Starbucks is the number one speciality coffee retailer in the world. The company was founded in 1971 in Seattle. The mission of the company is “to inspire and nurture the human spirit – one person, one cup, and one neighbourhood at a time.”
Starbucks has more than 25.000 retail stores in 75 countries. The logistics of this huge company can’t be easy and that’s why I chose to look up some more details about this firm.
In 2008 the company had a problem namely the operational costs were rising, even though the sales were declining. This problem came up because Starbucks opened more and more stores around the world, but didn’t reorganise the supply chain. The supply chain organization had to focus on keeping up with the expansions. This problem had to be solved so a plan for reorganisation was made.
Plan for reorganisation
In this plan 2 things were investigated. First of all, the company determined how well the supply chain was serving the stores. This was very disappointing because less than 50% of the goods were delivered on time. The second investigation was to find out where the costs were coming from. The costs were very high because Starbucks was outsourcing most of the services like transportation, logistics, manufacturing.
The new plan
The plan consisted of 3 steps:
- Reorganising the supply chain organisation by simplifying its structures and defining more clearly the functional roles
- Focus on the reducing of the costs
- Improving the supply chain capability for the future
In the first step the complex structure was replaced by a simple one. Every job fell into 1 out of 4 ‘basic’ supply chain functions:
- Plan
- Source
- Make
- Deliver
In the second step the costs were reduced and a more efficient method was used. Also there were more negotiations about prices. For the last step a more efficient model for the delivery of coffee beans to the processing plants was invented.
Finally, Starbucks wanted to create one logistics system for the whole world. It was difficult because everything comes from a different part of the world. Coffee beans come from Asia, Africa and Latin Amerika. Merchandising comes from China.
Everything has to go to Europe and the USA in ocean containers. When it arrives, it is trucked to 6 storage sites. Then it is trucked to regional distribution centres. Some of these are company-owned, others are third-party logistics companies. So in the end in the warehouses there is not only coffee beans, but also merchandising, cups, napkins… Depending on the stores’ location they are supplied by a large or regional warehouse.
Starbucks tries to be as efficient as possible by making service data by store, delivery lane and stock keeping unit available to its supply chain partners. They want to be as transparent as possible in the improvement of the cost base while keeping the focus on the service to the customer.
The 4 focus categories for the global chain team are:
- Safety in operations
- Service measured on time delivery
- Total end-to-end-supply
- Enterprise savings
By reorganising the company, the costs were cut, but the customers didn’t feel or see a change.
References
(2013). How did Starbucks transform it’s Supply Chain. Retrieved from https://www.slideshare.net/NatashaBarrett/starbucks-supply-chain-39449671
Du, D. (S.D.). Supply Chain Management: Logistics Network Design. Retrieved from http://www2.unb.ca/~ddu/4690/Lecture_notes/Lec5.pdf
Company information? Retrieved from https://www.starbucks.com/about-us/company-information
Cooke, J. (2010). From bean to cup: How Starbucks transformed its supply chain. Retrieved from http://www.supplychainquarterly.com/topics/Procurement/scq201004starbucks/
Du, D. (S.D.). Supply Chain Management: Logistics Network Design. Retrieved from http://www2.unb.ca/~ddu/4690/Lecture_notes/Lec5.pdf
Heil, K. (S.D.). Location Strategy. Retrieved from http://www.referenceforbusiness.com/management/Int-Loc/Location-Strategy.html
Khan, Z. (2016). Transportation, warehousing and inventory decisions. Retrieved from https://www.slideshare.net/zebakhan38/transportation-warehousing-and-inventory-decisions
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