Exporters and importers are centralising operations to cut costs

cars converge into warehouse
  • Green coffee exporters and importers have started to centralise their operations
  • As companies scramble to cut costs, new hires tend to be in local teams 
  • Technology is helping – since 2021, the percentage of remote workers in Latin America has increased from 3% to 30%

EVERYONE is trying to save money in today’s economy, and that includes green coffee exporters and importers. In a bid to optimise resources and enhance cost efficiencies, they are increasingly centralising their operations.  

This strategic move allows companies to consolidate functions, streamline processes, and capitalise on economies of scale. 

Whether it’s companies themselves tightening their belts or investors and shareholders demanding greater efficiency from their acquisitions, it has become hard to avoid.

As organisations prioritise cost-cutting measures, the trend towards centralisation is reflected in the localisation of new hires, with a focus on building robust local teams to manage key aspects of the business efficiently.

“There is a growing trend of offshoring certain roles in producing countries,” says Alejandro Cadena, Co-founder and CEO of Caravela Coffee.

“This trend not only applies to coffee, but to many other industries, and it’s usually driven by cost efficiencies. I’ve observed more offshoring related to back-office roles, such as logistics, finance, or quality, than in front-office roles, such as sales.” 

Examples of this centralised approach seem to indeed materialise in the consolidation of administrative functions, logistics management, procurement activities, and quality control measures within centralised hubs or regional offices. 

Trading companies are increasingly leveraging technology, data analytics, and streamlined communication channels to enhance operational effectiveness, reduce overhead costs, and drive productivity in a competitive market environment.

Green coffee trade is a tight margin game 

The green coffee trading business operates within a challenging landscape characterised by tight profit margins that continue to be squeezed left and right. 

Inflation, fluctuating market prices, supply chain disruptions, and evolving consumer preferences are placing downward pressure on all businesses. 

In this context, exporting and importing companies are compelled to implement cost-cutting strategies to remain competitive and sustain profitability in a demanding industry.

These include optimising transportation routes, leveraging digital platforms for trading and procurement, negotiating favourable contracts with suppliers, and implementing efficient inventory management practices. 

By streamlining operations, reducing overhead expenses, and enhancing supply chain visibility, the idea is to mitigate cost pressures and improve bottom-line performance.

When these measures extend to team members and their location, questions that go beyond daily savings arise. Is it more valuable to have operational and sales teams based locally versus abroad, or in target markets? Does having a local sales person in consuming countries have the same value it once had, and is it still worth the return on investment?

“I think the answer to these questions really depends on the type of relationships you want to have with your customers,” says Alejandro. “If it’s mainly transactional, there is probably very little value having salespeople in consuming countries.” 

“In today’s interconnected world, a call or an email can be sent by someone sitting anywhere in the world – plus there’s plenty of good talent in producing countries, where you can pay lower salaries than in consuming countries. However, if you want to have a consultative and relationship-driven approach, then having a team of salespeople close to customers makes more sense, despite the higher costs involved.”

green coffee transport preparation

Will short-term labour savings come at long term sales costs?

The shift towards centralised operations and cost-cutting initiatives is reshaping the coffee industry. These new dynamics impact workforce structures, operational strategies, and industry practices. 

The rise of remote work arrangements, for example – accelerated by the COVID-19 pandemic – has transformed how coffee trading businesses operate, with remote workers playing an increasingly prominent role in managing key functions and driving operational efficiencies.

In just the last three years, the amount of remote workers in Latin America has increased from 3% to 30%, with an estimated 20 million remote employees and counting. 

While centralisation and cost-saving measures offer short-term benefits in terms of operational efficiency and financial savings, there is a critical need to balance these efforts with long-term considerations related to customer satisfaction, market responsiveness, and sustainable growth. 

The risk of prioritising labour savings over strategic investments in innovation, quality assurance, and customer service could potentially – depending on brand ethos and target market – lead to long-term sales costs, impacting brand reputation, market positioning, and overall competitiveness in the coffee industry.

“The ability to visit your customers often, developing strong personal connections with them, while getting to understand the local market and your customers deeply, is a benefit that can’t easily be obtained with remote salespeople,” says Alejandro. 

“A company’s strategy should drive those kinds of decisions, not costs alone.”

The evolution towards centralised operations in the green coffee trade underscores the imperative for exporters and importers to adapt to an increasingly cut-throat business environment, enhance cost efficiencies, and drive sustainable growth in a competitive marketplace. 

By navigating the complexities of cost optimisation while prioritising long-term value creation, coffee trading businesses can position themselves for success, but it will require shrewd observation and the ability and desire to make some hard pivots.

Coffee Intelligence

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