Managing Resources And Operations: Starbucks Operations Essay

Question:

Discuss about the Managing Resources and Operations for Starbucks Operations.

Answer:

Overview of Starbucks

Starbucks was established in the year 1971 with the efforts of Gordon Bowker, Zev Siegel and Jerry Baldwin. The first and the primary store of Starbucks were established in Seattle and were recognized by the name ‘Starbucks Coffee, Tea, and Spice’. Slowly and gradually the company developed itself in one the biggest giant in the beverages industry. In 1980, the company holds 4 retail stores and a roasting plant which trade coffee in the regions of Seattle. From the year of its commencement it started making huge profits (Starbucks, 2016).

In 1987, Gordon Bowker and Jerry Baldwin thought of selling the Seattle’s operation market of Starbucks completely including its brand name, roasting plant and the stores. It was immediately bought up by Schultz by raising the capital. The new name given was Starbucks Corporation (Loyd, Jackson andGaulden, 2002). In 1992, Starbucks Corporation went public (Loyd, Jackson andGaulden, 2002).

By the year 2005, the company had its business running in more 35 nations with around 10,200 stores worldwide which were licensed. There were offered number of things at all those Starbucks’ units such as music, teas, coffee accessories, coffee beans, food items and coffee drinks. In only 10 countries, the company had 5,200 business units and out of which US market hold the highest i.e. 80% and primarily by the areas such as airports and shopping centers. By the year 2011, it was recognized that the company holds 8,139 licensed stores and around 8,870 owned stores (Loyd, Jackson andGaulden, 2002).

(Source: Cheah, L. (2010). Starbucks: Thriving Coffeehouse, Award-Winning Employer. Retrieved on: 9th September, 2016. Retrieved from:

Supply chain/logistics management from the source to the customer

Inbound Logistics: Logistic Centre and Suppliers

For the development of the operational and the strategic plans Starbucks possess a formal process which makes sure that it links the requirements of the business with logistics, procurement and manufacturing. Starbucks’s material flow initiates from procuring the green coffee, towards the shipping port, at the target destinations the delivery and unloading of the containers, roasting of the coffee beans, the packaging of coffee, brewing of the coffee and serving to customers (Geereddy, 2012). For establishing an efficient and highly organized logistic system, few effective practices are implemented in Starbucks:

It makes sure through the updated information systems that the flow of the information is competent but if there is any requirement than the company can revert to its manual processes once again. With the help of the database the allocation of the goods is being controlled by the IT manager in every store and as a result it increases the efficiency of the inventory of Starbucks. The company integrates this with their manual processes so that in any case of emergency the staff can be able to make alternative solutions and arrangements (Janithri, Silva and Fernando, n.d.).

The inventory’s effective management is ensured through this distribution centers for better fulfilling the needs of all the stores worldwide from a suitable location (Geereddy, 2012).

There has been an announcement by the company for establishing a distribution center which will be of 125,000 square foot in the suburban Nashville (Rodrigo, 2012). From Wisconsin to Florida there will be providing services related to shipping and logistics to around 900 locations of Starbucks through the distribution center (Rodrigo, 2012).The company’s major distribution center is at Memphis which is also the residence to the recognized international cargo handler, Federal Express Corp. and also one of the largest distribution organizations of the nation, Ingram Micro. It supports Starbucks in attaining effective transportation between the distribution centers and its stores (Rodrigo, 2012).

Immense supplier partner and trustworthy logistic partner: The Company always tries hard to develop and maintain good association with its chief vendors, distributors, suppliers and business partners. This practice adds higher values and standardsby having a perception of efficient service and basic backups (Grosse-Ruyken and Wagner, 2010).

(Source: Project of operation management, (2011). Retrieved on: 9th September, 2016. Retrieved from:

Operations: Products

The key strength of the operations of Starbucks is the competence to offer the customers products with high quality and standards across the globe. In each and every store of the company, despite of the location, there is no concern by the customers related to the quality of the products. The consistency and the standardization ensure that the company realizes a reliable status for its merchandises and this robustly strengthens the long-term association with the customers.

Outbound Logistics: Distributors

In comparison with other various companies, Starbucks is highly flexible related to its distribution channels. There are two divisions of the distribution channels i.e. non-company channels and company-operated stores. Though the channels which are non-company based holds a squat percentage of sales. This non-company based channel includes associations with carious vital distributors, enables the organization to extend its reach to several customers with the help of diversified channels. In North America Starbucks have few of its partners:

Direct sales which comprises of online sales and mail order

Partnership with Draft Foods, Safeway and Albertsons.

Joint ventures with Dreyer, Pepsi and Hyatt Hotel (Rodrigo, 2012).

Linkage between the company activities and LB5230 theories

The growth and development of the Starbucks Corporation is grounded on its cost leadership as well as differentiation strategy. The stores of the company demonstrate the differentiate strategy by their various activities such as the ideal location for the store to establish, exceptional services, extensively trained staff, great product variety, efficient roasting process, unique process of coffee blending, theatrical atmosphere and exceptional experience. All these things supports in maximizing the company’s market share in a particular region and helps in building the company’s regional goodwill, which simultaneously upsurge their recognized goodwill to a national level of great status and high prestige. For above mentioned reasons the customers are willing to pay high prices for the Starbucks’s products. The company’s strategy of cost leadership is represented by the supply chain operations by which the company receives the finest rates of transportation and is also able to attain economies of scale through maximizing the efficiency and eradicating redundancy. Starbucks also established itself as a cost leader because of its good association with the exporters of coffee who were used to be very anxious and concerned to become the suppliers of Starbucks. And thus it facilitated the company to reduce the costs of bean-sourcing and to attain better prices (Katie, 2011).

The operational objectives of Starbucks make sure that the tactic goals and the strategic goals are met by the subsequent step in the supply chain. It offers for compliance with the standards of Starbucks, although regularly reducing the costs by managing and controlling the inventories. For securing the smoothness in the operations of ever outlet and distribution channel of Starbucks there is a need that the product’s quantity must be distributed, processed, delivered, scheduled, planned and forecasted. This objective is delivered by a set of tools which comprises of ERP i.e. Enterprise Requirement Planning systems, TRP i.e. Transportation Requirement Planning systems, DRP i.e. Distribution Resource Planning, automated POS systems, high-tech equipments for grinding and roasting, forecasting accuracy, inventory control accuracy, lean operations, operating systems related to integrated supply chain and RFID for the shipping containers and dark deliveries through the suppliers (Jeboda and Hillier, n.d.).

Purchasing: One major factor behind the success of Starbucks is the procurement and usage of coffee beans of superior quality. In order to attain the competitive benefit over the company’s opponents, there is a need that the procurement personnel must visit the nations who produce coffee on a continuous basis. These visits develop better association with the exporters and the growers. These also facilitate checks on the crop yields and agricultural situations and also aid the search for sources and diversity which can meet the critical standards of Starbucks in relation with the products’ flavor and quality. With a robust and well-established belief that the success in the business of coffee depends upon the quality of the coffee beans, the company has recognized itself as the leader in relation with promoting and contributing towards the preservation of the community and the environment of the coffee-origin nations. Starbucks implement a policy according to which the small coffee growers are paid high prices so that they can have a better living standard and can cover their cost of production.

Warehousing and Distribution: In the delivering stage where the product is finally reached to its end customer, the functions of warehousing and distribution are the final steps and again it has relevance in maximizing the returns and reducing the costs. The long-term association with the providers of logistics and distributors of foodservice for example Sysco &HAVI, balance the connectivity and arrangement of distribution channels and the retail stores of Starbucks. This comprises of online sales, mail orders, joint ventures, wholesale club accounts and licensing agreements of grocery and retail stores. The various other instances of distribution network include medical facilities, school facilities, airports, businesses, movie theatres, departmental stores and convenience stores (Moon and Quelch, 2003).

Sustainability throughout the value chain

By analyzing each component of the value chain it has been recognized that Starbucks is highly robust in about all segments of its primary activities such as services, outbound logistics, operations and inbound logistics. There are several competitive benefits attained by Starbucks with its effective value chain, logistics and distribution, products, services and innovation which led the increased sustainability of the company.

Sustainability through Logistics and Distribution

The company holds more number of distribution channels in comparison with its opponents:

Stores which are company oriented: the rapid international growth of Starbucks is highly depended over the licensed store and the franchise stores.

Channels which are non-company based such as partnerships with supermarkets, Safeway and Albertsons and joint ventures with Dyner, Pepsi and Hyatt Hotel which have built coffee shops of Starbucks have immensely upsurge its market share.

Mail-order and online sales order are the innovative distribution channels which offer the highest convenience to the consumers which increase both the convenience base as well as the sales volume (Modarress, Ansari and Lockwood, 2009).

(Source: Taking The Starbucks Experience Digital, (n.d.). Retrieved on: 9th September, 2016. Retrieved from:

Sustainability through the products

The company offers products of superior quality and standards across the globe:

High quality control: For achieving the high quality, the company initiates the practice of selecting their coffee beans by taking one extensive step i.e. by ensuring that the procuring managers must visit and experience the nations from which the coffee beans are supplied although the coffee is not purchased directly from the farms. There is an informal meeting and developing of association with the farmers who cultivate the coffee. With the help of this practice, Starbucks develops robust associations with the suppliers and also attained superior quality control for the coffee beans. This competitive benefit aid Starbucks by continuously offering the customers the superior quality of the products, diminishing the indirect expenses and cost which generated at the time of the process and improving the association among Starbucks and its suppliers (Paryani, 2011).

Encouragement of innovation levels of superior products: For meeting the requirements of the customers, Starbucks invest huge amount of capital in developing innovative features and products. The company encourages and promotes a creative mind to facilitate new experiences and environments to the customers for example bringing in cookware selling, music selling and breakfast. This pioneering spirit of Starbucks offers huge competitive benefits to the company and established it as the leader of the coffee industry (Lemus, et al. 2015).

(Source: Recycling coffee beans to make milk, (n.d.). Retrieved on: 9th September, 2016. Retrieved from: )

Sustainability through the services

Starbucks offers exceptional coffee experience and legendary services to its customers:

The only aim of the company is not to provide the best services but to offer legendary services to the customers. The company trained its each employee in a way that he or she must be competent in delivering the elegance and style of Starbucks.

The experience which every customer gets from the Starbucks’s coffee is special and unique in its own way. The atmosphere, background music and the artistic interior of every coffee shop aims to offer the most stylish coffee drink across the globe (Enquist, Edvardsson and Sebhatu, 2007).

Sustainability through innovation

Based upon the needs of the customers, Starbucks offers an extensive range of services for example high speed internet facility in the stores, pre-order facility, pre-paid cards and on-line sales. For avoiding the long queues, the customers can even give their orders before entering the Starbucks’s store via their mobiles (Berry, et al., 2006).

(Source: Tobey, J.S. (2014). Starbucks' New Strategy: 7-Step Plan For 5-Year Growth. Retrieved on: 9th September, 2016. Retrieved from:

Conclusion

The strategy of Starbucks to grow and develop is very simple i.e. reach the consumers at the places where they shop, travel, dine and work. These are attained by enhancing the understanding of a product of superior quality, familiarizing the stores with the lifestyle of the customers and reaches and cover the developing regions completely. For achieving the objectives, integration of activities helps Starbucks as in the entire supply chain, integration plays a vital role as failure of any activity of supply chain will put the whole venture at a risk (Gulati, Huffman and Neilson, 2002). The activities which are the part of integration are information sharing and analysis among the participants of supply chain, tactics and strategies, tools for cooperation, establishment of shared goals, eradication of obstacles towards cooperation and building of better and long term association with the suppliers. An instance of these activities at the initial phase of the chain could be the work on the practices related to cultivation with the people who grow coffee which can help in improving the quality of the coffee beans and offers a continuity and consistency. And as a result it better go with the process of roasting, facilitates for making higher payments to the growers which aid in developing a sustainable supply of coffee beans with the help of C.A.F.E. practices etc (Rodrigo,2012).

The companies which are socially responsible consider themselves as an element of the community and hence are accountable to the community for their relevant actions. As in consideration with ethics, it is often difficult to construct an agreement upon the scope and nature of social responsibility, provided the diversity of values there in various corporate cultures, businesses and societies. To achieve sustainability in the business, there is a need to develop more responsible and sustainable supplier base so that there can be a pace with the growth of the company. C.A.F.E. practice is one of the examples which offer preference to the verified suppliers through making premium payments to the coffee growers and developing long-term associations with them. The value chain of the company is highly effective and offer number of benefits to Starbucks such as low cost, high productivity, international growth, increased sales and efficient distribution channels (Maloni and Brown, 2006).

References

Berry, L. L., Shankar, V., Parish, J. T., Cadwallader, S., &Dotzel, T. (2006).Creating new markets through service innovation.MIT Sloan Management Review, 47(2), 56.

Enquist, B., Edvardsson, B., &PetrosSebhatu, S. (2007). Values-based service quality for sustainable business.Managing Service Quality: An International Journal, 17(4), 385-403.

Geereddy, N. (2012). Strategic Analysis Of Starbucks Corporation.Retrieved on: 6th September 2016, Retrieved from:

Grosse-Ruyken, P. T., & Wagner, S. M. (2010).Does supply chain “Fit” matter to investors.Supply Chain Quarterly, 4(4), 44-50.

Gulati, R., Huffman, S., & Neilson, G. (2002). The barista principle: starbucks and the rise of relational capital. Strategy and Business, 58-69.

Janithri, W. L. Y., De Silva, D. A. M., & Fernando, G. Impact of value chain management on firm cometitiveness. Retrieved on: 6th September, 2016, Retrieved from:

Jeboda, T., & Hillier, T. 2) Starbuck’s Strategies 3 3) Starbuck’s Strategy in Terms of Its Fit with its Internal Resources/Capabilities and External Environment 4, pp.15

Katie, J. (2011). Starbucks Strategy, Business economics - Marketing, Corporate Communication, CRM, Market Research, Social Media, United Kingdom: University of Portsmouth Portsmouth, pp10.

Lemus, E., Von Feigenblatt, O. F., Orta, M., &Rivero, O. (2015). Starbucks Corporation: Leading Innovation in the 21st Century. Journal of Alternative Perspectives in the Social Sciences, 7(1), 23-38.

Loyd, S., Jackson, W. T., &Gaulden, C. (2002, January).Starbucks.In Allied Academies International Conference.International Academy for Case Studies.Proceedings (Vol. 9, No. 1, p. 73). Jordan Whitney Enterprises, Inc.

Maloni, M. J., & Brown, M. E. (2006). Corporate social responsibility in the supply chain: an application in the food industry. Journal of business ethics, 68(1), 35-52.

Modarress, B., Ansari, A., & Lockwood, D. (2009). Outsourcing logistics to third-party providers: practitioners perspectives. International Journal of Logistics Systems and Management, 6(1), 23-38.

Moon, Y., &Quelch, J. (2003). Starbucks: delivering customer service. Harvard Business School, pp.20.

Paryani, K. (2011). Product quality, service reliability and management of operations at Starbucks.International Journal of Engineering, Science and Technology, 3(7), 1-14.

Rodrigo, (2012).Supply Chain Management in Starbucks and its impact on Company Performance. The writepass journal. Retrieved on 6 September, 2016 from:

Starbucks, (2016).Company Information. Retrieved on 6th September, 2016 from:

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