Supply Chain Management at Starbucks Coffee

This article discusses the challenges faced by Starbucks Coffee's supply chain and the measures taken to improve efficiency and reduce overhead costs. It also explores the advantages and disadvantages of hiring third-party logistics companies.

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SUPPLY CHAIN MANAGEMENT AT STARBUCKS COFFEE
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Question 1a
Starbucks coffee is a beverage multinational company based on coffee and tea. This
describes how it has a complicated supply chain since it sources it coffee beans and other
merchandise from around the globe. This translates to the main challenges facing the
Starbucks coffee supply chain that are: increased overhead charges and decline in sales due to
the inefficiency of the supply chain.
Question 2a
Making supplies form the regional warehouses would generally lower the overhead
charges incurred from transportation, inventory and fixed costs. This translates to a positive
increase in efficiency of the supply chain. The transportation cost would have been reduced
due to the reduction in the geographical distance and lead time.
Question 3a
So as to make the supply chain more effective and reliable Starbucks reorganized its
supply chain into four basic supply chain roles: planning, deliver, make and source. In a bid
to reduce overhead charges each department made certain cost- oriented improvements. The
sourcing department devised a new way of negotiating price based on ingredients. The
manufacturing team proposed processing of coffee beans in their production locality so as to
cut on transportation cost. The delivery team opted to formulating one logistical system of
global deliveries.
Question 4a
The sourcing department formulated a new pricing system based on the ingredients of
the products. This aided a lot in reducing the prices that star backs were paying for coffee

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beans and other merchandise. Moreover, by employing an ingredient pricing system
Starbucks will enjoy a steady supply of quality raw materials translating to quality output.
Question 5a
The make unit proposed processing of coffee beans in their sourcing locality. One of
the advantages of producing locally is that it results to a drastic drop in the transportation
cost. Moreover it translates to the reduction of lead-time.
Question 2a1
A third party logistical company is an independent company mandated to make
logistical services such as transportation to a purchasing party. According to (Wambua, 2017,
p.2) third party logistical companies do not have any rights on ownership on the goods
distributed.
Question 2a2
It is a good idea for Starbucks to employ third party logistical companies. This is
because Starbucks could have incurred more transportation at a lower efficiency and
reliability. According to (Langley, 2017, p.5) third party logistical companies aids in supply
chain transformation.
Question2a3
Starbucks prefers running and managing two regional distribution centers because
they are situated in the US. Regional distribution centers in the US are easy to manage
because they are located close to the headquarters of Starbucks coffee situated in Seattle,
Washington. This means that Starbucks is able the two regional distribution Centre efficiently
and at a lower cost.

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Question2a4
Despite of having numerous advantages there are also cons of hiring a third party
logistical company. One of the most apparent disadvantage is that some of the third party
logistical companies end up providing poor services at relatively high costs. According to
(Rodrigo, 2012, p.1) it is a difficult task to determine whether hiring a third party logistical
company is reliable efficient and cost effective.
Question2a5
In a move to a have an efficient supply chain Starbucks coffee formulated a weekly
scorecard to aid in measuring the efficiency and reliability of the hired third party logistical
companies. The assessment scorecard entails only two scores a 0 and 1. When a vendor
undertakes a successful delivery it is awarded 1 and an unsuccessful delivery is awarded a 0
Question 3. Essay
Starbucks coffee is a multinational majoring in coffee processing and coffee chain
stores. Being a global coffee company this translates to a larger and complex supply chain. In
the year 2008 Starbucks executive questioned the sustainability and efficiency of their supply
chain. This because according to (Cooke, 2010, p.1) in the October 2008 to October 2008
Starbucks noted a spontaneous increase in its supply chain expenses from $750 million to
$825 million. Due to this Starbucks coffee had to put in measures on how to regulate the in
their overhead charges. This essay highlights on the measures put in place by Starbucks
coffee in order to realize a sustainable supply chain.
To facilitate their supply chain transformation Starbucks coffee had to first restructure
its supply chain departments so as to improve efficiency. Moreover, in a move to curb the
increase in supply chain overhead charges it had to reduce the cost incurred in running its
regional distribution stores by hiring more reliable third party logistical companies.

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References
James. A Cooke (2010). From bean to cup: How Starbucks transformed its supply chain.
Supply Chain Procurement.
<http://www.supplychainquarterly.com/topics/Procurement/scq201004starbucks/> [Accessed
9 Sep 2018]
John Langley (2017). 2017 Third-Party Logistics Study: The State of Logistics Outsourcing.
Results and Findings of the 21st Annual Study.
<http://www.sipotra.it/wp-content/uploads/2017/06/2017-Third-Party-Logistics-Study.-The-
State-of-Logistics-Outsourcing.pdf> [Accessed 9 Sep 2018]
Rodrigo (2012). Advantages and Disadvantages of Hiring Third Party Logistics Providers
(3PL). The WritePass Journal.
<https://writepass.com/journal/2012/11/advantages-and-disadvantages-of-hiring-third-party-
logistics-providers-3pl/> [Accessed 9 Sep 2018]
Wambua Musyoka Julius (2017).influence of outsourcing third- party logistics on the
performance of food and beverages manufacturing companies in Kenya. Jomo
Kenyatta University of Agriculture and Technology.
<http://ir.jkuat.ac.ke/bitstream/handle/123456789/3312/Wambua%2C%20Julius
%20Musyoka.%20Phd%20SCM%2C%202017.pdf?sequence=1&isAllowed=y >
[Accessed 9 Sep 2018]