A Detailed Analysis of Starbucks Supply Chain and Quality Management

This report provides a comprehensive analysis of Starbucks' supply chain and total quality management practices. It examines the company's vertically integrated supply chain, from coffee bean production to customer service, highlighting the importance of direct interaction with farmers and ethical sourcing. The report details Starbucks' inventory management processes, including the use of automation and radio-frequency identification, and its customer service strategies, emphasizing personalized experiences and loyalty programs. It also explores the company's strategic planning, including broad differentiation and intensive growth strategies such as market penetration, market development, and product development. The report also discusses demand forecasting methods and distribution networks, concluding with an overview of how Starbucks integrates these elements to maintain its competitive edge in the global coffee market.

Running head: ANALYSIS OF THE SUPPLY CHAIN OF STARBUCKS
ANALYSIS OF THE SUPPLY CHAIN OF STARBUCKS
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Author Note

1ANALYSIS OF THE SUPPLY CHAIN OF STARBUCKS
Introduction
Total quality management or TQM mainly consists of the various processes and
efforts that are installed by the organization to form a climate which can be improved on a
continuous basis. The process of total quality management deals with an approach related to
long-term success with the help of customer satisfaction. The members of the organization
take part in the improvement of the various processes, services and products. The process of
total quality management is based on 8 primary factors which are, customer-focused,
involvement of the employees, process-centred, integrated system, systematic and strategic
approach, continual improvement, decision-making based on facts and communications
(Akgün et al. 2014).
Supply chain management is the process of managing the flow of the services and
goods which mainly involves the movement and the storage of the raw materials that are
related to the manufacture of goods. The supply chain management process consists of
interlinked or interconnected networks, node business and channels which combine the
provision of the services and products that are required by the end consumers. The marketing
channels of an organization play an important role in the supply chain management related
processes. The major function of the supply chain management of an organization are
designing, planning, executing, controlling and monitoring the supply chain activities. The
processes of total quality management and supply chain management are linked with each
other in the organization. The reason being in a global organization managing the quality is
not enough as the supply of the products at the right is also important (Androniceanu 2017).
The essay will be based on the analysis of the total quality management related steps
that are taken by Starbucks and the ways by which the organization manages its supply chain
activities. The major theme that will be discussed in the essay and its applications in

2ANALYSIS OF THE SUPPLY CHAIN OF STARBUCKS
Starbucks is “the commitment of management to quality”. The initiatives related to total
quality management implemented by Starbucks to fulfil the commitment of the organization
to provide quality will be analysed in the essay.
Starbucks is a coffeehouse chain and coffee company of American origin. The
organization was established in the year 1971 in Seattle. The organization has more than
27,000 stores all over the world. Starbucks has acquired the position as a major representative
of the concept of “second wave coffee”. The company distinguishes itself from the other
venues in the US which serve coffee based on the quality, taste and the customer experience
that is provided by them (Starbucks Coffee Company. 2018).
Discussion and analysis
The supply chain process of Starbucks is managed closely by the management of
the organization and this has been the key behind the success of this global coffeehouse
chain. The supply chain practices that are employed by Starbucks are highly acclaimed in the
industry and help them in providing superior services to the customers. The supply chain that
has been formed by the organization is vertical in nature which involves the management of
Starbucks in all the steps of the supply chain starting production of coffee beans to the coffee
that is sold to the customers. The implementation of vertical supply chain enables the
organization to work with almost 300,000 coffee growers all over the world. The
organization believes in the direct interaction with the farmers and tries to ensure that all the
coffee that are procured by them have same standards and quality (Augusto, Lisboa and
Yasin 2014). The organization collaborates with the coffee growers as they are committed
towards selling coffee related products which are sourced in an ethical manner. The quality of
the products of the company are also measured by the standards that are established by the
company itself. The standards that are developed by Starbucks are Coffee and Farmer Equity

3ANALYSIS OF THE SUPPLY CHAIN OF STARBUCKS
(C.A.F.E) standards and the Coffee Sourcing Guidelines (CSG). These standards mainly
require the suppliers of the company to meet the sustainability, ethical and quality related
standards. The standards of production that are set Starbucks provide benefits for the
suppliers and the organization as well (Beske and Seuring 2014). The organization interacts
directly with the coffee growers and the suppliers and provide them with special training
related to the growth process. The frequent communication and close relationship with the
suppliers makes them feel like an integral part of the organization. The suppliers of Starbucks
along with the management make the supply chain of the organization least susceptible to the
disruptions that can occur due to the external factors like shortage of workers. The various
processes which are part of the supply chain management of organizations are, forecasting,
transport, inventory, distribution, customer services, strategic planning and procurement
(Campos et al. 2014).
The inventory management process of Starbucks is mainly linked with the supply
chain related activities of the organization. The inventory management process in the cafes of
Starbucks involves activities like manual monitoring and office automation. The automation
process is used in a more comprehensive manner in the supply hubs of Starbucks. The
organization addresses the decision areas related to management operations by focussing on
the supply of adequacy and the automation (Chaudary, Zafar and Salman 2015). Inventory
management is one of the most important method of the entire operations management
process. This requires high amounts of capital and it further affects the delivery of various
goods to the customers. The process of inventory management affects all the operations of an
organization including marketing, accounting, finance and the information systems. The
inventory management related decisions that can be improved with the usage of tools like,
bar coding and radio-frequency identification. The radio-frequency identification method
refers to the usage of electromagnetic fields to identify and then track the tags that are

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attached to the objects in an automatic way. The process of radio-frequency identification can
help an organization like Starbucks to address the issues that occur in its operations. This new
process of delivery has further assisted Starbucks to improve its supply chain related
activities and speed up the process of delivery of raw materials. The inventory related
information of Starbucks are stored in the financial statements of the organization. Starbucks
is an organization which sells products and not services and hence the organization possesses
a large inventory.
According to, Dubey et al. (2017), the customer services process of Starbucks is
related to the consistency of the experience that is provided by the organization. The
Starbucks coffee company is dedicated towards providing quality service to the customers
from the time of their establishment. The organization has gained a fame for itself with the
help of their customer services related strategies. The coffeehouse chains aim at establishing
successful connections with the customers and this strategy has played an important role in
the success of the organization. The employees of Starbucks are trained in such a way so that
they can recognise the needs and the desires of the customers. The employees try to address
the issues that are faced by the customers and provide them with a positive experience in their
stores. The employees of the organization try to build relationships with the customers rather
than just addressing their complaints and issues. The personalized experience that is provided
to the customers helps in ensuring loyalty towards the organization. The organization has also
introduced rewards program for the purpose getting much more personal with the customers
(Cătălin, Bogdan and Dimitrie 2014). The different customers of the organization will receive
unique offers via emails and messages. This strategy has been implemented by the
organization for the purpose of increasing their customer base and increasing their sales
further. Starbucks has recently implemented artificial intelligence for the purpose of
providing personalized experience to the customers. This process provides suggestions to the

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employees regarding the type of coffee they wish to order based on their previous orders or
existing database with the company. The customer strategy is based on the ways by which the
organization can convince them to spend more in the stores of the coffeehouse chain. The
unique customer service strategy employed by Starbucks has helped the organization in
gaining the topmost position in the market (Chaudary, Zafar and Salman 2015).
As discussed by, Izvercian et al. (2014), the strategic planning related process of the
Starbucks Coffee Company is based on the emphasis on the specialty coffee based products.
The combination of strategies related to intensive growth influences the method that is used
by Starbucks to ensure expansion and growth. The intensive growth related strategies of the
organization need to be aligned with the generic strategies so that the performance of the firm
is maximised and it can achieve success in the industry. Starbucks has taken initiatives to
align the generic strategies with the growth related strategies by penetrating into the new
markets with the unique products. The management of the coffeehouse chain mainly
emphasizes on providing a warm and welcoming environment to the customers. The
Starbucks Coffee uses the strategy of broad differentiation which helps in making the
organization different from the others in the industry. The emphasis of the organization on
specialty coffee helps in differentiating Starbucks. The implementation of the broad
differentiation strategy is related to the other business areas of Starbucks. The organization
has been using the responsible and sustainable policy of sourcing to differentiate its products
from those of its competitors (Jackson et al. 2016). The major implication of the generic
strategy of broad differentiation states that Starbucks needs to continue its innovation
activities so that it can ensure innovation in the long-term. The organization brings
continuous changes in the ingredients used for manufacturing and the products that are
offered by them so that they always stand out from the competition in the market. The
organization also aims at innovating its supply chain so that the generic strategy implemented

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by the company is satisfied. Therefore, based on the generic strategy, the major aim of
Starbucks Coffee is to innovate the products and the supply chain (Jacobs, Chase and
Lummus 2014).
Demand forecasting is related to the estimation of future demand for the products of
an organization. The estimation of sales or the demand of the products in future can be
termed as demand forecasting. Starbucks uses the survey method for the purpose of
forecasting demands for their products in the future. The consumers of the company are
surveyed based on their choice and preferences. The organization then designs its products
based on the results of these surveys. The opinions of the customers are taken in the form of
feedback that can be provided by them in the feedback area of their outlets (Jiménez-Jiménez
et al. 2015).
Starbucks has implemented the intensive growth strategies along with their generic
strategy to ensure continuous growth of the organization. The various intensive growth
strategies of the organization are as follows,
Market penetration – The major growth strategy of Starbucks is the penetration of
markets for the purpose of maximising the revenues from the existing markets. The
organization has its presence in more than 60 countries of the world. The company aims at
increasing the revenues and growth in the current markets and it involves the strategy of
opening company-owned stores.
Market development – This strategy is used by Starbucks Coffee to ensure the
development of market. This strategy helps the growth of the revenues of the organization in
the new market areas or the market segments (Jiménez-Jiménez et al. 2015).

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Product development – This strategy is used by the coffeehouse chain for the
purpose of product development. This involves the creation of new products so that revenues
can be increased.
According to, Leavengood, Anderson and Daim (2014) the distribution network of
Starbucks consists of multiple channels for the purpose of global trading of the coffee
market. The distribution channel consists of various processes which start from the coffee
farmers to the to the importers or the brokers. The brokers then sell the coffee to the mass-
market of coffee producers and roasters. The organization aims at maintaining the quality of
coffee by improving the supply chain and creating relationships with the coffee growers. This
has helped the organization in attaining the supplies from the coffee growers and further
effectively bypassing the middle market which leads in saving the funds. Multiple
distribution channels are used by Starbucks for the manufacture of their products. The
organization therefore has more than one design related to distribution (Kasemsap 2014). The
organization sells the products with the help of direct retail chain in the stores owned by the
company. Starbucks imports and further processes coffee and sells this under their brand
name. The organization also sells the products in the shopping centres and supermarkets. The
company has agreements related to distribution with the coffee suppliers in the hotels, airlines
and coffee suppliers. The usage of multiple channels of distribution allows the organization to
reach the wider market. The organization however needs to be careful about the approach of
using multiple channels so that conflict related situations can be avoided (Mahmood, Qadeer
and Ahmed 2015).
As discussed by, Mangan, Lalwani and Lalwani (2016) the procurement policy of
Starbucks is related to the ethical purchasing of the sustainable raw materials for the purpose
of production. The success of the organization is related to the success of the suppliers and
the farmers who grow the coffee beans. The company helps these farmers to thrive and

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ensure long-term sustainability of premium products that are provided by Starbucks. The aim
of the organization is to make coffee the first sustainable product of the world and improve
the lives of around 1 million people. The approach of the organization related to ethical
sourcing of high quality coffee helps in fostering the better future of the farmers and the
communities. The purchasing practices of the organization are responsible and sustainable in
nature. The company supports fair trade in the purchase of coffee and helps in empowering
the small-scale farmers which will help in protecting the environment. The company grows
organic coffee by using the materials and methods that have low impact on the environment
(Meixell and Luoma 2015). The organic farming process helps in the replenishment and
maintenance of soil health and reduction of the usage of toxic and pesticides for the purpose
of building agriculture that is biologically diverse in nature.
According to, Mežinska, Lapiņa and Mazais (2015), the transportation related
activities of Starbucks are a major part of the effective supply chain management. The
system related to the management of supply chain is designed in a centralized manner and
this helps in the control of transportation of the raw materials and the products. The
management of the operations of the organization are sustainable in nature and it has the least
effect on the external environment.
Comparison between the Dunkin Donuts Group and Starbucks Corporation will
enable in understanding the major differences between the two largest eatery and coffee
producing organizations. The menus of the two organizations and the major style of business
of the two organizations are similar, however they have different business models. The
Starbucks Corporation has been established around twenty years after the inception of
Dunkin Donuts. However, Starbucks has shown huge growth after they have started their
operations in USA. The generic strategies described by Porter have been implemented by
Starbucks along with their growth related strategies (Mohammad Mosadeghrad 2014). The

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major implications of the generic strategies are related to cost leadership, focus strategy and
differentiation strategy. The organizations need to choose a specific strategy for the formation
of their overall business related strategy. Dunkin Donuts which is a U.S. based snacks and
coffee shop which has selected the strategy related to cost leadership. Dunkin Donuts charges
quite low prices for their products as compared to its competitors. There are three major
reasons due to which the organization is able to charged lower prices for their coffee from the
customers. The first reason is that they are able to produce more results and high turnovers.
The production of the organization is high and this enables them to spread their fixed costs
within a large number of units. Dunkin Donuts offers huge variety of products which further
limits the customization which of the services and products (Monczka et al. 2015). The
organization is able to bid in a competitive manner over the contracts that are made with the
suppliers as they purchase the raw materials in bulk. Dunkin Donuts is able to keep tight
control over the supply chain as they have strong relationships with the suppliers. The strong
supply chain relationship helps the organization in keeping the costs related to production
low. Dunkin Donuts has a strong presence in some parts of the United States of America,
however their presence is quite less in the other parts of the country. The organization has
more than 3100 stores in more than 30 countries and they serve their international customers
in an effective manner. The growth of the organization has been successful due to the
consistency that they have maintained between the stores (Palm, Lilja and Wiklund 2016).
The strategy that has been implemented by Starbucks is different from that of Dunkin
Donuts. Starbucks has implemented the product differentiation strategy as compared to the
cost leadership strategy applied by Dunkin Donuts. The organization has given utmost
importance to the quality of the products rather than cost related factor. Customer service and
experience has been given huge importance by Starbucks and they pride themselves for
providing the best coffeehouse atmosphere to them. The customers can stay in their outlets

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and enjoy the coffee and the ambience of the place. The coffeehouse of Starbucks is designed
in an environment friendly way and by using materials that are environment friendly in
nature. The company has taken other major steps towards reducing their environmental
footprints by using cups which are also environment friendly. Starbucks has always taken an
ethical approach when they acquire raw materials for the production of coffee (Rushton,
Croucher and Baker 2014). The ethical methods of Starbucks include the purchasing of raw
materials in a responsible manner and further supporting the farmers and promoting the
conservation of forests. This strategy of the organization has been able to attract the
consumers who are conscious about the environment. Starbucks has implemented the strategy
related to growth in a successful manner in addition to the product differentiation related
strategy. The international expansion of the organization has given them the topmost position
in the coffee industry. The success of Starbucks in the international arena is related to their
partners in the different countries and the strong relationship that they have created with the
suppliers. Starbucks gives their best in finding the partners who match their ideals, ethical
considerations and strategic practices (Sabella, Kashou and Omran 2014). The organization
also respects the cultures of the countries where they plan to expand their operations.
The comparison of the two organizations depicts that the generic strategies
implemented by Starbucks and Dunkin Donuts are different from each other. Dunkin Donuts
has implemented the strategy cost leadership and tried to increase their revenue in the market.
On the other hand, Starbucks has implemented the strategy of product differentiation and
implemented ethical business practices to create a different position in the market. The
strategies implemented by Starbucks have been much more successful as compared to that of
Dunkin Donuts. This has been proved by the aggressive expansion of the operations of
Starbucks in 50 countries as compared to the presence of Dunkin Donuts in 30 countries
(Saljoughian et al. 2014).

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The comparison of Starbucks and Costa Coffee is related to the difference in
strategies that are implemented in both the organizations. Costa Coffee is a multinational
coffeehouse of the British origin. Costa Coffee is considered to be second largest coffee chain
in the entire world after Starbucks. The organization was founded in the year 1971 and has its
operations in around 31 countries of the world. Costa Coffee and Starbucks give tough
competition to each other in the industry. Costa Coffee has implemented the strategy which
deals with high volume of production and low margin on the sales. The organization has been
expanding its sales by selling the products for prices much lower as compared to their
competitors (Siva et al. 2016). On the other hand, Starbucks has always aimed at
differentiating themselves based on the quality of their products. The organization has been
extending their line of products with the help of the upward stretch strategy where expensive
and high quality products were introduced. The organization has introduced coffee which are
made using coffee beans which are rare in the industry. As compared to Costa Coffee the
strategy of Starbucks is related to low volume and high margin related approach. The
strategies implemented by both the organizations have some advantages and disadvantages as
well. Costa Coffee uses a strategy which involves low risk in the development of the market
(Stadtler 2015). The organization targets the same level of customers and the changes in their
preferences with respect to the location are also taken into consideration. Costa Coffee has
employed the multi brand strategy which is related to the production of other products like
sandwiches and cakes along with coffee. The cafes also contain self-service machines along
with the service provided by the staff of the coffeehouse chains. On the other hand, Starbucks
aims at delivering the best possible service and high quality coffee to the customers who visit
their outlets. The customers can enjoy the ambience in the cafes along with the best quality
coffee with premium prices (Topalović 2015). Starbucks has been creating a lot of hype
around the exclusive products that they supply to the customers. This has helped them in