Chipotle Mexican Grill (Chipotle) - Environmental Health Division - Supply-Chain Management Assessment Answer

Supply-Chain Management Assessment Answer

TASK: Chipotle Mexican Grill: Quality at Stake In July 2017, Chipotle Mexican Grill (Chipotle), a Mexican chain of fast food restaurants based in Denver, Colorado, provisionally closed a restaurant in Virginia, the US, after more than 130 customers complained of falling ill and experiencing symptoms consistent with norovirus. The company reassured its customers that it was maintaining proper food safety procedures. “Norovirus does not come from our food supply, and it is safe to eat at Chipotle,” said Jim Marsden, Executive Director of food safety at Chipotle. Nevertheless, the shares of the company declined by 4% as soon as news of the closure of the facility came out. The history of Chipotle could be traced back to 1993, when Steve Ells (Ells), a graduate from the Culinary Institute of America, in Hyde Park, New York, opened the first store near the University of Denver campus, with a loan of US$85,000 from his father. Ells’s dream was actually to launch a fine-dining restaurant and he opened Chipotle to make the money to fund this restaurant. The name Chipotle was derived from the Mexican Spanish name for a smoked, dried jalapeño chili pepper. In 2015, a series of foodborne illnesses caused by repeated outbreaks of E. coli, salmonella, and norovirus were reported from 11 Chipotle restaurants in Washington and Oregon. In September 2015, more than 60 customers fell ill after eating at Chipotle’s Simi Valley Towne Center location at Ventura County. While investigators were not able to determine the exact reason, it was believed that an outbreak of norovirus was responsible. “We may never know what caused it in the end. We’re focused on making sure there are no other illnesses going forward,” said Mike Byrne of the Ventura County Environmental Health Division. Recurring outbreaks of E. coli, salmonella, and norovirus at various Chipotle stores not only affected the company in the form of declining sales and market valuation but also it's the brand image. Analysts raised questions about the company’s supply chain fundamentals, in-house training, and food safety practices. While many other restaurant chains had faced a spate of food-borne illnesses, Chipotle’s problems were far more complex due to the scale and variety of problems. Analysts were of the view that merely using ingredients like organic vegetables, responsibly raised pork, or antibiotic-free chicken would not be enough if they weren’t safe for consumption. In its 2013 and 2014 annual reports, Chipotle acknowledged that it might be at higher risk for such outbreaks compared to its rivals as it used fresh produce and meats and used traditional methods of cooking rather than automation. Chipotle took various initiatives in an effort to recover from a spate of disease outbreaks – including E. coli, salmonella, and norovirus. The company took aggressive steps to rebuild its image and strengthen its food safety practices. “Since the 2015 food poisoning outbreaks, Chipotle has taken major steps to improve food safety at every level of the supply chain,” said Steve Kronenberg, an attorney specializing in food safety issues. Notwithstanding all these initiatives, on July 25, 2017, Chipotle’s shareholders filed a class-action lawsuit alleging that the company had misled them into thinking that its food-safety issues had been resolved in 2015, whereas the new incidents with the mice and the norovirus outbreak proved that Chipotle’s food-safety issues were an ongoing problem. “While norovirus at a single location is not overly significant on the surface, we believe there is greater uncertainty now. There is a reasonable probability that media coverage will outweigh the severity of the incident and create renewed same-store sales weakness,” said Andrew Strelzik, an analyst at BMO Capital Markets. Moreover, some analysts felt that Chipotle’s communications following the crisis had been far from effective. Questions 1. ‘While investigators were not able to determine the exact reason, it was believed that an outbreak of norovirus was responsible. “We may never know what caused it in the end.’’ Discuss the problems with the current Chipotle Mexican Grill’s process, Use the root cause analysis to get to the bottom of these problems. 2. Explain to Mr. Jim Marsden, Executive Director of food safety at Chipotle the role of inspection and how it could be used to his advantage or Chipotle’s advantage? 3. Use the SCOR model to analyse the steps that Chipotle Mexican Grill’s can take to improve the flow of information between itself and its supply chain partners. 4. Describe how ERP systems can be used to link the different functions in Chipotle Mexican Grill’s

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