Starbucks Operations | Supply Chain Management

Running head = STARBUCKS OPERATIONS 0
Starbucks operations
Supply chain management
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Contents
Overview..........................................................................................................................................1
Operation management strategy of Starbucks.................................................................................2
Design for Goods and services.....................................................................................................2
Quality management....................................................................................................................2
Location strategy..........................................................................................................................3
Layout strategy.............................................................................................................................3
Human resources..........................................................................................................................3
Process capacity and design.........................................................................................................3
Inventory management.................................................................................................................3
Scheduling....................................................................................................................................3
Maintenance management............................................................................................................4
Supply chain management...........................................................................................................4
Challenges in supply chain management.........................................................................................4
Analysis of Starbucks supply chain management...........................................................................5
Recommendation.............................................................................................................................7
Conclusion.......................................................................................................................................7
Reference.........................................................................................................................................8

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Overview
Starbucks is an American coffee organization with its coffeehouse chains spread throughout the
world. The growth of the organization since its foundation in 1971 to date is has attracted many
researchers towards the study of operational management at Starbucks. The major products
offered by the organization in their coffee shop are Coffee beans, pastries, freshly brewed coffee,
and confectionaries (Gallaugher & Ransbotham, 2010). The major driving source for the
organization is there differentiation strategy along with its targeting of the premium consumer
with its approach in premium pricing. Operations have a decisive role in the growth of the
organization; it covers the whole pathway starting from the procurement of raw coffee beans to
delivery to a consumer in the form of freshly brewed coffee (Paryani, 2011). Supply chain
management in operational management strategies play a significant part as a tool for the
attainment of the organization goal. Present report provides a brief overview of the operational
strategy with an emphasis on supply chain management.
Operation management strategy of Starbucks
The strategies adopted by the organization for their smooth operation in business could be
categorized into 10 parts. The 10 categories are the different areas of operation and approached
by the organization with different policies. The organization’s coffee and farmer equity policy in
supply chain management provides examples of organization policy in its operation management
system (Azriuddin et al., 2020). The 10 decisions of operational management strategies adopted
by Starbucks are:
Design for Goods and services
The distinction and superior pricing policy adopted by Starbucks as their universal approach of
the organization, hence resulting in a highly tailored methodology targeting the need of
consumers on the individualistic basis who has visited their store. One of the examples of the
tailored approach of Starbucks service is the naming of the customer on the cups (Susanty &
Kenny, 2015).

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Quality management
It involves the overall quality in the context of planning, assurance, control and improvement
quality. For example, the coffee beans are under the standards established by Starbucks and in
accordance with environmental sustainability (AlMaian et al., 2015).
Location strategy
The high-class customers of Starbucks are placed throughout the world, in most of the major
cities. The location selection is based on the population demographic and generally, stores are
opened in the area has a high density of middle and upper-middle-class population. In terms of
way of people eating Starbucks devise its strategy for the store location, as in the case of the
united kingdom, Starbuck has planned to open drive-through stores.
Layout strategy
The Starbucks café is designed to provide enough leg space for the customers along with the
innovative design in the placement of various equipment of the store helps in maximizing the
workflow efficiency (Wu & Liu, 2014).
Human resources
Team with the specific responsibility towards the performance management of the employees,
along with that the human resource department also makes sure that the adopted strategies are in
accordance with the vision of the organization. A special emphasis is made at the time of
requirement; hired employees have values similar to the values of the organization (Xue, 2017).
Process capacity and design
It has been reported in the literature, that the organization's production capacity must be in
accordance with the demand of the product. The staff training program ensures that the staff
could work efficiently during peak hours (Simon, 2011).
Inventory management
It governs and makes sure that the material flow should be continuous, such as from the stating
source, which could be a manufacturer to the stores (Gibbons, 2011).

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Scheduling
It is used to control and organize the workload, Starbucks applies flexible scheduling, which is
used by its management team. The organizations have their major focus on streamlining the
process, however, the managerial staff has been provided with flexibility in the service (Jacobs et
al., 2014).
Maintenance management
To reduce the lag in time attributed to the inefficiency in the processes of maintenance of
damaged or not working equipment. Most of the maintenance work in the Starbuck has been
outsourced to the third party, also the organization provides ample training to the employees for
proper utilization of the equipment (Fitzgerald et al., 2014).
Supply chain management
To organize and keeps a check on the movement of organization resource supply chain
management plays a vital role. It corresponds to movement of material in the organization, from
the early fresh material to the ultimate finished good. In case of Starbucks, it revolves around
the idea of the triple bottom line, which allows the business to be more directives towards the
sustainability factor. The organization’s supply chain management policy is in accordance with
corporate social responsibility and ethical responsibility (Smith, 2013). The procumbent of the
coffee beans by Starbucks is carried out with an association with the farmers of developing
countries.
Challenges in supply chain management
The exponential growth of Starbucks provided a major challenge in front of the organization in
terms, to cope up with the increased demand of the market along with the pressure of meeting the
expectation of theirs. The prime focus of the organization was on the reasonably priced
transportation process of the ingredients such as raw coffee beans, various materials associated

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with the food products provided by the organization, and the service provided to the costumers,
to make the experience of customers an unforgettable one. The recent change in the buying
habits of the consumers in terms of rapid service and on the go demand has presented a major
challenge in the organization.
One of the initiatives started by the organization in terms of reducing the service time is their
mobile application, which helps a customer to order their food and type of beverage on the app
and the app also provides the option to pay. The customers can use this app to find the nearest
Starbuck store from their location and place theirs on the go orders. The application provides an
acknowledgment of the order along with the approximate time limit; it would take to complete
their order. This helps the customer in terms of saving time for ordering food after reaching the
store and then waiting for the food to be served (Li et al., 2017).
In order to reduce the cost of transportation and logistics, along with resource management, the
organization has collaborated with various organizations and international reputed institutions,
such as MIT. The prime reason for the organization to focus on the transportation part is due to
the increased demand for Starbucks coffee in the big city and traffic of city provides hindrance
towards the supply of the goods to the store. The application of big trucks multiple in the city to
deliver well is not only economically expensive it is a threat to the environment. Therefore the
organization is investing in the mini driverless trucks which could work out of the city to deliver
a product with minimal hindrance from the traffic along with the reduction of carbon pressure on
the environment, which is in accordance with the organization's values towards the
environmental sustainability (Lemus et al., 2015).
Analysis of Starbucks supply chain management
The primary activity in context of Supply chain management is movement of anything whether it
is a piece of information or some sort of material and even finance from the source to the final
destination. The role of an efficient supply chain management stands to develop the speed and
effectiveness of operations of an organization. The growth of the organization with the help of
operational supply chain management involves sustainable increase in the organization’s
revenue along with the reduction in the cost of transportation and services, which would further
make an impression on the bottom line of the business

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The environment of Starbucks, the supply chain activity involves both the internal as well as an
external process. The process of coffee production, to the import of coffee beans, the processing
of the beans and preparation of final product and roasting. Other operation tangled with the
supply chain management process is the distribution of goods to the stores, various markets and
directly to the consumer.
The process of agriculture of coffee beans in the field and its harvesting to the roasting comes
under external process of the organization, on which they don’t have much control. The external
process could be comprised of many small scale organizations, such as the farmers who produce
coffee in the small scale in comparison to the purchasing scale of the Starbucks, the small
organization involved in the treatment of coffee beans, the organization involved in the export of
the coffee beans, the organization working as the middle man to negotiate the deal with the
exporter to and the importer. The organization makes a special effort in order to optimize these
external factors, with special emphasis is made during the optimization process that the steps
taken by the organization should be in accordance with the organizational ethical values, with a
no corporate moral boundary has been crossed prior to the purchase or at the time of the
purchase of the coffee. The organization also makes emphasizes that the business carried by
them should be done in good faith with a sense of global responsibility. To achieve the earlier
mentioned goal towards the conduct of fair business with responsibility, Starbucks has made
contact directly to the farmers who grow the coffee beans and the distributors. Moreover, this
direct contact with the farmer and the distributor helps the organization in making direct deals
that help in providing transparency to the process. The organization provides premium pricing
for the coffee to the farmer in order to guarantee that the farmer, should have sufficient money to
compensate for their production cost along with the fulfillment of the need of their families. The
organization works on the principle of fixed price purchase and contract for the future purchase
that helps the organization in the time of price fluctuation in the market. To save company coffee
supply that could hamper due to various reasons, one of them could be climate change, and
Starbucks obtain their coffee beans from the multiple locations over the world throughout a
different geographical area.
The internal process involved in the management from step of roasting to the final destination.
The various process involved in planning, inventory, and transportation and distribution. The

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organization uses Distribution Resource Planning (DRP) and Transportation Requirement
Planning (TRP) for the management of the material flow from the warehouse to the stores. An
emphasis is made in the organization for the flow of information, to and from the management in
order to detect the flaws in the operation and develop the operation management for the
betterment of the organization.
Recommendation
The dependence of the Starbucks in their supply chain strategy on the coffee bean from the farm
provides a major challenge to the organization, as the continuous change in the global climate.
The disturbance in agriculture due to the climate is a major threat to the organization's supply of
coffee beans. The organization has made an effort in this context by purchasing coffee beans
from different geographical locations. However, further, the improvement could be made by the
organization to save its expense by applying the concept of greenhouse growth stations that are
free from any impact from the outer environment.
The other issue faced by the organization is their transportation of goods from their warehouse to
the respective stores. The supply of goods by bigger trucks in a big city is not economically
viable therefore; innovative methods are needed to make product delivery more economically
effective.
Conclusion
The major driving source of Starbucks is there differentiation strategy along with its targeting of
the premium consumer with its approach in premium pricing. The operations management
system presents decisive pathway for the organization to achieve its goal; it covers the whole
pathway starting from the procurement of raw coffee beans to delivery to a consumer in the form
of freshly brewed coffee. Starbucks has categorized its operation in 10 categories and
approached by the organization with different policies. Operation management strategies of
Starbucks are categorized based on the corporate policy and the different area of the market that
are in contact with Starbucks. Supply chain management is a parts of organizational operation
management is supply chain management. The supply chain corresponds to the flow of material

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in the organization, from the initial raw material to the final finished good. The organization is
making a continuous effort for the improvement in its supply chain management system for
consumer satisfaction and sustainable growth of the organization.

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Reference
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Simon, B., 2011. Everything but the coffee: Learning about America from Starbucks. Univ of
California Press.

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Smith, D., 2013. Ethical Product Sourcing in the Starbucks Coffee Supply Chain. The Supply
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