Managing Business Operations: Analysing Starbucks Crisis and Supply Chain Management Strategies

This article discusses the crisis faced by Starbucks in 2008 due to the increasing cost of supply chain management and how the company coped up with it using operation management principles. It also explains the principles of 4D's and 5 Performance objectives and how Starbucks turned around. Additionally, it covers Starbucks company's supply chain management strategies and a calculation of Starbucks cafe in Swansea. The subject is managing business operations and the course code is not mentioned. The course name and college/university are also not mentioned.

Managing Business
Operations

TABLE OF CONTENTS
TASK...............................................................................................................................................4
(1) Analysing the crisis of Starbucks taking perspective of operation principles.......................4
(2) Principles of 4D's and 5 Performance objectives, discussing Starbucks turned around.......5
(3) Starbucks company's supply chain management strategies .................................................7
(4) Calculation.............................................................................................................................8
REFERENCES..............................................................................................................................10

TASK
(1) Analysing the crisis of Starbucks taking perspective of operation principles
Operation management refers to the management of the practices of the business that
used to create the goods and services of the organization. It is basically includes the overall
processes that used to transform the raw material into the final products. This management
includes the process such as planning, organizing and supervising in order to ensure the higher
productivity and profitability in the business. It also helps to improve the overall efficiency in
managing the operations of the organization (Liu and Li, 2021). In the year 2008, Starbucks was
not sure that its supply chain management was meeting the planned objectives of the business or
not. This is because the operation cost of the organization was rising even when there was not
selling of more product. The expenses of the managing the supply chain was rose in the US but
the sales were dropped by 10% in the same year. The organization is themselves is responsible
for creating the crisis and decreases its success in the market. There were some areas o which the
organization is more focused that was designing of goods and services as it emphasizes on
providing the premium quality of goods and services.
As they used to design and manufacture their own goods like Starbucks coffee mugs
which makes the customers attract to have that products. The organization used to provide and
maintain the premium quality of services to their customers. This used to ensure the leadership
and have the friendly culture in the organization. The organization used to find that there are
small competitors and they have launched the new technologies in order to maintain its image
and reputation in the market. Starbucks company was itself the victim of its success as they have
opened many stores around the world at the rapid and continuous basis. The organization has to
keep focus on the doing the expansion in different countries of the world. In order to grow at the
rapid pace the company have faced the increasing the operating expenses and which causes the
crisis in the operation principles. The cost of supply chain was increasing very fast which makes
the company to be in crisis.
In order to cope up with the crisis the company have many operation management
principles which makes them to increase its reputation worldwide. The organization is always
focused on the location strategy which is basically opening its stores in the urban areas as middle
calls and upper class people can only afford the coffees' ad other products of the Starbucks. In

order to manage the operational principles the company has the very good job design and human
resources which used to maintain the culture of the organization. As due to increasing its stores
its different countries of the world which leads to increase in operations cost the organization has
hold the expenses. In order to hold the expenses and have the balance between the performance
and the operation cost the company has to make the important changes to do its operations. The
company used to use various productivity criteria on the basis of operations. The supply chain
management of the organization is global. The strategy of the company is to have diversification
of suppliers in order to have the safety (Palmieri and Musi, 2020). This makes the company to
have the ethical practices, which includes to focus on the sustainability. In order to focus on the
operation principles the organization also focuses on the ethics and corporate social
responsibility by have efficient supply chain management.
(2) Principles of 4D's and 5 Performance objectives, discussing Starbucks turned around
Schultz has persuaded the organization and turned the local coffee chain into the big and
reputed organization in the world. It is very hard to remember that the company was not on in
every big cities and countries. But the Starbucks has the very big turn around in order be reputed
company in the coffee cafe industry. The company turned around is described the principles of
4D's which are evaluated below.
There are 4D's of principles of productivity system which includes the following:
Do: This means if there is any task arrives it is important for the company to do that task
in order to survive in the market. Managing the task makes the organization to prevent them
from wasting the time (Mansell, Urmson and Mansell, 2020). The cited organization has done
the many operation task in order to increase its name and fame in different countries around the
world.
Delegate: In this, if any task arises that the company is unable to do it may delegate its
task to it s organizational members, colleagues. In the head of the company used to delegate its
task totally to the other member of the company. In this the cited organization will delegate the
task to the most experience person in order to take the good decisions in the company. After
delegating the task they must also consider the time in order to do work on time.
Delete: If the task is unnecessary and unimportant the mangers of the company must
delete the task (Azvee and et.al., 2021). Rather than adding that task and wasting the time the
company must open its stores in the areas where the people can afford the coffee. As the prime

function of the company is to dump the unwanted things from their plates and always keep
organized. This makes the company to focus on the urban areas only where the people can afford
their products.
Delay: If the organization has done with the previous three suggestions, then they must
keep the reminder for themselves for the task they have delayed. The task is often delayed when
they are not more important or unwanted (Alexeev and et.al., 2019). By doing this the
organization can delay the non-urgent tasks or projects and makes the business to reduce the
pressure. This makes the company to do their work in right and in innovative way and make
them to focus on important projects.
5 performance objectives
Quality - For successful business, it is necessary to aware about the productivity and
efficiency, so the key to having overall performance the firm needs to focus on Quality product
or services. Starbucks coffee quality is a visual sign of how well the company is doing their work
and satisfying its customers.
Speed and cost– when the company delivers the product or services on time without any
delay, then customer satisfaction level can be achieved. To attract customer Starbucks began its
supply chain transformation to improve its service delivery (Redfern, 2019). The firm delivers
coffee order on time, this makes customer more satisfied with their experience at stores.
Ultimately, this is the best way to attract customers as high speed can allow for faster service
with respect to delivery and hence saving costs as well.
Dependability- dependability influences whether the clients return to make a purchase in
the future or suggests company's business. It is the most important objective which is
successfully achieved by Starbucks in providing the reliable delivery of products or services.
Flexibility – This term means when the company change its operation to match the
requirements of customer and provide them facility as per their preferences. In other words, it
includes changing what the business operation does and how it works. For example- Starbucks is
able to change the delivery time as per the convenience of customers. They have offered variety
of coffee and new drinks to customers such as caffee mocha, salted caramel and other new
product line.
Cost- The company do not compete on price of product as want to keep their costs as low
as possible and want to maintain the quality, flexibility and dependability to satisfy its customers

(Hamburger, 2019). They are focusing on coffee cost so that resources can be used to grow in
various areas of the business.
(3) Starbucks company's supply chain management strategies
Starbucks is most popular brand and largest coffee house chain headquarters in UK, it is
so successful company because it was able to offer various range of coffee and drinks. The
drinks include chai latte, vanilla late, Frappuccino and others. The company provide a great
experience that changes how much of the people thought about coffee shops. The firm is
expanding its business across the world with the help of mass distribution channels. Due to
heavy competition in the industry, independent coffee shops differentiated themselves by serving
coffee to customers that was handcrafted by expert Baristas in UK. Therefore, the competitive
market position facing Starbucks did not go unnoticed by its management team.
During the year 2007-2008 the company has faced supply chain expenses which was
$750 million-$825 million. Also, the sales in the one-year reduced by 10% in U.S stores. As the
company was opening stores around the world and expanding its business then they have to
focus on market situation (Starbucks company's supply chain strategies, 2021). Also, they need
to keeping up with the expansion says executive vice president of global supply chain operations,
Peter D Gibbons. Hence, due to this crisis, the operating expenses and costs of running the
supply chain were increasing rapidly. In order to handle situation and hold those unnecessary
expenses the company would have to make changes to its business operations.
The firm uses a vertically integrated supply chain, which means that the Starbucks is
involved in supply chain process stages from the manufacturing process of coffee bean to serving
customer. In other words they are involved in each and every step of its process related to supply
chain from planning to cup of coffee sold to clients. The company's supply chain is well-known
as it is an example of value chain model (Richey and Ponte, 2021). The most likely supply chain
objectives for Starbucks includes:
In order to achieve the demands of the industry standards, the company had to accomplish major
goals such as -
(1) To improve a centralized logistics system so that distribution can be done across the world
The firm uses the centralized system which prepare package beans, manufacturing for
delivery . The package beans are delivered for the customers to the physical stores, which is

around 70000 deliveries on daily basis which is enough to supply the global network of firm.
They are using agile supply chain in order to manage operations on daily basis so that it can
avoid potential shortage. It will reduce costs so that firm can adapt to accomplish customer
demand in a rapid changing business environment.
(2) For current supply chain management, the company focuses on simplifying the complexity
The firm is focusing on planning, making, sourcing and delivering in order to achieve
supply chain function properly with respect to lean supply chain management. As this can
eliminate the waste components and increase productivity which is beneficial for company's
quality and employee morale. In planning, they focused on replenishment, new launches of
products, production planning whereas in sourcing activities there were two areas non coffee and
coffee procurement. Finally, for delivering the firm is working in transportation, customer
service and distribution channels which was assigned to the deliver group. After this, the various
department in the firm turned their proper attention to the another objective such as improving
efficiencies and reducing costs of products (Alwaleed and et.al., 2019). On the top of that,
sourcing group worked on identifying the business related cost drivers that were pushing up the
product prices. The firm began an initiative to provide training program to top graduates which is
related to supply chain education programs to ensure a future flow of talent.
(4) Calculation
Starbucks cafe in swansea
the average time which is required for receiving and ordering is 5 minutes, it means 12 cars are
being served by the cafe per hour.
So, the customer average number arriving will be calculated by dividing rate per hour
25/12= 2
so, the average number of customer who arrives at the checkout is 2
service rate for the cafe
60/5 minutes=
μ= 12 per hour
The arrival rate of clients
λ= 25 per hour
The average time they must wait before exiting Starbucks Drive thru
=(25/12)^2

=2.083×2.083
=4.33 minutes
From the above calculation it has been noted that the service rate is greater than the
arrival rate of customer at Starbucks. By calculation, Starbucks average time customer wait is
4.33 minutes and customer average number arrive is 25 per hour. The solution for the challenges
include they need to adopt self-service measures and also work on hold times for the clients.
Therefore, the waiting line of customer would eventually increase infinitely large. To improve
waiting line it is recommended to focus on both the arrival rate and average time of wait.
Because customers leave after being in the long line assuming that it is moving too slowly. As
the arrival rate is totally depended on the customers numbers being waiting or being served by
Starbucks, so they need to work on these criteria.

REFERENCES
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Online
Starbucks company's supply chain strategies. 2021. [Online]. Available through:
<https://studycorgi.com/starbucks-companys-supply-chain-management-strategies/>