Strategic Supply Chain and Logistics Management Analysis for Starbucks

This report provides a comprehensive analysis of Starbucks' global supply chain and logistics management. It begins with an introduction to Starbucks' supply chain, highlighting its role in a multinational company. The report then develops a 10-point plan to ensure the supply chain's relevance to Starbucks' organizational objectives, followed by a discussion of three key supply chain management strategies that support the company's goals. The effectiveness of Starbucks' strategies for maintaining supplier relationships is evaluated, including an analysis of the IT systems used. The report concludes with recommendations based on the analysis, offering insights into how Starbucks can optimize its supply chain for future success. The report covers various aspects, including cost reduction, supplier alliances, inventory management, and risk assessment, providing a detailed understanding of Starbucks' supply chain operations and strategies within the context of a competitive global market. The report draws on various sources to support the arguments and analysis.

Running head: Strategic Supply Chain and Logistics Management
Strategic Supply Chain and Logistics Management (TASK 1)
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Strategic Supply Chain and Logistics Management
Table of Contents
a. Provide a brief introduction on the Starbucks Global Supply chain and the role of supply
chain function in the context of a Multinational Company such as Starbucks..........................3
b. Develop a 10-point plan that will ensure that the supply chain function and its strategies
remain relevant to Starbuck’s organizational objectives in future.............................................4
c. Discuss 3 Supply chain management strategies that are likely to aid Starbucks in achieving
its goals.....................................................................................................................................10
d. Evaluate the effectiveness of strategies used by Starbucks to maintain supplier
relationships and analyse the Information Technology used by Starbucks to create strategies
in developing relationships with suppliers...............................................................................12
e. Conclude your report by providing adequate recommendations as a result of your above
analysis done on Starbucks supply chain.................................................................................14
Reference list............................................................................................................................15

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a. Provide a brief introduction on the Starbucks Global Supply chain and the role of
supply chain function in the context of a Multinational Company such as Starbucks
Starbucks coffee is one of the reputed brand in the world of beverage industry. The
Starbucks coffee has increased its supply chain management so that the company can
improve their delivery of coffee to about more than 16,700 retail stores serving more than 50
million customers in 51 countries per week. During the period of 2008-2009, the operational
costs of the company in US region increased to more than USD 825 million from around
USD 725 million and yet the sales in the region fell by 10% (Stories.starbucks.com, 2019).
One of the main policy that has been taken by the company managers is that they felt the
need to reduce the cost of operation. Taking the cost analysis for the Starbucks Company, it
has been seen that 65-70% of the Starbucks cost of operation is getting increased due to
outsourcing agreements for transportation, third-party logistics, and contract manufacturing.
The overall structure of the business has been changed by the company and in order to
indulge the development of supply chain management, the company has segregated the
sourcing activities into two main sectors as coffee and non-coffee organisations. Starbucks
spends US $600 million on coffee each year (Stories.starbucks.com, 2019). Purchases of
other items, such as dairy products, baked goods, store furniture, and paper goods, total US
$2.5 billion annually is actually showing the increase in the cost of operation for the company
(Stories.starbucks.com, 2019).
After the reformation of supply chain management, each department started to indulge
cost minimisation programmes that has definitely allowed the company to improve the
condition of the company. The company took the policy of revising the price of the raw
materials that has been paid to vendors, shipping costs were revised and the products were
being broken down based on the ingredients rather than based on purchasing prices. All these

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strategies have helped the company in reaching the desired level of objectives that the
company had set as part of strategic management.
b. Develop a 10-point plan that will ensure that the supply chain function and its
strategies remain relevant to Starbuck’s organizational objectives in future
In order to improve the position of any particular company, the strategic management
of the company in terms of production and marketing of the products. Through the course of
their journey in establishing them as one of the biggest player in the world of coffee
production the company has enabled them to minimise the worries and focused mainly on
customer satisfaction. The manufacturing group developed more efficient model of sending
beans to the processing plants so that more amount of fine coffee can be extracted. By
regionalizing the plantation, the Starbucks Company were successful in minimising the costs
delivery rate of the coffee beans. However, ten supply chain management functions and
strategies that can be applied to the Starbuck Company are described below.
1. Establishing government council
Developing supply chain government council is mainly aimed in identification of
resources that has been previously increasing the costs of operation for the Company. It is
extremely important for the supply chain management to rely on the company objectives and
failure in the delivery of best amount of raw materials mainly happens because of mismatch
in the company objectives and supply chain management objectives (Arabian Gazette, 2019).
After the development of the business, Starbuck Company aimed in providing high quality of
coffee to its customers. In order to achieve the objective, the company has identified the
supply chain management by reforming the existing designs. Not only the provision of best
quality of services to the customers is the sole responsibility of supply chain managers but
removing the barriers within the organisation is also important. For example, the company

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segregated the groups into main category in the form of planning groups, delivery groups and
development group. Building of one logistics system has helped the company in simplifying
supply of around 70,000 to 80,000 deliveries per week plus all the inbound shipments from
around the world (Stories.starbucks.com, 2019).
2. Align the supply chain organization
It is important to bring all the supply chain management and vendors under one roof
is always beneficial for any company and even the company like Starbucks has taken this
policy so that they can have a monitoring power on the supply chain management. Taking
decentralised procurement process is mainly important for the development of error free and
efficient supply of goods and raw materials.
Figure 1: Supply chain management
(Source: Arabian Gazette, 2019)
It is extremely important for the company to bring in high class of logistics and management
and Starbucks has done the same thing by operates a coffee plant in Amsterdam, the
Netherlands, and a processing plant for its Tazo Tea subsidiary in Portland, Oregon and

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relying on 24 co-manufactures mostly from Europe, Canada and Latin America. While
making business in UAE, the Company has taken three important strategies
(Stories.starbucks.com, 2019). The first strategy that the company took is by introducing
direct retail system, they purchase and produce the products under their level of management
so that tough competition can be provided to stiff competitors. Secondly the Starbuck
Company has started to sell of their products in the shopping malls of UAE. Delivering the
products through airlines, hotels and restaurants and other multi diversity channels has helped
the company to capture wide range of markets in UAE. Starbucks first entered the Middle
East market in 1999 through MH Alshaya WLL, a company based in Kuwait.
3. Recruit supply chain professionals
It is important for any company to hire supply chain management professionals that
has helped them in improving better level of productivity. Even Starbucks has hired
professional in this field in the United Arab Emirates, this has helped the company in hiring
the technical professionals that are helping the company in improving their business position
within the market of UAE (Stories.starbucks.com, 2019). Through the recruitment of high
skilled professionals will help the company in minimising the overall development of
resources so that long run growth can be achieved.
4. Set the strategic sourcing strategy
Through the incorporation of strategic sourcing supply, the company is basically
aimed in improving the distribution system. Based on the geographical location of the
company, the company has taken the initiative of using small warehouses called as central
distribution centre (CDS) or through large distribution centres. The CDS are responsible in
delivering dairy products, baked products paper cups and napkins (Stories.starbucks.com,
2019). They are delivered along with the coffee to the customers in a dedicated Starbucks

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fleet trucks. Introduction of Stock keeping Units or SKU is helping the company in
identifying the quantity of stocks that the company is having in their retail outlets.
Continuous evaluation of the products and raw materials will be helping the company to
bring in changes in the production of high rated coffee and helped them in providing better
level of customer satisfaction.
5. Establish key supplier alliances
Through the development of supplier alliances the Starbucks has successfully
achieved the required amount of growths in the retail industry of coffee. The Starbuck
Company has taken the initiave to bring all the suppliers under one roof has definitely helped
the company in dealing with better level of resource distribution that has enabled the
development of better level of coffee to the customers. In order to indulge better level of
marketing, the company has processed high quality of coffee beans that has helped the
company in increasing the overall improvement in the customer satisfaction
(Stories.starbucks.com, 2019). Increasing the level of resource distribution, the company has
successfully improved marketing of the products so that overall resource distribution can be
taken in the form of better distribution.
6. Manage total cost of ownership
Identification of costs of ownership and reducing them is one of the biggest strategy
that has enabled the company to bring in high quality of risk and asset management and close
monitoring of the process will be crucial for the development of resources. Now it has been
see that Starbucks is mainly relying on developing new models. Through the incorporation of
models in the form of authenticity and storytelling, the Starbuck in United Arab Emirates are
helping in the development of better brand image for the company (Stories.starbucks.com,
2019). In the region of MENA the company took the advantage of franchise business that has

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enabled the development of better amount of customers. In the MENA region, Starbucks has
tailored halal menu items to the local customer, with some including halloumi, kashkawane
and zaatar wraps, labnah sandwiches, halloumi ciabatta, and sweet blended lattes to satisfy
the notorious Arab sweet tooth and this was the most important strategy that the company
took in increasing their position in the market.
7. Manage compliance and risk
Developing partnership with local economies has actually helped the company in
dealing up with better level of productivity. Now in order to increase the overall resource
channelization of the company within the United Arab Emirates, the company has tied up
with Alshaya Group to bring in high quality of coffee in the desert regions. The collaboration
of the company with AMIDEAST Entrepreneur Institute since 2016, the Company has helped
the development of local people participation so that local people will be able to identify the
resources (Stories.starbucks.com, 2019). Now in order to indulge the development of
resources, it has been seen that in order to bring in high grade of employee participation, the
company also used the social media to attract more number of customers.
8. Reduce company-owned inventory
Reducing the company-owned inventory has helped the company to bloom in high
quality of resource channelization. It is an important concept for the development of high
quality of supply chain management the company has built up strong reputation in the United
Arab Emirates. With 1,464,361 followers on Starbucks Middle East Facebook and 375,000
followers on the Starbucks Middle East Instagram account, the company has found ways to
engage directly with consumers in the MENA region in their own language
(Stories.starbucks.com, 2019). Reducing inventory is one of the important concept because of

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the fact that in United Arab Emirates, the company has enabled the supply of dairy products
by separate services.

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9. Gather Information on a timely basis
Through the incorporation of timely gathering of information it is highly important for
the Starbucks to deal with persisting challenges that are lying within the economy of United
Arab Emirates. Now in order to deal with the better level of social media marketing will
really help the development of business through both online and offline platform. The people
of United Arab Emirates prefers sweet dishes more compared to other dishes. It can be felt
through the social media marketing of the country and it has been seen that in order to
indulge the development of business in the market of United Arab Emirates.
10. Establish Processes and Controls
In order to ensure smooth functioning of the supply chain management it is important
to bring a control on the process and products that are going to be brought in markets of
United Arab Emirates. In the initial period the company was not being able bring any control
on the process and resource distribution but once the company started to expand in other
cities, the resource distribution improved and the company has successfully implemented
high grade of growth by incorporating young people in the business.

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c. Discuss 3 Supply chain management strategies that are likely to aid Starbucks in
achieving its goals
In order to achieve goals of the company, Starbucks has to take some of the important
strategies that will definitely highlight the incorporation of better and quality level of
production. Through the incorporation of better level of strategy management, the Starbuck
has identified some of important strategy that are described below.
Strategic alliances
The company has entered the market of United Arab Emirates is through the
franchising business. The company has expected estimated that $51 million in 1992, and are
expected to increase from 10 to 20 percent a year on average over the following three years.
Revenues from foreign retail stores in Kuwait totalled about $8 million in 1993 and are
expected to rise at an average annual rate of 25 percent through 1996. The average income of
people living in Kuwait is having large disposable incomes and they are preferring US
products more compared to other kinds of products. Now the Starbuck Company has
identified the development of the business in the shopping malls and other places that are
mostly visited by people having high disposable income. Now in order to survive within the
market of United Arab Emirates the companies need to bring continuous innovation in their
products because the people of Kuwait tends to change their tastes and preference depending
on what new is coming to market (YouTube, 2019).
Not only provision of best level of coffee is being produced but the Starbuck
Company takes time to but the African coffee beans regardless of price. Since 1999, the MH
Alshaya WLL has successfully helped Starbucks in increasing their business.

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The Urgency for Supply Chain Change
During the phase of staggering growth and complexity that are having within the
model of the company, the Starbuck has taken the initiative to change the technologies as
well as the supply chain management of the company. In the 2000s, Starbucks was already a
racehorse, with an increase in revenue from $4.1 billion in 2003 to $10.4 billion in 2008
(Logisticsbureau.com, 2019). The increase in the revenue is an alarming situation for the
company that has helped the company in implementing best quality of strategic management.
The company felt the need to identify the gaps in the form of investment. Previously the
company had fragmented supply chain and now the company has segregated the supply chain
management. Now in order to increase the development of the business the company has
brought all the supply chain management under one roof. This has improved the overall
supply chain management to bring in more quality of resource management and they have
developed the raw material quality that has enabled the company to improve their position in
the market.
Cutting the costs
This is one of the important strategy that is associated with the development of the
business. In order to indulge the development of high quality of resources, it is highly
important to reduce the total costs of operation. Through the minimisation of fragments of
raw materials, the company has successfully enabled them to bring in high quality of
resources. Now in order to indulge the incorporation of business, it is important to indulge the
development of better level of productivity. Through the involvement of one supply chain the
Starbucks has improved the overall quality of business. Opening of roaster plants have
enabled the overall improvement in the business that has merely improved the overall level of