AMSC700 Case Study: Analyzing Starbucks Green Supply Chain Initiative

This case study examines Starbucks' green supply chain initiative, focusing on its performance, integration considerations, and value generation. The study begins with a research question on how Starbucks can sustain its green supply chain without compromising its competitive advantage. It then provides an executive summary outlining key findings. The introduction offers industry and organizational background, highlighting Starbucks' commitment to green supply chain management (GSCM). The operations and performance section analyzes supply chain phases (manufacturing, supplying, and distribution) and performance drivers like facilities, sourcing, and pricing. Integration considerations explore both internal and external integration strategies. Value generation discusses how Starbucks creates value through its supply chain practices. The conclusion summarizes the findings, emphasizing the need for a balanced approach to GSCM and competitive advantage. The study highlights the importance of collaboration, communication, and data accessibility to sustain the green supply chain initiative. The analysis also recommends cost reduction strategies to ensure reasonable market prices and maintain competitiveness.

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Table of Contents
1. Research Question............................................................................................................................3
2. Executive Summary...........................................................................................................................3
3. Introduction.......................................................................................................................................4
4. Operations and Performance..............................................................................................................6
5. Integration Considerations.................................................................................................................9
6. Value Generation.............................................................................................................................12
7. Conclusion.......................................................................................................................................14
8. References.......................................................................................................................................15
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1. Research Question
Supply chain and logistics interventions are central to the success of any organization
(Zailani et al., 2012). According to Kaipia et al. (2013), retailer and wholesalers in the
corporate sector including food industry are currently conscious about the impact of their
supply chain activities on the environment. In fact, Chkanikova and Mont (2015) pointed out
that the debate about sustainable supply chain practices is creating the need to review and
modify supply chain logistics from acquisition of raw materials to production and finally to
when the products reach the customers for consumption. Sarkis (2012) states that based on
the recent shifts in logistics, companies are therefore required to integrate environmental
concerns in their supply chain strategies, which brings about the dimension of green supply
chain management (GSCM). Starbucks is one of the organizations in the food industry that
has currently embraced the GSCM framework. The following research question is addressed
in this paper.
How can Starbucks sustain its green supply chain initiative without compromising its
competitive advantage?
2. Executive Summary
The purpose of this case study is to determine how Starbucks can sustain its green supply
chain initiative without compromising its competitive advantage by examining its
performance analysis, supply chain integration, and value generation as depicted in the
company. The case study found out that the company is striving to balance between
implementing effective green supply chain practices and improving competitive advantage.
The company carried out several activities to ensure that the green supply chain program is
sustained without compromising on quality. First, the Starbucks collaborated with other
investors through joint venture, which led to internal and external integration of supply chain
activities. The company also ensured that the communication is open and data on supply
chain activities is easily accessible. Moreover, the management also focused on eliminating
sales skews by improving the accuracy of market forecasts and lining the insights to supply
chain management. Furthermore, the company reduced planning cycle time, lapsed outlets
instances, and late deliveries.
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3. Introduction
Industry Background
Green retailing is food industry revolves around a well-elaborated framework that seeks to
foster sustainability. GSCM in this industry is tailored to ensure that there is a positive
consumer perception regarding the implication of the organization’s activities on the
environment. Youn et al. (2017) argued that companies operating food retailing business are
supposed to focus on measures that define supply chain logistics with a purpose of improving
sustainability. The scholar went ahead to list waste control, carbon emission, energy
management, and water preservation as the key dimensions of GSCM (Youn et al., 2017).
When these factors are incorporated in the supply chain models in food industry, an efficient
green in-store logistic process is guaranteed (Chkanikova & Mont, 2015).
Supply chain, therefore, plays a key role in the degree of quality of service and products
based on customer tastes and preferences, which depends on how internal operations are
conducted. Supply chain management defines the level of efficiency, quality of products and
services, and the revenue-cost interaction for growth and competitiveness (Shahzadi, Amin,
& Mahmood, 2013; Zailani et al., 2012). While some top companies in food industry have
managed to implement robust GSCM initiatives, a significant number are still unable to
develop an effective framework of implementation that supports sustainability while at the
same time maintains a competitive advantage.
Organizational Background
Starbucks is a major investment in the food industry and it is operating as a multinational
corporation since its inception back in 1971 (Starbucks, 2019). The firm has over 2200 units
in North America. The company has over 291,000 employees across the world. By 2018, the
stores operated by the company generated $19,690,300 while licensed stores generated
$2,652,200. Current operating income is estimated at $3,883,300 with corresponding net
earnings of about $4,518,000 (Starbucks, 2018b). The products and services offered could be
categorized as beverages, food, and non-food items. The most common product line are the
assorted beverages such as Italian espresso, fruit juice, tea products, cold blends, and brewed
coffee. Branded non-food items include mugs, coffeemaker, grinders and compact discs,
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tumblers, and media bars. The mission of the multinational company has been to offer quality
services across the globe by adapting to market changes and customer expectations.
Starbucks has been pursuing this mission through joint ventures, licensing, and franchising
some company operations. On the other hand, the process of transforming supplies chain
operations in Starbucks started back in 2009 with the move to enhance efficiency,
sustainability, and environmental safety. The company started green supply chain
implementation by considering ways of enhancing waste control, water consumption, energy
management, and carbon emission control within its supply chain and production processes
(Starbucks, 2018a).
By 2015, the company had extended its initiative to include third parties suppliers as part of
the compliance strategy (Leblanc, 2019). The management resorted to upstream and
downstream approach as a combined framework for the implementation of the green supply
chain program with the objective of enhancing its efficiency. The GSCM initiative and the
need to sustain the organization’s competitive advantage have become conflicting strategies
in Starbucks. Based on this challenge, a review of the program indicates that the intended
objectives have not been entirely achieved, which implies that the company needs a robust
strategy on how to balance the two corporate objectives.
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4. Operations and Performance
Supply Chain Phases
A critical review of the Green Supply Chain initiative at Starbucks shows how the company
considered the three primary phases of decision and management. Supply chain and logistics
process fall under Manufacturing, Supplying, and Distribution.
Manufacturing: At Starbucks, the management resorted to a collaborative approach with the
farmers to ensure the production of adequate coffee at reasonable prices. The farmers were
outsourced from developing countries because of limited cost of production. The company
worked with farmers to protect water catchment areas while at the same time increasing their
coffee zones and using modern and green farming techniques. The company currently
collects the harvested products, process it within the local subsidiaries, and transport the
finished product to other local warehouses for distribution. The success of this process
depends on interrelated functions such as inventory, transport, information, and clients’
relationship management (Leblanc, 2019).
Distribution: Through distribution, an organization is able to enhance access to the product
and services produced. During this initiative, the company enhanced its distribution by
adopting regional decentralization. Local warehouses have been designed to support energy
consumption. The outlet managers and owners are encouraged to equally adhere to green
retailing methods to reduce carbon emission, enhance water conservation, and control energy
consumption. Distributors are bound by the company’s cost management guidelines, quality
standards, market timing, external policies, and internal resource capacity.
Suppliers: At Starbucks, the suppliers work with the organization to ensure efficient
management of the production process. The management at Starbucks first evaluated the
external shifts and compliance requirements as a basis to improve collaboration with
suppliers (Rodrigo, 2012). By adopting the FIFO approach, the firm has been able to
maintain the quality of the products and reduce the cost emerging from warehouse
mismanagement. The company also considers the existing procurement planning and control
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measures and how they could be transformed to meet the milestones of green retailing
initiatives.
Performance Analysis
Facilities: Facilities are key drivers in the supply chain, which should be considered during
the design and planning phases (Estampe & Lamouri, 2011; Kurien & Qureshi, 2011). When
Starbucks was implementing the Green Supply Chain program, they resorted to
manufacturing recyclable cups for their coffees to reduce the amount of waste. The company
also resorted to energy conservation techniques in their kitchens and coffee processing plants.
However, a challenge emerged regarding the efficiency of the subsidiaries to meet these
demand without extra costs or strain on existing plant resources. The quality of the stored
product was also affected since the company was struggling to meet energy conservation
targets. Based on this problem, the company should consider centralizing the production
based on regional units for the production and processing of coffee.
Sourcing: Sourcing is another critical driver of supply chain performance, which is part of
design and operations phases (El-Baz, 2011). Starbucks resorted to outsourcing to reduce
expenditure and maximize profits and use of internal resources. However, based on the
number of outlets, the issue of increased cost was inevitable. The company became
concerned on how to remain competitive when the cost of production was escalating. In line
with this problem the company should ensure that it continues to outsource coffee and other
raw material from developing nations to reduce the cost, which ensures that more funds are
channeled to sustain quality and improve customer satisfaction.
Pricing: Pricing in the supply chain is a key factor during the planning phase (Estampe &
Lamouri, 2011). Pricing as a determinant of performance, especially in food industry,
emanates from other related factors such as transport and third-party costs (Shin et al., 2013).
During this initiative Starbucks works with an integrated pricing strategy that takes into
account the production cost and incurred expenses. In this case, the cost associated with
GSCM practices impacted the pricing strategy. Therefore, it is important for the company to
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consider other cost reduction strategies that will guarantee reasonable market prices for its
products for Starbucks to remain competitive in the market.
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5. Integration Considerations
Supply chain integration is a component of logistics management geared towards efficiency,
improved performance, and competitiveness. External integration involves the adoption of
coordinated efforts with partners to achieve the desired performance output in supply chain
management (Hulthen, 2016). On the other hand, internal integration entails the enhancement
of functions and processes in an organization with the purpose of improving efficiency in
supply chain management (Hulthen, 2016).
Internal Supply Chain Integration
Starbucks undertook several internal interventions to provide a sophisticated environment for
the daily operations under the new supply chain strategy (Cooke, 2010). The following
elements of internal supply chain integration were evident.
Organization: When Starbucks initiated the Green Supply Chain initiative, it was necessary
for the company to realign the internal operating structure and strategy (Morai Logistics,
2017). Moreover, all the outlets adopted the recyclable cups, reduced their energy and water
consumption, and ensured limited carbon emission (Rodrigo, 2012). However, the company
should consider how these changes impact the level of competitive advantage.
Communication management: The Company linked all the regional units through a
centralized managerial communication framework. In this case, all stores had to adopt a
proper warehousing strategy, inventory management, and production planning based on
customer flow rate as part of green retailing practices (Boyer, 2013). Nevertheless, Starbucks
needs to create an integrated supply chain system that links distributors and suppliers to
according to their regions to reduce the cost.
Coordination: The Company enhanced its coffee processing framework through localized
production based on existing subsidiaries especially in developing countries (Rodrigo, 2012).
While this is a move to reduce cost, the management should consider the impact of distance
on GSC needs and consideration, especially on transportation.
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Performance Evaluation: The use of reviews of performance based on instantaneous
outcomes allowed the company to link the supply chain implications to the projected or
forecasted milestones (Morai Logistics, 2017; Boyer, 2013).
Information Management and Technology: The management understood the role of
technology in this initiative; therefore, a customer management program and a supplier
coordination framework were needed. The company resorted to the use of integrated systems
to enhance operations within the supply chain strategy (Cooke, 2010).
External Supply Chain Integration
Starbucks also considered the advantage of the partnership to enhance internal strength and
supply chain efficiency by considering the role of external supply integration. The company
therefore resorted to the following measures.
Third-party partnership: Starbucks worked with farmers from developing countries because
of the cheap cost of coffee production while at the same time supporting afforestation
programs (Morai Logistics, 2017). Nevertheless, since the afforestation initiatives only
localized in developing regions, the firm should also consider developed states where most
outlets are found.
Information management and communication: By setting a comprehensive communication
structure between suppliers and outlet managers, it was possible for the company to enhance
capacity and efficiency (Cooke, 2010). However, to balance between GCSM and competitive
advantage, the company should consider the essence of linking suppliers and distributors
within a specific region to enhance the flow of products within a short period.
Resource management: The dissemination of the roles and management of suppliers as well
as resources is an approach used in Starbucks to improve efficiency. For example, the firm
ensures that the roasting plants, distribution centers, and outlet stores are compliant with the
green supply chain targets. However, in order for the company to continue improving its
competitive advantage capacity while at the same time enhancing competitive advantage in
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the sector, there should be a joint production to pool up resources across all regions (Morai
Logistics, 2017).
Compliance: GSCM comes with several requirements such as green manufacturing,
imperative energy consumption concerns, and green supply chain risk management.
Therefore, a high level of compliance is needed (Lehner, 2015; Wiese et al., 2012). The
Company was keen on legal requirement and supported a high level of compliance based on
supply chain practices. Such a move was seen on how the company approached the issue of
waste management and energy conservation (Rodrigo, 2012).
Consultation: GSCM is a new concept that required extensive consultation to improve the
success of the implementation process (Kaipia et al., 2013). At Starbucks, the use of external
professional assistance enabled the company to strengthen its inventory technology using
third-party applications. However, the company should consider the need to outsource
external expertise on long-term and permanent basis across its identified regions to improve
GSCM implementation and efficiency.
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AMSC700 Case Study (Assessment Two)