Procurement and Supply Chain Analysis Report: Starbucks Coffee

This report provides a comprehensive analysis of Starbucks' supply chain management, encompassing procurement, operations, information, integration, and sustainability aspects. It examines Starbucks' mission, vision, and strategic goals, and how these are reflected in its supply chain practices. The analysis delves into Starbucks' sourcing of coffee beans, its use of vertical integration, and its commitment to ethical sourcing through programs like CAFE. It also explores the company's inventory management systems, the challenges it faces such as the bullwhip effect and congestion, and its adoption of technology. Furthermore, the report assesses Starbucks' integration model, its global logistics system, and its adherence to triple-A supply chain tenets. Finally, the report examines Starbucks' sustainability initiatives and concludes with a discussion of improvement programs, correlating them to the company's vision, mission, and strategic goals. The report also covers the challenges faced by Starbucks supply chain, including increasing costs and market saturation.

Running Head: SUPPLY CHAIN MANAGEMENT 1
Supply Chain Management
Name:
Institution

SUPPLY CHAIN MANAGEMENT 2
Table of Contents
Executive summary.....................................................................................................................................3
Vision, mission and strategic goals..............................................................................................................4
Findings of supply analysis..........................................................................................................................4
Findings of operation analysis.....................................................................................................................5
Findings of information analysis..................................................................................................................6
Findings of integration analysis...................................................................................................................7
Findings on sustainability analysis...............................................................................................................8
Starbucks procurement and supply chain analysis......................................................................................9
Discussion of improvement programs.......................................................................................................11
Correlating improvement programs to vision. Mission and strategic goals...............................................11
Conclusion.................................................................................................................................................12
References.................................................................................................................................................13
Appendices 1.............................................................................................................................................16
Appendices 2.............................................................................................................................................17

SUPPLY CHAIN MANAGEMENT 3
Executive summary
Starbucks is a multinational American coffee company established in 1971. It has its headquarters
in Seattle, Washington. Starbucks operates more than 26, 000 coffee stores across the world. Starbucks
uses vertical integration in its supply chain process. This implies that Starbucks is actively involved in
each step of the supply chain process. Starbucks connects directly with over 300, 000 coffee farmers
located in Asia, Africa, and Latin America. This is because the company is critical on the quality of its
coffee and ensures that it acquires the best quality coffee in line with its common Starbucks experience.
Starbucks ensures sustainability through its Coffee and Farmer Equity campaign (CAFE) that
promotes ethical sourcing and fair trade in the coffee market. Additionally, Starbucks promotes its own
code of conduct that is stipulated in the Coffee Sourcing Guidelines (CSG) that requires all its suppliers to
maintain high level of operation ethics, good quality standards, and sustainability. The company evaluates
and vet the suppliers based on this standards. The CAFÉ program and the direct interaction between
Starbucks and its suppliers develop a mutual beneficial relationship that makes the suppliers feel critical
in the supply chain activity of the company.
The supply chain process of Starbucks is high integrated through digitization and constant
monitoring. The company makes use of inventory software like the Inventory management Systems,
Periodic review System and Economic order quantity. This system facilitate the supply chain process by
linking the stores to major distributors such as the Brittle Deliveries. This system facilitate Starbucks to
make over 70,000 weekly deliveries.

SUPPLY CHAIN MANAGEMENT 4
Vision, mission and strategic goals
Mission- to inspire and nurture the human spirit one person, one cup and one
neighborhood at a time.
Vision-to establish Starbucks as the premier purveyor of the finest coffee in the world
while maintaining our uncompromising principles while we grow
The strategic goals of the company include standing as a recognized and acceptable brand
across the world. This is to be achieved through ethical sourcing, sustainability practices, and
environmental stewardship ("Starbucks", 2019). The goal of Starbucks is becoming the leading
retailer of coffee and its products in every market that the company expands to..
Findings of supply analysis
The department of procurement in Starbucks is involved in the sourcing of the raw
materials that can be used to develop the final product. The key product in the supply chain of
Starbucks is coffee beans sourced from Africa, Asia, and Latin America. The procurement agent
travel to these countries to source for the finest quality of the coffee. Additionally, the
procurement team handles dairy products such as cream and coffee mixes and flavors. The
suppliers of Starbucks are mostly coffee farmers located in Africa, Asia, and Latin America.
Other products such as furniture and dairy products are delivered by 3pls companies (Fahimnia,
Sarkis & Davarzani, 2015). The green and unroasted coffee beans are procured directly from the
farms. They are transported by large ocean liners to 48 regional distribution centers and 8 central
distribution centers. Starbucks uses less storage centers to promote quality of the final coffee by
closely monitoring the roasting and packing activities at the distribution centers. Starbucks does
not outsource its procurement of the coffee beans but rather it engages directly with the farmers
("Starbucks", 2019). However, it uses outsourcing in other product such as dairy products, coffee

SUPPLY CHAIN MANAGEMENT 5
flavors and in the outbound logistics through franchises and established retailers including
Amazon and Walmart. The benefits of outsourcing are; cutting on the operation cost of the
company, reducing overhead, reduces the risk of management and helps to expand the operations
of a business. Starbucks uses strict guidelines to vet its suppliers, using Coffee Sourcing
Guidelines as a standard to evaluate the suppliers. Additionally, the suppliers are expected to
conform to ethical guidelines. For example, Starbucks has zero tolerance for child labor (Rueda,
Garrett & Lambin, 2017). In Line of enhancing the concept of ‘a third place,’ Starbucks has
personal development and training programs like Barista training, retail managers training, and
suppliers induction training. Some of the challenges facing the supply chain of Starbucks include
an increase in cost due to the vertical integration of the company. Additionally, the global
recession experienced in 2008 resulted in an increase in business operations. Starbucks can use
the opportunity presented by technology to digitize its supply chain system. The sustainability in
the procurement process encouraged by Starbucks can attract more consumers to the brand.
Findings of operation analysis
Starbucks target markets are both men and women in the age brackets of 25-40 years.
The organization appeals to this consumer group through advertising, interior design, and décor
and quality products. The female consumers are concerned with premium health and Starbucks
targets them through low calories beverages. Starbucks also incorporate technology into its
operations to attract millennial (Zhu, Sarkis & Lai, 2013). Additionally, young consumers are
attracted by sugary beverages such as ‘baby cappuccinos’ and whipped cream drinks. Starbuck is
a global company with operations in over 75 countries and nearly 26,000 stores (Gavin, 2013).
The customers are dispersed across the globe. The customers are important because they bring
revenue to the company. Starbucks uses inventory tracking like managing their customer loyalty

SUPPLY CHAIN MANAGEMENT 6
cards to gain real-time data on consumer behavior and consequently forecast demands. This
information dictates whether to increase or reduce stocks. Starbucks also assess daily sales in
each location. The trend and patterns obtained inform the company whether to increase or reduce
certain products and when to launch promotions such as their 1 dollar regular brewed coffee.
Starbucks uses inventory systems, an example being the Periodic review Systems and Economic
Order Quantity (EOQ), to monitor the stock of its product (Tseng & Chiu, 2013). Additionally,
Starbucks uses the Inventory management System to connect the point of sales devices at
Starbuck stores with Bartlett deliveries center, which is its main distributor. These multiple
systems enable Starbucks to manage each function of inventory. Some of the challenges in
demand facing Starbucks include too much congestion at particular stores. Too many orders put
a lot of pressure on the workforce and results in fatigues. Challenges of inventory include the
integration of all the inventory systems under one platform.
Findings of information analysis
Bullwhip effect at Starbucks occurs when customers demand leads to an increase in
inbound logistics to meet the demand. The effect starts from the stores up the supply chain to the
raw materials suppliers. For example, Starbucks has been closing stores in the US market due to
market saturation. The cause was the need for Starbuck to address consumer demand for coffee.
However, the continuance decrease in disposable income has affected these stores. The remedy
of this is Starbuck closing down stores operating in the same street. Starbucks use Information
technology tools like the inventory systems. Some of these systems include Inventory
Management System and Economy Order Quantity (Susanty & Kenny, 2015). These tools
facilitate efficiency in the supply chain by linking the distributor with the organization. For
example, the IMS system links Starbucks with its major distributor, Bartell Deliveries. These

SUPPLY CHAIN MANAGEMENT 7
systems also increase customer service by correcting product assortment and the quantity to be
delivered. Technology adoption is a collaborative practice that is enhanced by customers and
suppliers. The advent of smartphones necessitated the company to introduce mobile order
systems. Additionally, most suppliers of Starbucks rely on IMS system to integrate the inventory
operations (Kolk, 2013). These systems were implemented through critical review and resource
allocation. The challenge of mobile orders is that it has resulted in congestion at the stores. The
technology system results in opportunities such as streamlined services and cost reductions.
Findings of integration analysis
Starbucks uses a single global logistic system in sourcing for the coffee beans. The
procurement team source raw coffee beans from farmers in Africa, Asia, and Latin America. The
global supply system of Starbucks is very centralized and effective. The warehouse is grouped
into large regional warehouses and smaller central distribution centers. The central distribution
centers are operated by third-party logistics companies and are involved in delivering dairy
products, coffee cups, and napkins, furniture and coffee flavors (Brandenburg, Govindan, Sarkis
& Seuring, 2014). Starbucks makes over 70,000 deliveries weekly to its stores. To assess
Starbucks using the 9-step integration model, the company eliminate waste by integrating all
aspects of the supply chain under one centralized global chain control (Aiello & Dickinson,
2014). It uses advanced technology in supply chain management through systems such as IMS.
Starbucks analyze customer usage by tracking loyalty cards. The company creates a lean supply
chain by reducing lean time through an effective global supply chain. It also creates a level flow
by distributing its supply chain to 3pl logistics companies. Additionally, Starbucks uses pull up
systems in its Enterprise resource planning systems. The system is also collaborative, for
example, the IMS links stores operation to Brittle deliveries, which is the lead distributor for

SUPPLY CHAIN MANAGEMENT 8
Starbucks. The 70,000 weekly deliveries done by Starbucks increases velocity and throughput to
customers ("Behind the Scenes at Starbucks Supply Chain Operations it’s Plan, Source, Make &
Deliver - Supply Chain 24/7", 2019). The global supply chain of Starbucks focuses on cost
fulfillment. Starbucks utilizes the three tenets of triple-A supply that are agility, adaptability, and
alignment. In agility, Starbucks responds to sudden and unexpected change by making daily
deliveries. It also carries out demand forecast to ensure a steady flow of the supply chain during
both peak and low periods. The supply chain faces constant change driven by various factors.
The vertical integration model of Starbucks limits its adaptability as the company does not
outsource critical procurement functions bearing all the risk involved. Starbuck institutes
alignment by rigorously assessing its suppliers through the code of conduct to ensure the interest
of the suppliers conforms to the company own interest. An example includes sustainability
practices across the supply chain.
Findings on sustainability analysis
Starbucks enhances procurement and supply chain sustainability through the
development of mutually beneficial relationships with the Suppliers. For example, Starbucks has
a sustainability program known as Coffee and Farmer Equity (CAFE). This framework ensures
the farmers grow high-quality coffee using sustainable farming practices such as using
environmentally friendly pesticides (Beske & Seuring, 2014). The triggers of the Coffee and
Farmer Equity(C.A.F.E) is the internal need of Starbuck to ensure it maintains a high quality of
Arabica coffee and maintain the distinctive taste that has been commonly known as ‘Starbucks
experience; externally, Starbucks understands the need of participating in sustainability farming
process in order to conserve resources. These guidelines help Starbucks to evaluate its supply
chain. CAFE is not all about sustainable farming practices but also alleviating the living

SUPPLY CHAIN MANAGEMENT 9
conditions of the primary suppliers in the supply chain of Starbucks (Campbell & Helleloid,
2016). The company engages in education empowerment programs for children living on the
farm. Additionally, the contemporary consumer is very keen on sustainability engagement
practices of multinational corporations. Companies that engage in corporate social responsibility
develop their brand image, consequently attracting more consumers to their brand.
Starbucks procurement and supply chain analysis.
For companies to succeed in the contemporary business environment, they must adapt to
the changing needs of the business environment and align the operations around a compelling
strategy. Dynamic alignment involves working towards a common objective through the
establishment of a foundation of shared values and beliefs. For the achievement of the dynamic
alignment, organizations must structure their plans by creating strategic goals that increase
performance. Dynamic alignment model in the supply chain is captured effectively by John
Gattorna and friends in his book Dynamic Supply Chain Alignment. He explains how multiple
supply chain models can be developed and maintained with flexibility and addressing the
opportunities and threats posed and involving all the stakeholders in the supply chain process
(Martínez-Jurado & Moyano-Fuentes, 2014). This includes the suppliers, customers, and chain
partners. Starbucks has strived to use the dynamic alignment model where possible in its
procurement and supply chain function. The global corporation has over 26,000 stores located in
more than 75 countries and this poses a great potential for inefficiency and procurement waste
(Seuring, 2013). But for Starbucks, sustainability and efficiency form the basis of its supply
chain. The company employs best practices in its operation, integration, sustainability, and
alignment of its supply chain process. Starbucks uses a centralized global supply and logistics
system to manage its supply chain across a vast network of six continents. It is able to manage its

SUPPLY CHAIN MANAGEMENT 10
multiple distribution centers located in Asia, USA, and Europe effectively. The company make
use of a scorecard system to analyze its supply chain process. It asses operations in supply chain
safety, on-time delivery, supply costs, and enterprise saving. Additionally, Starbucks makes use
of technology by automating its supply chain systems ("From bean to cup: How Starbucks
transformed its supply chain – Procurement – CSCMP's Supply Chain Quarterly", 2019). This
helps Starbucks in simplifying the supply chain process enabling the company to address such
instances as demand fluctuations. The company manages inventory through integrated inventory
management systems, and Economy order Systems to monitor its stock production. Starbucks
has a sustainable mutual beneficial supplier relationship, through its program such as the CAFE.
This program supports the primary suppliers who are the farmers located in Africa, Asia, and
Latin America. The company also benefits from this by getting high-quality coffee beans which
have been developed through sustainable practices. The company is strict on its third-party
logistics partners and has established rigorous vetting in line with the strategic objectives of the
company. It ensures the suppliers meet the green and efficient approach designed by Starbucks.
The coffee sourcing Guideline (CSG) set standards to be followed by the suppliers as most of
these suppliers manage the central distribution centers of Starbucks (Letizia & Hendrikse, 2016).
The company is strict on delivery timelines and has zero tolerance for child labor. The company
counters the effects of bullwhip by analyzing trends in the market and forecasting demand.
Market saturation has been one of the causes of bullwhip at Starbucks. The company focused
more on the expansion of its stores in the United States market and this lead to a decrease in
sales. This enabled Starbucks to forecast demand by tracking buyer behavior using loyalty cards
and act accordingly. Starbucks carefully manages cost to reduce wastage. However, the vertical

SUPPLY CHAIN MANAGEMENT 11
integration model of Starbucks limits its interaction with many third-party logistics. Starbucks,
therefore, misses on the advantages of outsourcing that can reduce operating costs and risk.
Discussion of improvement programs
Starbucks can make use of the following measures to improve its supply chain. First, it
can outsource more the procurement process to global supply companies that are well vetted.
The company can use its CSG program to vet new distributors and global logistics company to
better facilitate the transportation process. The company can also create a modern supply chain
process by merging the operations with a dependable analytical capability (Chae & Olson, 2013).
Additionally, it is imperative for Starbucks to set up teams to identify hidden risks in the supply
chain process. This is by setting up systems that monitor each process in the supply chain and
detect any discrepancy in the process. Starbucks can also set performance benchmarks right from
the distribution centers to its stores (Handfield, Cousins, Lawson & Petersen, 2015). The
company can make use of key performance indicators. This includes measuring production costs,
market segments, agility in tackling fluctuating product demands, and stable supply of the coffee
beans.
Correlating improvement programs to vision. Mission and
strategic goals
Outsourcing of the supply chain can enable Starbucks to streamline its service by
focusing on more critical issues such as managing the customer relationship and improving the
quality of services. Outsourcing will further increase the amount of deliveries done both to the
stores and the distribution centers. It will also reduce the liability of the transportation process
currently being incurred by Starbucks. This will nurture the customer spirit in line with its
mission and improve service quality as stipulated in the vision statement. Managing the

SUPPLY CHAIN MANAGEMENT 12
operations capabilities with data analytical system can help reduce the cost of operation in the
supply process. Consequently, Starbucks will be able to minimize waste which is one of its
strategic goals. Lastly, the use of performance benchmarks will enable Starbucks to address
specific problems encountered in the supply chain process enabling the brand to maximize its
supply chain process. An effective supply chain increases service quality which can elevate the
status of the brand.
Conclusion
The strategy of the supply chain used by Starbucks is fairly simple: reach to the root
location of the farmers to source for quality coffee beans. This approach ensures the company
controls its supply chain activities through vertical integration. This ensures only good quality
coffee beans are selected. The integration of supply chain activities enables Starbucks to
efficiently control the supply chain process. This includes building a mutually beneficial
relationship with the suppliers, establishing common objectives, and the sharing of information
across the supply chain process. Starbucks also engages in sustainability in its supply chain
through the CAFÉ program.