Caribou Coffee is a coffee distributor in Minneapolis that has consistently grown over the years despite very tough competition in many markets. Caribou's overall mission is to uphold the highest standard of quality in its coffee beans and still make a profit. This requires its managers to manage the tradeoffs between the cost and quality of coffee beans.

In order to compete, Caribou must come up with one- to three-year plans. One-year plans are based on hard numbers, while three-year plans are more strategic in nature. Caribou finds that flexibility is important in its planning process because predictions are not always correct. During the planning process, Caribou's managers must make assumptions, which should be questioned to make sure they are reasonable. Flexibility entails being able to change plans if forecasts are not correct.

For example, at one point employee costs were higher than forecasted, and the firm had to regroup and make adjustments to make sure it could still meet its bottom-line objectives. Caribou is careful to spread out its purchases among several suppliers so that it is not dependent on any one supplier. Contingency planning is also very important to Caribou. For more information on Caribou Coffee, go to http://www.cariboucoffee.com.

Questions

1. What tradeoffs does Caribou face in focusing on both the freshness and quality of its coffee and the coffee's cost?

2. How was Caribou hurt when one of its suppliers experienced financial problems? What solutions did Caribou come up with to avoid such problems in the future?