Supply Chain Management and Operations Analysis: Starbucks Report

This report provides a comprehensive analysis of Starbucks' supply chain management. It begins with an overview of Starbucks' global presence and its vertically integrated supply chain, highlighting the company's strategy, which includes direct relationships with coffee farmers and a centralized supply chain structure. The report then examines Starbucks' global expansion strategy, core competencies, and the challenges it faces, such as competition, climate change impacts, and rising costs. It details Starbucks' capabilities, including its centralized supply chain system and digital technologies. The analysis extends to an evaluation of Starbucks' supply chain management, including its financial resource management, and the tools and techniques it employs, such as warehouse management and transportation systems. The report concludes with recommendations for Starbucks' continued growth and success, emphasizing the importance of diversification and adapting to social and cultural differences in international markets. The report also includes an analysis of the financial resources of Starbucks.

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Supply Chain Management
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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

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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

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protection operations and business saving (Lee and Vachon, 2016, 245-280). Starbucks uses
digital technologies to ensure that the supply chain is secure and can meet increasing global
demands for quality coffee. An electronic information system allows the organization to
monitor its market. This strengthens the supply chain of Starbucks to enhance manufacturing
consistency, logistics practices and scheduling and enable the organization to reach demand
peaks efficiently. Starbucks has access to new production, storage and transport records,
thereby allowing the supply chain of this business to work to the fullest extent possible.
Evaluation of Supply Chain Management
Most individual firms are nowadays not just autonomous but supply chain
competitors. A supply chain is a group of organizations engaged on commodity, distribution,
financing and consumer knowledge upstream and downstream flows (Mentzer et al., 2001)
and is known as supply chain suppliers. In general, the supply chain can be interpreted as a
network of business relations. In this regard, the performance of a single business, as
mentioned depends mainly on its capacity to incorporate its business connections network
(Fahimnia, Sarkis and Davarzani, 2015, pgs. 101-115). The supply chain in which the
business is placed could therefore be closely related to a basis of competition. The actual
competition is actually not between firms, but rather the supply chain against the supply
chain. Supply chain management (SCM) has evolved in this sense as a way to ensure that a
company's business partnership network is properly integrated. Supply Chain management
refers to all organizations in a supply chain, which can operate in close association with
suppliers with product creation and operation control, and include the entire supply chain, the
concept to combine internal business operations, divisions and systems across organization
borders. The Global Supply Chain Framework has been introduced in view of all of the above
considerations and clear goals. "Supply Chain Management is alignment of key business
processes from end users to original suppliers, which provide goods, services and knowledge

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which will add value to customers and other stakeholders. We plan to expand SCM
assessment, to accommodate both theoretical and practical perspectives (Nguyen, 2016).
Management of Financial Resources
Starbucks has everything on their current assets, including currency, account
receivables and inventory. Starbucks ' liabilities are split into two growing categories: current
responsibilities and long-term liabilities. In 2011 it posted $3,794.9 million in existing assets,
with $2,075.8 million in current liabilities (LeBaron, Lister and Dauvergne 2017, 958–975).
Therefore, Starbucks had a net working capital of $1,719.1 million in 2011. Two of the main
goals of the production management of working capital are to maintain a balance between
inventories, accounts receivable, cash and other profits and ensure that it remains manageable
while paying out existing assets. These are the two goals that Starbucks indeed strives for
with effective handling of corporate resources. Starbucks would be able to suffer the delivery
of its product to its customer as the basis of its business if the company failed to monitor its
product stock and individual stock carefully. The inventory specifically applies to receivable
statements and cash flow statement of Starbucks, where they closely follow to guarantee that
these standards are achieved and that productivity and consistency are preserved. Starbucks
seems to understand that it is necessary to effectively manage its network resources and thus
employ more than 500 employees, including accounting, auditing and product development,
in its financial division. However, with Starbucks maintaining profits and liabilities, given its
significant improvements in total working capital between 2010 and 2011. ⠀
The productivity of the organization depends purely on the quality and effective use
of financing by the business. The financial management helps to improve the competitive
status of the organization by adopting robust financial management tools such as schedule
tracking, ratio analysis and expense value profit analysis. However, Financial management

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aids to make the right corporate financial decisions. The financial decision would impact the
whole activity of the business since there are similar interactions with different functions in
an organization such as publicity, production staff.
Tools and Techniques applied by Starbucks Firm
The tools and techniques for supply chain management allow users to reduce failures
and costs when managing the entire supply chain.
Warehouse Management
The supply chain software can also help manage day-to-day processes in your stock
based on your preferred strategy. SCM applications deliver a broad range of stock control
roles to the client Ivanov, Tsipoulanidis and Schönberger, (2017), in the broadest or precise
manner. Most SCM applications offer the ability to handle dynamic logistics related to
sourcing, inventory management and expert product chain and preparation capability. Many
SCM systems offer specialized supply chain planning capabilities that enable users to handle
complex logistics linked to procurement, goods monitoring. However, retail operations tools
aid in the administration of the kitting and bundling process and of many warehouse sites.
This is particularly useful when you have to package multiple products in numerous
warehouses.
Transportation and Logistics Tools
Starbucks company needs some form of transport management to achieve a full supply chain
management solution. Transport and distribution software help users control product and
inventory transport from one position to the next. According to Ferreira, Mueller and Papa
(2018), consumers can schedule multi-stage journeys, merge shipments to maximize capacity
and arrange less than load (LTL) distribution using a transport-friendly SCM system. Both
resources help users cope with problems as they arise, in addition to transportation planning.

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Through monitoring inventories, people can see when inventories slow down and interfere
with identifying the cause. Collaborative instruments are also available inside transport
modules that enable all supply chain players to handle the shipping phase.
Recommendations
Starbucks has expanded considerably in recent years to international markets. Even
though it has grown recently and has achieved great foreign market growth, the bulk of its
shops and revenues stay in the States. Starbucks must expand its existing international
markets to diversify its income base. Starbucks has a broad support in the United States, but
much less than its base internationally. (Ernst and Haar, 2019, pgs. 125-144). Starbucks
should do more to grow its market in more countries and regions. Approximately 50 per cent
of Starbucks ' income derives from one nation, the United States, and in markets in which
they currently work. When the market begins to do poorly, it makes it difficult to recover.
Although Starbucks wants more foreign investment, it is necessary to take account of social
standards and cultural differences.
Another way that Starbucks could best succeed as an enterprise is to diversify its
product base and offer lower prices to customers. Starbucks is famous for its exceptional
coffees, teas and healthy products, but it does not provide any substance. Many in us earn
little money, so it's difficult for many people to buy expensive coffee. Therefore, it should
also reduce the prices of coffee to accommodate low and high-class people for the business to
thrive. When Starbucks sold dinners or even more deserts, they could significantly extend its
merchandise range and broaden the reach. When Starbucks diversifies its product range and
introduces alternative buying approaches, the business will benefit substantially as a
corporation (Chen and Lee, 2019).

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The corporation will increase its global market presence and strengthen its
organizational structure to build a more stable business model for Starbucks. The US is
limited mainly to growth and expansion, but in other areas, there are still many buyers and
opportunities. In the coming years, the company will be able to multiply rapidly if it
continues studying and exploring new nations. Through diversifying the product range and
introducing new and innovative economic strategies, Starbucks may extend its operating
reach (Wang, Gunasekaran, Ngai and Papadopoulos, 2016, 98-110). ⠀
Conclusion
Starbucks from the above discussion is an industry that is experiencing faster growth.
To maintain control of its prices, it secures the coffee supplies from India and China.
Although two-thirds of their stores are local, the percentage of foreign stores will rise in the
next few years. Starbucks is a company that takes and adapts its corporate commodity to the
local and cultural demands of various regions and societies. A cross-border business model
encourages it to have a general merchandise that can be customized to suit local
specifications. The Starbucks learning system allows it gain insight into new marketing ideas
and products, which can then be transferred within Starbucks to other national areas.
Starbucks must adapt to its different markets. To expand as a company, Starbucks should
maintain its strong communication network. It will grow globally without the additional
research tools and without the added time and money it needs by moving into a new market,
by opening more stores in countries to which it currently operates. Starbucks has a robust
international business model but still needs to build on its priorities and aspirations. Starbucks
will never be established as a business unless it overcomes any challenge that might be in its
path, and consider putting its goals and strategies in place.

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References
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