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Supply Chain Case

Outline
STARBUCKS

Sami Choura | GSBA 560 | April 3, 2016

I.

Inbound logistics:
a) Modernized Information Systems:
i. Using this system Starbucks ensures that the flow of
information is efficient. Locally, each branch controls the
amount of goods needed using a fully integrated database,
which allows Starbucks to maintain a very efficient inventory.
The use of such technology enables Starbucks to monitor the
growing demand in real-time.
b) Distribution Centers:
i. Each distribution center uses the same database and
information system to fulfill all branches requirements and
keep the global roasting centers informed through a real-time
demand updates. Giving Starbucks supply chain added
flexibility and making it able to address peaks in demand with
agility.
ii. Depending on the region, the stores are supplied by either large
regional DCs or by smaller warehouses called central
distribution centers (CDCs).
c) Reliable Logistic/Supply Partners:
i. Maintaining great business relationships with suppliers, is key
for Starbucks. Having a healthy relation adds value to its whole

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supply chain system by making it more efficient and adaptable


to changes.
ii. Starbuck uses one scoreboard system to evaluate its supply
chain efficiency under four high-level categories: -Safety in
operations -On-time delivery and order fill rates -Total end-toend supply chain costs -Enterprise savings.
II.

Outbound Logistics: (One World, One logistic System)


a) Distributors:
i. Starbucks has a more flexible distribution channels when
compared to similar firms with global outreach. Starbucks has
two types of distribution channels, company-operated and
non-company-operated, that involve partnerships with major
established distributors.
ii. Company-Operated branches: Franchised and licensed stores
that contributes to the companys fast growth.
iii. Non-company-operated channels: It is a combination of Joint
Ventures with well-established channels and partnerships with
other supermarkets who have built Starbucks coffee shops,
which have greatly increased Starbucks market share.
b) Suppliers:
i. The company established its Coffee and Farmer Equity (CAFE)
sustainability standards to sustainably support its suppliers.

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ii. The Supplier Relationship Management enables Starbucks to


have a better communication and collaboration with its
suppliers. Starbucks makes its suppliers feel like an integral
part of the operation process, and that is critical given many
suppliers remote locations.
iii. Starbucks has contracts in place that secure its exclusivity to
the coffee suppliers, which means there is a reliable continuous
flow of supplies without the threat of potential competition for
resources.
iv. The company made a service data by store, delivery lane, and
SKUs available to its suppliers and partners to ensure
transparency and focus on satisfying both suppliers and
customers.
v. In the spirit of the companys commitment to global
communities, Starbucks host a Supplier Summit in China each
year. The summit includes a community service event and time
for suppliers and factories alike to raise questions and concerns
to the companys staff and other key business leaders from the
support centers and markets.

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III.

Supply Chain Security:


a) Enterprise Security Platform: Starbucks uses this central facility that
converges enterprise and physical security to monitor all of its
facilities and retail stores around the world.
b) Video monitoring: Starbucks uses video monitoring of loading
facilities to capture images of loading and sealing containers to ensure
containers security, which is an essential part of the companys supply
chain management.
c) Magnetic device trackers: Starbucks does not use RFID or GPS devices
due to their high cost, instead, the company uses magnetic devices
that track the temperature, humidity, opening, and closing of the
container doors. Those devices can also upload data from third party
logistics providers.

IV.

Procurement:
a) Starbucks strategy for supply chain involves diversification of
suppliers to ensure stability of supply. The company agents travel
across continents seeking high grade raw materials in addition to
establishing strategic partnerships with all of

Starbucks global

suppliers.
V.

Operations Management:
a) Optimizing Capacity: Starbucks designs its processes to meet
fluctuation in demand, therefore, optimizing its global capacity and

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capacity utilization. Through this operation strategy the company


maximizes its cost-effectiveness through efficiency of workflows and
processes.
b) Location Strategy: The company uses strategic clustering of its
branches in the same demographic area to maximize market share
and stay ahead of its competitors in those areas. Starbucks focuses on
urban centers where the majority of people are middle to upper class.
VI.

Sustainable Operations Management:


a) Starbucks takes a holistic approach to ethically sourcing the highest
quality coffee which includes, responsible purchasing practices,
supporting farmer loans and forest conservation programs.
b) Their supply chain is operating in a way that does the least harm to
our planet and they are working to significantly reduce their
environmental footprint by doing recycling and green construction in
addition to water and energy conservation. For example, Starbuck was
taking steps to making all their cups recyclables by 2015 using paper
napkins that they use in their stores.

VII.

Marketing Strategies:
a) Getting personal with customers: Starbucks uses this strategy by
having all their employees ask for customers names while making
their order. This initiative has helped the company gain new
customers as well as retain its current ones.

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b) Adding value: The company offers free WiFi to all its customers and
that in fact has enhanced Starbucks sales and increased the demand
for its goods. Since a lot of people hit the coffee shop seeking internet
access while on the road or travelling in a new city.
c) Great word of mouth: word-of-mouth recommendations are a
cornerstone of Starbucks marketing strategy. The focus on this
strategy helps Starbucks minimize its marketing budget in new shops
for example to as little as 1% of the usual total marketing spending.
d) Great offers: The offers are usually focused around new products and
done in a very engaging but understated way, which often makes a
customer feel like theyre in on something that not everyone else
knows about.
VIII.

Manufacturing:
a) Frequent factory assessments: This strategy has been a key part for
Starbucks. Since they started the program in 2006, they continued to
work with more than 70 factories on programs to improve standards
and in 2013 they assessed 86 factories and found that 22 of them failed
to meet their standards. Even though Starbucks approach is to work
with suppliers to correct the issues, there are times when they halt
business due to the nature of the issues and until adequate resolution
takes place. While Starbucks was able to implement improvement

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plans with almost half of the factories assessed, they discontinued


working with 17 factories for standards issues.
IX.

Innovation:
a) Starbucks Mobile App: Starbucks has recently leveraged the use of
mobile applications and has an investment partnership with Square, a
mobile payments app that is integrated with its Starbucks app. This
creates an ease of use process for customers, aligns customer loyalty
through reward programs. Starbucks has already set the bar in the
industry with this advancement and according to different sources
about 10% of its transactions in the US have been made using mobile
applications.
b) New Distribution Channels: Starbucks introduced a beta version of a
delivery system called Mobile Pour. This presents a great opportunity
for the future by expanding their end product distribution systems
and could drive more revenue if the implementation is successful.
c) Full-scale coffee production: Starbucks purchased a farm in Costa Rica
used for research to learn more about a dangerous fungus. This move,
however, will allow the company to meet increased demand and gain
massive competitive advantage over other coffee manufacturers.

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