account changes in sensibility of the final customer in the food sector; and consider customer at the starting point. In drawing up my thesis, I tried to answer the key analytical questions that I placed at the beginning of this paper. We have several critical areas in the supply chain: maintaining quality and safety of products, ensure supply chain flexibility and high performance, designing a future configuration of the supply chain in a continuous globalization process. Cost and efficiency through the supply chain are fundamental, to reach a totally globalization is important to reduce labor costs and expand the entrance in local markets.
The most critical trend concerns in supply chain development are: if we want to expand the supply chain globally, product quality and safety, supply chain delivery and security become the keys point. Become global and expand the supply chain require to ensure a green supply chain, on time delivery, product quality, product safety, product availability and corporate social responsibility rules. A supply chain on a global scale, however, is exposed to serious risks: we manage risk in the right manner if we were prepared to understand risks where they occur. Risks can refer to different categories: natural calamity, diseases, economic, political or due to an unstable market trends. Among all risks, the availability, cost, and quality of labor are the principals. In order to minimize potential risks of supply chain, a company can takes different actions: contracts with supplier to increase performance, alerting customers about potential risks and with a vertical integration. For the next years appeared as main points in the agenda of supply chain leaders: improve customer access of supply chain planning, reduction, integrate and invest to empower supply chain organization. increase flexibility upstream and downstream supply chain, focus on total supply chain cost

The principal characteristics of a good supply chain for create a food responsible value chain are: respect all the international standard; operating legally and trusty; 109

offer to the final customer products with quality and sanitary characteristics; offer nutritionals information; traceability of production process and ingredients.

The Supply chain management and Marketing decisions are the two drivers for the creation of the Demand Chain Management. The most important objectives to reach with a demand chain management are a full customer satisfaction and the maximum revenues for the company in terms of profit and image. The companies organize their strategy of action on the basis of stakeholders: their work have to meet to those who are the needs of the consumer, the choices and purchase decisions and understand the laws and regulations imposed by the government and local authorities. Last but not least, we must take into account the views of non-governmental organizations: they are able of mobilizing the interest and public opinion, and they can damage the image and reputation of a company.
The attention to quality, security and to environmental impact increase. In the post modern society, wealth and consumption hold an important role in people's lives. The major drivers to consume are a sense of responsibility towards others, supports the pursuit of pleasure or the satisfaction of individual needs. A growing number of consumers in making their purchasing decisions pay attention to the effects their choices can have on the welfare of others: producers, workers, consumers, animals or the environment. Today, customers not consider in their options of purchasing only chance of buying, durability of products, packaging. Its behavior led to try to investigate about quality, ecology, ethics, respect of right of labor, pleasure, health and diet. In a food product, consumer try to find satisfaction to multiple needs: he point out attention to food security, in particular to sanitary and nutritional characteristics, to environmental sustainability and employment of local and renewable resources. Employment of natural products and procedures that respect the life conditions and animals farming, valorization of rural production area.

Consumers base his purchasing and consumption decision ' on ethics and social responsibility. Their purchase choices and consumption forcing companies to support and create a sustainable and responsible management of the supply.

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Supply Chain Responsibility refers to a responsible source to manage relationships with suppliers in a responsible way. Companies need to integrate Supply Chain Responsibility in their regular purchasing practices and involving management and employees to build a social and environmental performance objective. Supply Chain Responsibility is growing importance for business: in food industry production is largely outsourced, and often takes place in developing countries. In these countries legislation may be poor or ineffective and we have to ensure acceptable standards of quality and working conditions. We have to ensure sanitary inspections, a strictly controls and evaluations of raw materials and supplier. Provide nutritional information of product and traceability of its ingredients, source and process.

Compliance with the conditions of working, certification and international standards.

The coffee supply chain is very complex and complicated because there are so many different and diverse layers: it requires a very long and complicated chain to get finished coffee products to consumers. Producers, at the base of the supply chain, are often located on distant farms in undeveloped countries, and consumers are located thousands of miles away. The success of chains is dependent on the relationships of those involved. Producer cooperatives are a very clear indication of the interdependency and collaboration of the growers around the world. In these cooperative growers share information, technology, and are able to collectively negotiate for higher prices. Nowadays we e have a great deal of collaboration within members of the supply chain: in the current trends of the coffee industry we look for higher quality and quality management programs shows how different members of the chain are working together to improve overall products. They work to improve demand for coffee and new market development. The fair trade movement shows the power and interrelationship that consumers have on the market and the supply chain as a whole. Each members of the chain must work to form relationships with, not only those links that surround them but with the supply chain as a whole.

Illycaff is a clear example of how a leading company in its industry, the coffee industry, is able to meet the needs of the consumer. It gives them a quality product, appreciated, so they are willing to pay a premium price; the company also provides the security, traceability and sustainability of production and supply chain management. The model that illycaff has perfected over the last twenty years is a direct relationship with the producers of coffee in the southern hemisphere. 111

Through the certification agency Det Norske Veritas, illycaff has received the certification of Sustainable Supply Chain. DNV has developed an innovative approach to the certification standard for sustainable companies, analyzing the processes and relationships with stakeholders along the production chain, with particular regard to the supply chain. The standard was developed and integrated with current and emerging guidelines on sustainability and corporate responsibility, and also with reference standards for certification and accreditation activities. This certification standards of supply chain is particularly innovative, oriented to building long-term value by achieving high standards of quality and their perpetuation through time, even through social policies in support of the supply chain. A standard verifiable by a third party that promotes responsible behavior in supply chain considering the ability to create quality. With this certification you are in possession of an effective instrument and based on a concrete system of indicators that also serve to control parameters and quality. The illycaff model was built according to current requirements that represent best practices in the industry, the widespread dissemination of the policy of social responsibility, the determination of specific performance objectives in the field of quality, social, environmental and safety, and finally assessing the status of achievement of objectives. It has also thought the application of a recognition according with the commitment on socio-economic environment. The assessment is based on checking Key Performance Indicators (KPI). Is introduced a management of suppliers based on constant relationships with the verification of compliance with certain basic requirements and the definition of objectives, which vary according to the main criticalities local identified. To achieve these goals, providers are expected recognition of a social nature, not purely economic, and oriented towards mutual sustainability. The sustainability of the supply chain is one of the main criteria to make sure that a leading company can manage the supply chain to its maximum efficiency.

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http://ec.europa.eu http://ec.europa.eu/food/food/labellingnutrition/foodlabelling/index_en.htm www.agilier.com www.bureauveritas.it www.cepa.org www.comunicaffe.com www.csr-supplychain.org www.dnvba.com www.en.wikipedia.org/wiki/Peter_Drucker www.ethicaltrade.org www.fairtrade.net www.globalexchange.com www.iccwbo.org www.ico.org www.illy.com www.interex.org/hpworldnews/hpw101/03erp.html www.iso.org www.logistic.about.com www.mckinseyquarterly.com/home.aspx www.ncausa.org www.ncausa.org www.oecd.org www.qualityi.it www.thetimes100.co.uk

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