Supply Chain Management - Starbucks Coffee

Supply chain management 1
Supply Chain Management
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Supply Chain Management 2
Overview
With 27 000 stores in more than 64 countries worldwide (Rueda, Garrett and Lambin
2017, pgs. 2480-2492). Starbucks Coffee is the global leader in delivering the coffee
experience to customers. In the latter stages of 2008, the company took an important step to
reinforce and centralize the already fragmented supply chain. The team reorganized it to
include each of the four major functional groups, namely the strategy, source, produce and
distribution. For example, the supply group worked to define the reasons which contributed
to price increases. The distribution company, for its part, agreed that the launch of a fifth U.S.
roasting plant would reduce costs and delivery time. The implementation of weekly
scorecards with unique quality, expense and efficiency indicators was another critical aspect
of change. This strategy created a common framework for the expanded supply chain with
priorities to suit the company's overall performance. The "total order receipt" was one of the
leading logistics interventions. Starbucks has a vertically integrated supply chain, ensuring
that every phase of the supply chain, from coffee beans to cup of coffee in the cycle of
customer growth, is taken into account. Using a vertically integrated method, Starbucks
works directly with almost 300,000 coffee farmers worldwide (Sáenz, Revilla and Acero,
2018, pgs. 443-454). The company believes that close contacts with the growers guarantee
the consistency and flavour of all its coffee beans.
Starbucks Global Strategy
Starbucks company was able to return its investments, one of the advantages of
moving from a domestic to an international strategy. This means that the company can
achieve many advantages over its rivals concerning resources and capacity. Starbucks, a
multinational coffee house company, began to expand its business overseas in 1995 because
of the exhaustion of America's market. Starbucks tested Japan by forming joint ventures with

Supply Chain Management 3
local retailers for the first time. Rothaermel (2017), stated that by 2001, Starbucks had over
150 stores with plans to keep its momentum high. The firm began by joining forces with local
business people. It enabled Starbucks to retain control and profit from a local operating
partner and was successfully opened in the foreign markets. In 2001 Starbucks launched a
global expansion program. This strategy authorized the opening of more than 600 stores from
the USA. The choice to expand globally enabled Starbucks to achieve its stated growth
targets and a broader market. According to Touboulic and Walker (2015, pgs. 16-42), nearly
200 units in other nations, including China, Japan, Kuwait, Iraq, NZ, Malaysia, Singapore,
South Korea, Thailand, Taiwan and the Philippines. Since its launch in China, Starbuck's
company has ensured that it adapts itself to the local environment, and this strategy has been
instrumental to its growth in the region. This develops strategic partnerships for the
implementation of digital technologies in China.
Starbucks has a crucial expertise to exploit its core product positioning approaches
successfully by offering high-quality drinks and snacks in a luxury product mix. Nguyen,
(2016), stated that Starbucks ' brand value is founded on the selling of the best-quality coffee
and related products and on a distinctive "Starbucks experience," which benefits from the
most exceptional customer service and tidy and well-kept shops that represent the
communities in which they work. Main core competency is the values-based approach for
human resources management to build good internal and external ties with suppliers, which
facilitates the effective execution of his business strategy of organic growth in international
markets and horizontal integration through means of smart acquisitions.
Challenges Facing Starbucks Operations
Through continually pushing on increased costs to its clients because of salary and
coffee prices, Starbucks leveraged its consumer satisfaction and the absence of elasticity

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among its consumers. Therefore, we saw four price rises on its products in the duration from
2014-2016, two of which were in 2016 (Marques, Camillo and Holt, 2015, pgs. 302-312).
The price increase was mainly designed to preserve the operating margins of the group. In
addition to intensified erosion and coffee rust infestation by pests and diseases, coffee
growers report rainfall and harvest trends changes which decrease the fertile land available in
coffee regions worldwide. A goal for Starbucks is to tackle the possible impact of climate
change on farming communities. Increased temperatures lead to increased pests and invasive
mushrooms (e.g. leaf-rust) which contribute to decreased overall crop yield. Besides, hotter
weather and rainfall anomalies are expected to restrict coffee production. Even a half grade
Celsius temperature shift can have a noticeable effect on the scent of their coffee for coffee
connoisseurs.
The company faces stiff competition from its rivals such as McDonald's and Dunkin
Donuts. McDonald's coffee segment is a significant competitor since its market capitalization
is about 50 million dollars (Marques, Camillo and Holt, 2015. Pgs. 302-312). However, they
face constant challenges due to change in external factors, such as market conditions,
economic conditions and adjustments to government regulations. Because of such a crisis in
2008, Starbucks had to close a large number of shops in the USA. According to forbs.com,
the firm also relies on an aggressive growth policy in China but also faces climate change and
well-developed tea markets in Asia.
Starbucks Capabilities
Starbucks uses a centralized system for its supply chain and the logistics network on
six continents. It lets Starbucks collectively run and maintain many world-wide distribution
centres, including five in the United States, two in Europe and two in Asia. Starbucks now
has a definite "scorecard" system to assess its supply chain efficiency, which improves