Supply Chain Management Starbucks

Running head: SUPPLY CHAIN MANAGEMENT
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Supply Chain Management
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Executive Summary
This report sheds light on supply chain management of Starbucks. Supply chain management is
essential for strengthening the relationship between consumers and suppliers. In this particular
study, an overview of Starbucks and its outsourcing are explained in a brief manner. The
implication of JIT, lean thinking and TQM on workflow of the respective company is also
covered in this particular report. An assessment of Porter’s Value Chain and Porter’s Five Forces
are covered in this study with reference to Starbucks. This report highlights on the current
supply chain management problems like mobile-app based problems and late delivery of items. It
also provides recommendations like introducing a toll-free customer care number and
upgradation of app that would resolve the supply chain management issues.

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Table of Contents
Introduction......................................................................................................................................3
Discussion........................................................................................................................................3
Background of the company........................................................................................................3
Supply chain management of Starbucks......................................................................................4
Porter’s Five Forces:....................................................................................................................4
JIT, Lean thinking and TQM in Starbucks..................................................................................6
Outsourcing..................................................................................................................................6
Analysis of Porter’s Value Chain in Starbucks Source Chain Management...............................7
Issues in supply chain management.............................................................................................9
Recommendations......................................................................................................................10
Conclusion.....................................................................................................................................10
References......................................................................................................................................11
Appendix:......................................................................................................................................13

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Introduction
In accordance with the opinion of Hugos (2018) supply chain management involves
effective management of flow of items as well as services. It also includes the movement of raw
materials and storage of the raw materials. From the perspective of Bag, Anand and Pandey
(2017), effective supply chain management aids the companies to increase their speed as well as
efficacy of the suppliers. This report focusses on supply chain management of Starbucks. A brief
overview will be given in this particular study. An analysis of Porter’s value chain will be
covered in this particular study with reference to Supply chain management of Starbucks. This
study focusses on the analyzing the Porter’s five forces in the context of Starbucks. In addition to
this, the outsourcing of the reputed coffee organization are highlighted here. Apart from this,
lean thinking, JIT as well as TQM of Starbucks are discussed in a precise manner. In addition to
this, this study sheds light on current issues and possible solutions of Starbucks, which are
briefly discussed here.
Discussion
Background of the company
Starbucks is a coffeehouse chain of America. This organization was established in 1971.
The headquarter of Starbucks is situated at Seattle, Washington. It conducts its business in 27,
339 locations all across the globe. About 2, 38, 000 skilled professionals work at this particular
organization as per the statistics of 2017. It has been observed that its net income is US$2.885
billion as per the statistics of 2017. About US$22.387 billion is the total revenue, which has been
earned by this organization in 2017. Its total equity amounts to US$5.450 billion as per 2017
statistics (Starbucks.in, 2018).

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Supply chain management of Starbucks
According to Pan et al. (2018), integrated supply chain plays a significant role in
satisfying its customer base. It is seen that integrated supply chain is responsible for
incorporating flexibility and agility in the working procedures of the respective company. From
the perspective of Ayers and Odegaard (2017), integrated supply chain also enhances the profit
margins of the business firms. It has been noticed that Starbucks follows a vertically integrated
supply chain when it comes to manage the functioning of its supplier groups. In the opinion of
Amara, Halilem and Traoré, (2016), vertical integration is such an arrangement where supply
chain of the business firm is completely owned by the respective business firm. In case of
Starbucks, coffee is made as well as roasted by the respective company in order to keep the costs
low. It is seen that this coffee company has a centralized system where it ensures the fact that it n
has streamlined its logistic operations at six continents.
Porter’s Five Forces:
Threat of new entrants:
Threat of entrants is moderate because it is not possible for any new company to enter
into the market and capture a larger market share in a short period. It has been noticed that cost
of switching is not very high, therefore there is a scope for the new entrants to attract the
attention of its users and buyers by providing them coffee at cheaper rates (Beaugency, Sakinç
and Talbot, 2015).
Threat of substitutes:

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It has been noticed that this power is high because there are other alternatives such as
fruit juice, energy drinks, and water available in the market. It has been noticed that bars as well
as pubs selling non-alcoholic drinks also poses threat to Starbucks.
Bargaining power of Buyers:
This power is moderate to low. It has been noticed that there are various purchasers in the
existing market, therefore, it is not possible for the single buyer to ask for cost concession. Apart
from this, this company offers high-quality coffee to different customers. It is seen that these
clients are quality sensitive and they want to pay premium prices. On the other hand, Filippini
and Forza (2016) commented that it is not possible for this coffee company to hike the process
because it will drive the customers to switch from their brand to another brand. In this regard, it
can be stated that the Starbuck’s product mix is diverse.
Bargaining power of suppliers:
This power is low to moderate. Ethical sourcing is one of the major policy of Starbucks.
It has been noticed that the respective organization has formed strong relationship with tea as
well as cocoa farming communities. They have provided training to the farmers so that they can
obtain fine quality coffee from them. It has been observed that there are many suppliers
available in the existing market. As a result, this power is considered as low (Hota and
Newlands, 2017).
Industry Rivalry:
It is seen that this power is moderate to high. It has been observed that monopolistic
competition exists in this market (Filippini and Forza, 2016). In this regard, it can be stated there
are many firms who are competing among themselves for capturing a larger market share. In this

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regard, it can be stated that entry as well as exit barriers are not very big, thereby moderating the
intensity of competition for the respective competition. On the other hand, Hugos (2018) asserted
that companies like Dunkins and McCafe are posing tough competition to Starbucks. Therefore,
this power is considered as low.
JIT, Lean thinking and TQM in Starbucks
In accordance with the opinion of Prajogo and Cooper (2017), Just-in Time is the
inventory technique, which has been employed by the business firms for enhancing efficiency.
In the opinion of Koc and Bozdag (2017), adoption of this strategy enables the companies to
reduce waste by accepting items because these goods are required in the production procedure.
It has been observed that vertical integrated supply management system aids the company’s
owners to implement JIT in a proper manner. In accordance with the opinion of Mohajeri et al.
(2014) All the logistics actions are fully integrated in the supply chain management of Starbucks.
The reduction in producing cycle times took place after the implementation of JIT in supply
chain management of Starbucks.
In accordance with the opinion of Amara, Halilem and Traoré (2016), lean supply chain
concentrates on adding the value for the clients through identifying as well as eliminating waste
from the workflow of Starbucks. In addition to this, it also focusses on managing the
relationships between clients and suppliers (Hodge, 2018). It has been observed that Total
Quality Improvement (TQM) is the approach which seeks to make improvement in the quality
along with performance e, thereby fulfilling consumer expectations. In this regard, it can be
stated that supply chain can achieve the targeted objectives of Starbucks by integrating every
quality-related function as well as procedures throughout the respective business firm (Bag,
Anand and Pandey, 2017).

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Outsourcing
Distribution and Sourcing
Multiple channels are used by this company in order to distribute its products. It has been
noticed that this company sells its goods via company-owned stores. Importing and processing
takes place and after that, the coffee is sold in their own outlets. It has been observed that this
company also sells its items in the supermarkets as well as shopping centers. In addition to this,
it has been noted that distribution agreements are made between Starbucks and coffee suppliers,
airlines as well as hotels. Coffee and Farm Equity Practices Program (CAFÉ) is the green coffee
sourcing standard, which has been used by this reputed coffee company (Bag, Anand and
Pandey, 2017).
Analysis of Porter’s Value Chain in Starbucks
Actions in Porter’s value chain can be categorized into two segments. The first segment is
termed as primary activities.
Primary activities:
Inbound Logistics:
This refers to obtaining of available resources from a supplier groups. The main objective
of Starbucks is to strengthen its relationship with its supplier groups. In order to share a close
bonding with supply chain, it has initiated numerous programs for effectively managing its
suppliers. In this context, it can be stated that farmer centers are an integral part of the supply
chain management program thereby offering their support to coffee as well as tea manufacturing
farmers (Mohajeri et al. 2014).
Operations:

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There are 10, 808 licensed outlets of Starbucks as per 2015 statistics. In order to conduct
business, Starbucks uses organization operated as well as licensed stores. It has been observed
that this reputed coffee company conducts its business in 68 nations all across the globe where
stores are taken at lease. These stores are usually used for providing training. It can also be used
as storage and it serves the purpose of administering the entire business of Starbucks (Villarreal
et al. 2017)
Outbound logistics:
It has been noticed that most of the goods are sold by the company via its licensed outlets
and company owned stores. Online channels are also used for selling its goods and merchandise.
It has introduced single-origin coffees, and leading retailers like Guatemala Laguna de Ayarza,
Rwanda Rift Valley as well as Timor Mount Ramelau will sell these single-origin coffee to the
customers.
Marketing as well as Sales:
In order to increase the sales volume, the respective company has adopted social media
marketing and word-of-mouth marketing. It has been observed that it had spent approximately
$351 million for merchandising its products.
Service:
It has been noticed that this reputed company aims to strengthen their relationship with
the customers. Outlets of the respective coffee company have a consumer friendly atmosphere
where they can communicate with the employees as well as Barista.
Support activities:

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Infrastructure:
It has been observed that Starbucks possesses a good infrastructure. The different outlets
are well-designed and these stores offers excellent quality service to its existing customs.
Human Resource Management:
It comprises of highly experienced and talented human resource. The company gives
incentives to the efficient employees who were delivering their best performance for a long time.
This shows that this company takes care of its manpower thereby reducing the rates of employee
turnover.
Technology:
It has been observed that this company has introduced mystarbucksidea.force.com for
strengthening its relationship with the customers. Customers are allowed to share their
viewpoints and they are allowed to share their valuable suggestions to the owners of Starbucks.
Procurement
It is seen the agents of Starbucks visit nations like Asia, Africa and Latin America in
order to procure a high-quality raw material so that finest coffee can be produced by this
company. Besides, certain standards are maintained when it comes to choose finest quality
coffee beans. It has crated strict regulations when it comes to choose supplier groups (Kirchoff et
al. 2017).
Issues in supply chain management
It has been noticed that Starbucks is suffering from delivery process issues. It has been
observed that the customers faced problems whenever they have attempted to place orders in

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their smartphone-based app. This has resulted to customer resentment and dissatisfaction.
Another issue, that is troubling the management working at Starbucks is associated with late
delivery of products. It has been observed that customers are not receiving their ordered items
on-time, which has elevated their dissatisfaction index towards the respective organization
(Amara, Halilem and Traoré, 2016).
Recommendations
It is suggested for the management to introduce a toll-free customer care number where
customers will place orders via text-message. Each of the stores of Starbucks will have a unique
code. After receiving messages from the client’s end, an automated message will be sent to
customer’s phone and the outlet of Starbucks. It should be noted that this automated code will
consist order number, customer details and code number of stores of this organization based on
which customer will receive their product on-time without waiting in the queue. It is a
suggestion for the management to set up a communication channel for the clients where
customers will be informed that their app will be upgraded by the company. This approach will
fix the issue of late delivery of goods.
Conclusion
From the above discussion, it can be stated that an effective supply chain management
will increase the workflow of any organization. It has been observed that supply chain
management helps the company to deliver its products on-time. In addition to this, it can be
stated that a fruitful supply chain management helps the company to add value to its business. In
this way, it is possible for companies like Starbucks to retain its competitive advantage in the
competitive beverage market of America.

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References
Amara, N., Halilem, N. and Traoré, N., 2016. Adding value to companies' value chain: Role of
business schools scholars. Journal of Business Research, 69(5), pp.1661-1668.
Ayers, J.B. and Odegaard, M.A., 2017. Retail supply chain management. Florida: CRC Press.
Bag, S., Anand, N. and Pandey, K.K., 2017. Green Supply Chain Management Model for
Sustainable Manufacturing Practices. In Green Supply Chain Management for Sustainable
Business Practice (pp. 153-189). IGI Global.
Beaugency, A., Sakinç, M.E. and Talbot, D., 2015. Outsourcing of strategic resources and
capabilities: opposing choices in the commercial aircraft manufacturing. Journal of Knowledge
Management, 19(5), pp.912-931
Filippini, R. and Forza, C., 2016. The Impact of the Just-in-Time Approach on Production
System Performance: A Survey of Italian Industry. A Review and Outlook. In A Journey
through Manufacturing and Supply Chain Strategy Research (pp. 19-39). Springer, Cham.
Hodge, G., 2018. Privatization: An international review of performance. Routledge.
Hota, M. and Newlands, D., 2017. Case Study 2: Starbucks Philippines: Brewing a Filipino-
American Experience. In Services Marketing Cases in Emerging Markets (pp. 17-25). Springer,
Cham.
Hugos, M.H., 2018. Essentials of supply chain management. New Jersey: John Wiley & Sons.
Kirchoff, J., Nichols, B., Stolze, H. and Brown, C., 2017, May. The Spillover Effects of Negative
Supply Chain Information on Consumers’ Perceptions of Product Attributes. In Academy of
Marketing Science Annual Conference (pp. 761-771). Springer, Cham.
Koc, T. and Bozdag, E., 2017. Measuring the degree of novelty of innovation based on Porter's
value chain approach. European Journal of Operational Research, 257(2), pp.559-567.

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Mohajeri, B., Nyberg, T., Karjalainen, J., Tukiainen, T., Nelson, M., Shang, X. and Xiong, G.,
2014, October. The impact of social manufacturing on the value chain model in the apparel
industry. In Service Operations and Logistics, and Informatics (SOLI), 2014 IEEE International
Conference on (pp. 378-381). Ieee.
Pan, S.Y., Gao, M., Kim, H., Shah, K.J., Pei, S.L. and Chiang, P.C., 2018. Advances and
challenges in sustainable tourism toward a green economy. Science of The Total Environment,
635, pp.452-469.
Prajogo, D.I. and Cooper, B., 2017. The individual and organizational level effects of TQM
practices on job satisfaction. International Journal of Manpower, 38(2), pp.215-225.
Starbucks Coffee Company. (2018). Starbucks. [online] Available at: http://www.starbucks.in/
[Accessed 10 May 2018].
Villarreal, B., Garza-Reyes, J.A., Kumar, V. and Lim, M.K., 2017. Improving road transport
operations through lean thinking: A case study. International Journal of Logistics Research and
Applications, 20(2), pp.163-180.

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Appendix:
Appendix 1:
Figure 1: Supply chain of Starbucks
(Source: Beaugency, Sakinç and Talbot, 2015)