Analysis of Operations Management at Starbucks Coffee

This report provides a comprehensive analysis of Starbucks' operations management. It begins with an executive summary and introduction, outlining the company's background and strategic approach. The discussion section delves into Starbucks' customer base, operational objectives, and the application of relevant business models. The core of the report examines various operational processes, including the design of goods and services, quality management, location strategy, layout design, job design, supply chain management, process and capacity design, inventory management, scheduling, and maintenance management. Each process is evaluated in the context of Starbucks' overall strategy. The report identifies areas for improvement, such as employee training, and recommends increased customer involvement in seminars to enhance Customer Perceived Value (CPV). Finally, it emphasizes the importance of customer awareness regarding Starbucks' community stores and online services. The report concludes with references to support the analysis.

Running head: OPERATIONS MANAGEMENT
Operations Management in Starbucks
Name of the Student:
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Author’s Note:

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Executive Summary
In this report, the operational management process of Starbucks has been analyzed .In the
discussion section, the customers of Starbucks and operational objectives of the organization
have been analyzed with the usage of appropriate business model. In the next section of the
report, the operational activities of Starbucks like design of goods and services, layout design,
location strategy, quality management, inventory management, supply chain management,
maintenance and scheduling activities have been analyzed. It has been found that Starbucks
invests only 20-25 hours of training for the front-line executives which may not be enough, so in
this report it is recommended that Starbucks should invest more time and resources in training
program of its employees and customers should be involved to participate in the seminars. It has
been recommended that customers should know about Community stores of Starbucks and
website for community services which will increase the Customer Perceived (CPV).

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Contents
a) Introduction.................................................................................................................................3
Discussion........................................................................................................................................4
b) Customers of Starbucks, Operational objectives.....................................................................4
c) The operational processes in Starbucks...................................................................................6
How Operational Activities Helps or Hinders Achievement of Operational Objectives..........11
Total Quality Management in Starbucks...................................................................................11
d) Recommendations.....................................................................................................................12
References......................................................................................................................................14

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a) Introduction
Starbucks Coffee is based in Seattle, Washington. The coffee chain has more than 20,00O
stores across globe and target customers with high disposable income in major cities of the
world. Howard Schultz is the CEO of Starbucks. The products of the organization include whole
bean coffees, freshly brewed coffees, premium teas, pastries and confectionaries, Starbucks
mugs and CDS. The organization follows differentiation strategy and premium pricing strategy.
Operations play a strategic role in Starbucks because transformed resources of the organization
can be converted to products and services which will add value to the customers. The raw
materials that are coffee beans from suppliers across the globe and human resources of the
organization are input resources and the operation management converts these input resources to
the output, that are products and services of Starbucks which include coffee, snacks, coffee-mugs
etc and services to customers latte (starbucks.in 2017).The operation management process
includes four steps- steering of operational processes, designing of processes, products and
services, delivering, planning and controlling of existing operations and developing and
improving operational capabilities. The operations management team of Starbucks can be linked
with core and supporting functional units of the organization like technical function, marketing
function, product and service development, accounting and finance function , human resource
function and Information Systems function. In the United Kingdom, Starbucks leverage the
opportunity of high purchasing power of customers who are willing to pay £3 for a cappuccino
or mocha (starbucks.in 2017).

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Discussion
b) Customers of Starbucks, Operational objectives
The customers of Starbucks coffee can be categorized into internal and external
customers. The internal customers of the organization are the employees of the organization
which include the Board of Directors and the supervisors, the team members, the store manager
and the front-line executives of the organization. Since Starbucks is a retain organization,
internal customers can be of two types- employees who work at the back office of the
organization-the employees of functional units like the marketing team, operations team, sales
team and finance team and employees at front end in the retail stores who are in direct contact
with the customers. Communication and information flow will include flow of information from
the Board of Directors to front line employees as well as feedback from customers should flow
from front-line executives in store to the managers(Heizer 2016).
The external customers of the Starbucks organization are the public who visit the retail
stores of Starbucks in different countries across the globe. Teens, young adults in the age group
of 18-24, Adults in the age group of 25-40 are main customers of Starbucks. These customers
have huge disposable income and visit the coffee stores for business meeting, hanging out with
friends and for relaxation with a cup of coffee. The customers of Starbucks also include the
suppliers of coffee across the globe (Walker et al. 2014).
The operation objectives of Starbucks in the United Kingdom contribute substantially to
the Triple Bottom Line of the business like People, Planet and Profit. Starbucks engage in CSR
activities among community members and create value for Stakeholders by ensuring all raw-
materials are sourced ethically, environmental sustainability is taken into account and Starbucks

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connect members of its community with CSR activities like promoting entrepreneurship among
youth. The five operational performance objectives of Starbuck Coffee are providing goods and
services of premium quality to customers, fast and efficient service delivery(speed advantage),
deliver the service promise( dependability advantage), embrace changes and achieve flexibility,
and to achieve cost advantage while sourcing and manufacturing. As stated by Slack, Brandon-
Jones and Johnston (2013), the order-winning factors are the prime reasons because of which
customers of Starbucks purchase the coffee and avail services of the organization. These
competitive factors are high quality, fast delivery, innovative products and services, wide range
of differentiated and customized products and reliable services Qualifying factors in operations
management are and operations management of Starbucks should always aim to raise the
performance of the firm above the qualifying level.

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Figure: Five external operational objectives
Source :( Slack, Brandon-Jones and Johnston 2013)
c) The operational processes in Starbucks
1) Design of goods and services
Starbucks has adopted differentiation and premium pricing as the generic strategy of the
organization and thus design of goods and services are highly customized, focus is often on
addressing individual needs of customers who visit stores of the café, operational management
ensures premium design of products for Starbucks, often manufacturers are involved in the

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design of products like coffee-mugs, the high-end brand image of the organization is reflected in
the operational activities at store, for instance, name of customers are written on coffee mugs to
incorporate tailor-made services(Hill and Hill 2012).
2) Quality Management
Quality Management is a process that involves quality planning, quality assurance,
quality control and quality improvement. The sourcing of coffee beans from farmers across the
globe is in compliance with the standards of Starbucks Coffee and Farmer Equity (CAFÉ) and
environmental sustainability and ethical sourcing is taken into account while sourcing the raw
materials at Starbucks (Schultz 2012).
3) Location Strategy
Starbucks target upscale consumers in major cities and towns across the globe. The
location strategy adopted by Starbucks ensures the availability of large section of middle and
upper class populations with high disposable income. In some places, Starbucks adopts the
strategic clustering of cafes with the aim to gain market share and to keep competitors at bay.
Starbucks also adapts and embrace change in location strategy. For instance, in the United
Kingdom the organization has planned to open drive-through stores because customers prefer
roadside cafes (Slack, Brandon-Jones and Johnston 2013).
4) Layout Design Strategy
Layout design is important in Operations management to make the production process
more effective and to meet the needs of employees. Starbucks café clearly reflects the culture of
the organization and ambiance of the cafés is relaxing and amiable. The innovative design of the

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cafes across the globe ensures that the efficiency of workflow is maximized. Space utilization is
not maximized in store design and layout process. Enough leg space and proper gap between
tables and chairs ensure that experience of customers visiting the store is of premium quality.
This operational strategy is in alignment with the generic strategy of Starbucks that is
differentiation strategy for premium customers (Preiss 2012).
5) Job Design and Human Resources
The culture and vision of the organization are aligned in all areas of business process.
The human resource management ensures that strategies adopted by the organization are in
alignment with the culture and vision of Starbucks. Functional teams are employed and it is
ensured that there is proper performance management system for employees .Starbucks café
ensures that during recruitment and selection process, employees are hired whose internal values
are in alignment with the culture and values of organization (Sodhi 2015). Performance
appraisal, rewards, recognition, compensation, bonus, pay hikes etc are effectively designed to
retain employees. An effective code of conduct is designed for front line executives of Starbucks
who are in direct contact with customers and they are trained well so that they can deliver
premium service to customers (Lewis and Brown 2012).
6) Supply Chain Management
Supply Chain Management involves flow of information, materials and finances from the
point of origin to the point of consumption. The supply chain management can increase speed
and efficiency of an organization by substantially increasing revenue, decreasing cost and thus
impacting the bottom-line of an organization. The coffee beans of Starbucks are usually sourced
from farmers of developing countries. There is stable flow of supply and to optimize the process

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of supply, diversification of suppliers is the strategy followed by Starbucks. For selection and
prioritizing suppliers across the globe, a special program is used in the operational management
of Starbucks; this program is Coffee and Farmer Equity Program. The supply chain management
takes into consideration the people and planet concept of the Triple Bottom Line and thus the
Starbucks focuses on sustainability factors. Efficiency of Supply Chain Management is
integrated with Corporate Social Responsibility (CSR) and ethical sourcing (Ivanov,
Tsipoulanidis and Schönberger 2016).
7) Process and Capacity Design
As stated by (Gupta and Starr 2014), Production capacity must be planned by an
organization to meet the changing demand of its products. Starbucks ensures that the capacity of
the process is designed in a way so that fluctuation in demand can be met. Demand during peak
hours are met by adjustment of personnel, this adjustment is done by effective management of
manpower in business process of Starbucks. Cost-effectiveness and cost advantage is obtained
by efficiency of business process and optimum utilization of capacity. The process strategy of
Starbucks ensures that staffs are adequately trained to serve customized needs of customers and
specialized equipment like customized blenders and coffee machines are used in the store
8) Inventory Management
As stated by Krajewski, Ritzman and Malhotra (2013), Inventory Management is a
component of Supply Chain Management that supervises the flow of goods from manufacturers
to warehouses and then to the point-of-sale. In Starbucks, the office automation and manual
management ensures effective management of inventory in Starbucks. Use of techniques like
Just-In Time Management and Material Requirements Planning are used to manage optimum

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inventory of Starbucks. Just-In-Time technology reduces waste related to excess inventory and
overproduction by receiving goods only when it is required in the production process. The
management of inventory is linked with other facilities like the Supply Chain. The stock-out is
minimized in the organization and in the hubs of supply chain, automation and software tools are
used. Continuous supply of coffee beans is ensured in Starbucks and adequate supply is ensured
through proper monitoring and use of modern tools and software
9) Scheduling
In a production or manufacturing process, scheduling is used to arrange, control and
optimize workloads. Flexible scheduling is the facility in Starbucks that can be availed by
management teams. Automation and manual scheduling are using for scheduling various
activities of the business process. Streamlining of business process is focused but flexibility is
provided to management personnel of the organization (Lee and Tang 2017).
10) Maintenance management
Maintenance Management is of paramount importance for an organization to reduce
downtime from inefficient procedures of maintenance and broken equipment (Zurich 2017).
Third parties are hired by Starbucks for maintenance of physical assets; also employees undergo
training to carefully handle equipments and facilities at Starbucks offices and stores. Huge
compensation is provided to employees to retain them so that skilled employees are available for
maintenance of physical assets.
The measures for productivity that are adopted by Starbucks are-

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1) The productivity at Starbucks café is measured by measures like duration of average
order filling.
2) The productivity at roasting plant of Starbucks is measured by measures like weight of
coffee beans which are processed per time.
3) The productivity of maintenance is measured by measures like duration of equipment
repair (Lemus et al. 2015).
How Operational Activities Helps or Hinders Achievement of Operational Objectives
The operational activities of Starbucks are in alignment with the mission, vision and
goals of the organization which is to build a Company with soul, sale of coffee beans without
artificial flavors, customer satisfaction, to be an employee-centric organization and to oppose
franchising model to control quality. The operational activities of Starbucks meet the operational
objectives of delivering finest quality of coffee to customers, to deliver service in a fast and
efficient manner to achieve speed advantage, to deliver the promise of service so that customers
find the organization dependable and reliable, to embrace changes in the business processes, to
adapt to changes in external environment which will demonstrate flexibility and to obtain cost
advantage during sourcing from farmers across the globe. As stated by Bowen and Sisson
(2013), the order-winning factors which enable Starbucks to achieve competitive advantage are
innovative products and services, high quality, fast delivery and products and services which are
of differentiated, customized and tailor-made to suit needs of customers
Total Quality Management in Starbucks
The coffee growers and suppliers are visited by the coffee buyers about 18 weeks every
year and tools like Total Quality Management are adopted by the organization. Starbucks make

12OPERATIONS MANAGEMENT
use of innovation in reducing waste and to increase productivity. The organization improves its
business processes to increase customer loyalty (Lansford and Mishra 2013). Digital technology
is used and Digital Tipping, Starbucks Card, Mobile Order and Pay are some of the technology
used by Starbucks (Schniederjans and Triche 2013). Starbucks constantly uses digital platforms
to connect with customers across the globe and to build relationship with global customers who
enhances the brand image and increased Customer Perceive Value (CPV) (Chua and Banerjee
2013).
d) Recommendations
Starbucks should spend more time in training the employees of the United Kingdom of
the recently opened stores before they hit the floor. The organization uses only 20-25 hours of
training the front-line executives which may not be enough because these executives are in direct
contact with the customers and it is of paramount importance to ensure that they receive
adequate training for delivering incredible experience for customers.
Starbucks should dismiss employees in the United Kingdom who have a bad attitude
irrespective of their seniority and the customers should be engaged more inside the stores of
Starbucks. Coffee seminars should be conducted by Starbucks and customers should be involved
to participate in the seminars, feedback from customers should be taken adequately by Starbucks.
The suggestion is to have open-ended comment area which can be included in surveys so that
customers can leave their feedback.
It can be recommendation to increase awareness among customers in the about the
initiatives of Starbucks regarding Corporate Social Responsibility (CSR).Customers should
know about Community stores of the organization and website for community services which

13OPERATIONS MANAGEMENT
will increase the Customer Perceived (CPV) and will enable the organization to achieve the
operational objectives of customer satisfaction. The operational activities at Starbucks are
instrumental for the organization to achieve operational objectives.

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