Optimizing Supply Chain Management in Starbucks

Table of Contents

Introduction and Supply Chain Role
Plan to Support Supply Chain Function
Strategies for Working with Suppliers
Information Technology
Procurement and Logistics
Conclusion and Recommendations
Task 2
Reference List

Introduction and Supply Chain Role

The modern world is a highly globalized environment characterized by constantly developing international discourse and relations. This factor influences all spheres of human activity, including the business sector. For this reason, the most successful corporations run globally and open their stores, facilities, or offices in numerous countries. It helps to acquire several significant benefits, such as the increased number of clients, a recognizable brand image, and the opportunity to enter new markets. At the same time, there are also some severe challenges associated with functioning at the international level. First of all, companies have to align relations with numerous suppliers, producers, and partners to ensure the constant income of necessary products and the ability to meet clients’ demands. Under these conditions, effective supply chain management acquires the top priority in generating a competitive advantage.

Introduction and Supply Chain Role

The critical role of this factor can be evidenced by using Starbucks company and analyzing its approach to managing this factor. Thus, it is a big multinational company with about 33,833 stores in 80 countries globally (Starbucks, 2021). It means that the brand has to ensure the practical cooperation between suppliers and guarantee that all shops are provided with the necessary products to meet clients’ demand for high-quality coffee. The company’s supply chain can be presented in the following way:

Thus, it is possible to see that the stable work of the company depends on the success of every stage of the whole process. Moreover, Starbucks depends on delivering dairy products and equipment used in stores (supply chains are similar to the presented one). Al stage implies a specific company acting as a supplier and a company of the corporation.

At the same time, Starbucks emphasizes its focus on sustainable supply chain management and its increased flexibility. It means that the company’s scheme of procurement and logistics should be altered to meet the changing demand for particular products. Under these conditions, as a giant multinational company, the brand might face several challenges, such as problems with the shipment, lack of raw materials, storage, and production issues. The ability to resolve these problems is central for the company as it ensures a competitive advantage and the ability to continue entering new regions and interacting with clients. Another critical factor is that leading coffee producers are located in regions that are not characterized by the highest sales levels and do not have the necessary production facilities. It means that the company has to guarantee the transportation and availability of the product. It evidences the complexity of supply chain management and the critical role it plays in the work of global corporations, such as Starbucks.

Plan to Support Supply Chain Function

However, the effectiveness of the supply chain depends on its ability to alter and demonstrate high flexibility levels. To remain relevant and meet organizational objectives, it should alter and adapt to the new requirements. For this reason, the following plan to support the existing chain’s effectiveness can be offered:

Continuously review the existing supply chain
Use agile planning
Work with customers to manage their needs
Cooperate with suppliers to ensure their loyalty
Secure the most vulnerable aspects of the supply chain
Enhance production management
Find reliable shipment companies
Promote digitalization
Encourage effectiveness
Promote positive change

The proposed 10-point plan can be viewed as a possible way to cultivate the positive change within the company and ensure it will remain competitive regarding the growing rivalry and the fast-evolving clients’ demands.

As it comes from the proposed approach, most attention should be given to the three major parties, such as suppliers, clients, and shipment companies. These actors play an important role in the stable work of the existing supply chain and contribute to the company’s ability to evolve. Starbucks should devote more attention to working with customers to consider their needs and ensure the required changes are introduced, and the supply chain preserves its effectiveness. At the same time, working with suppliers, it is possible to ensure they remain loyal and provide the necessary amount of products on time (Hugos, 2018). Effective supply chain management should also consider the most vulnerable aspects, such as shipment and delays associated with this activity. For this reason, it is critical to look for alternative ways and guarantee that the company has the necessary amount of coffee in its storage. Using the recommended plan, Starbucks can guarantee that the supply chain model will remain adequate and relevant to the existing company’s objectives.

Strategies for Working with Suppliers

Moreover, as it has already been stated, supplier relationships are fundamental for the stable work of any supply chain. For this reason, Starbucks devotes much attention to working with its major partners and guaranteeing they benefit from this cooperation. First, the brand supports organic and green farming as well as the fair-trade incentive, meaning it cares about low-income families involved in producing coffee beans (Starbucks, 2021). This activity helps to build sustainable relations with these communities and guarantees their readiness to continue cooperation with the brand. Furthermore, Starbucks acts as one of the central activists in sustainable coffee production, emphasizing the necessity to address the significant problems in the sphere to guarantee it will continue to evolve and the quality of people’s lives will continue to grow. As a result, better relations with this cohort of suppliers are established.

Another critical factor guaranteeing better relations with suppliers is focusing on long-term relations. The company emphasizes that trustful and open cooperation is the key to success (Doing business with Starbucks, 2022). It provides all parties with an opportunity to exchange visions and resolve problems when they emerge, which is fundamental for the improved work of the supply chain. At the same time, long-term cooperation helps to build stable routes and consider all possible risks (McDonough, 2019). It might reduce shipment time and increase the clients’ satisfaction levels linked to the availability of particular products, their quality, and price. Starbucks admits it has a set of loyal suppliers ready to continue their cooperation, which is vital for the future development of the brand and preservation of its leading positions in the selected sphere.

Ensuring the high quality of acquired products is another strategy employed by Starbucks. The brand states it works with suppliers which can deliver the product, meeting the company’s high standards (Starbucks, 2021). It becomes possible due to several important aspects. First, the long-term cooperation mentioned above helps to create a pool of reliable suppliers with a proven reputation and capable of providing the required products. Second, it helps to exclude firms focused on fast income with low quality, which is critical for the brand. Finally, the increased attention to the nature of delivered products and their sources helps to improve the brand’s reputation and ensure it is viewed as an attractive partner for other companies. As a result, the strategy contributes to the higher supply chain’s effectiveness and its ability to meet current demands.

Finally, Starbucks’ approaches to organizing the supply chain are impacted by the idea of ethical sourcing. Currently, the brand buys 3% of the world’s coffee, produced by 400,000 farmers in more than 30 countries (Starbucks, 2021). It means that the company impacts the sphere and, at the same time, might establish specific relations with suppliers. The brand established coffee and Farmer Equity (C.A.F.E.) practices as a unique verification program to evaluate farmers’ criteria, create transparent and profitable coffee growing practices, and ensure all parties benefit from the cooperation (Starbucks, 2020). As a result, the brand enjoys a high level of loyalty and trust from its suppliers. Altogether, the strategies used by Starbucks to manage this aspect demonstrate their effectiveness and the ability to contribute to the further brand’s evolution. They help to support the company’s image and generate the competitive advantage necessary to overcome rivals.

Information Technology

The brand also broadly uses Information Technology (IT) to support the strategies mentioned above and improve supply chain management. Data analytics and forecasting can be viewed as the key to successful brand growth. At the moment, Starbucks emphasizes that it is steps away from overproduction and oversupply by using IT and artificial intelligence to plan the demand (Starbucks Corporation, 2021). The task is accomplished by using relevant customer data, such as sales, preferences, and specific offerings’ popularity, to forecast demand changes and ensure the necessary amount of coffee is delivered (McDonough, 2019). As a result, supplier relations are maintained using the newest information from Starbucks’ data centers (Starbucks Corporation, 2021). Moreover, the information about delays or emergent issues is also shared using technologies, which increases the speed of reaction and the effectiveness of the response. It means that IT technology is an essential component of Starbucks’ supply chain management and supplier relations.

Procurement and Logistics

Procurement and logistics should also be viewed as two fundamental components of Starbucks’ supply chain management. The company is one of the giant global corporations opening a new store every 15 hours (Starbucks Corporation, 2021). For this reason, it requires effective schemes to manage these aspects. For this reason, the company plays an active role in every stage and process related to these aspects. First, it buys green and unroasted coffee beans directly from the farmers through the chain of Starbucks buyers (Starbucks Corporation, 2021). It ensures the company can control the price, the amount of purchased coffee, quality, and type (Starbucks Corporation, 2021). As a result, the brand improves its procurement control and acquires the chance to avoid unnecessary spending to pay third parties to repurchase coffee (Starbucks Corporation, 2021). It also increases the effectiveness of supply chain management and its flexibility.

Moreover, speaking about procurement, it is necessary to mention the extensive usage of fixed-price contracts. Using the given practice, Starbucks agrees to buy coffee from a particular supplier at a set price (Starbucks Corporation, 2021). It also outlines the period, transportation conditions, and the number of necessary products (McDonough, 2019). As a result, the company engages in legal relations with a particular company and reduces the risks linked to uncertainty or possible delays because of the absence of required items (Starbucks Corporation, 2021). Moreover, fixed-price contracts guarantee that no price fluctuations will be observed because of the changing environment or market conditions. On the contrary, it establishes the basis for long-term and effective cooperation between all parties and helps to avoid risks or misunderstandings because of vague terms. The given approach helps Starbucks to evolve and ensures effective procurement.

The existence of numerous suppliers in different parts of the globe means that the company faces a severe logistics challenge. It is critical to overcome it to ensure adequate supply and the ability to meet clients’ expectations. For this reason, Starbucks devotes much attention to this aspect and has its specific approach. The company uses the three main modes of transport such as air, motor, and water (Starbucks Corporation, 2021). The choice of the approach depends on the current demand and specific conditions. First of all, ships are the cheapest way to ensure the transportation of a high amount of products at a low price (McDonough, 2019). Using this method, the company might create the necessary stock and ensure its storage centers have the required raw material (Starbucks Corporation, 2021). However, some areas cannot be reached by sea, meaning that aviation is used to access such regions and transport coffee (Hugos, 2018). Finally, motor vehicles are used to transport coffee on less significant distances (Starbucks Corporation, 2021). Combining these three modes, the brand acquires the chance to boost the effectiveness of its supply chain management and align strong logistics.

The high level of innovativeness is another aspect of Starbucks’ logistics. For instance, the company cooperates with Microsoft to create a blockchain-enabled supply chain tracking system ensuring better control over logistics (Modum, 2020). Using the technology, the company, as well as its clients, has the opportunity to track cargo movement and see the journey of all beans bought to produce coffee and distribute it later (Modum, 2020). It helps to gather relevant and up-to-date information about the current logistics stage and plan possible actions if some delays occur. Moreover, the technology offers a better opportunity to interact with suppliers and order the necessary amount of products (Modum, 2020). At the same time, technology is used to control temperature variations and environmental factors throughout manufacturing facilities, transport, and warehouses, to ensure the high quality of beans is preserved (Starbucks Corporation, 2021). It helps to resolve the problem of logistics and ensure the delivered beans can be stored for long periods without any reduction in quality.

In such a way, Starbucks’ approach to logistics and procurement can be viewed as effective. The company realizes numerous challenges because of its global nature and the necessity to deliver products to various parts of the globe. For this reason, it interacts with multiple partners by using fixed-price contracts and participating in all stages of procurement and transportation. At the same time, the focus on technologies ensures the brand has numerous tools to monitor the shipment of products and their current state and store them effectively (Hugos, 2018). It impacts the final result and reduces spending on supply chain management. At the same time, the effectiveness of the approach helps to generate a competitive advantage and overcome the high level of rivalry peculiar to the sphere.

Conclusion and Recommendations

In such a way, the analysis shows that Starbucks has a complex and, at the same time, effective supply chain. The global nature of the company means it has to work with numerous partners located in different parts of the globe. For this reason, the central challenge is to align cooperation with coffee, dairy products, and equipment producers from various areas, ensure the goods are delivered in time, and preserve their high quality. The given challenges are addressed by effective supply chain management and the extensive use of technologies. Starbucks relies on innovation and views it as a necessary part of its future. For this reason, cargoes are tracked and monitored to guarantee that all shops will be provided with the necessary goods on time. This strategy ensures the practical work of the whole brand and its ability to meet clients’ demands.

At the same time, it is possible to offer several recommendations. First of all, Starbucks should continue increasing the transparency of procurements and ensure all suppliers are open to meet the demands of current distribution centers (Starbucks Corporation, 2021). It will help to increase the speed of delivery and the effectiveness of procurement (Langley et al., 2020). Second, it is possible to integrate customer information into supply chain management to guarantee that the most topical and popular sorts of coffee are given more attention. It will help to avoid unnecessary spending and make the company more effective. Finally, Starbucks might increase the power of its logistics by looking for reliable and long-term partners in the transportation sphere. Buying a subsidiary in the given sector might contribute to the increased effectiveness of all supply chains and help to resolve transportation tasks faster and with higher effectiveness levels.

Task 2

The current situation implies using sea transport to guarantee the delivery of a GT 6 Bladed Rotor to the destination point. The given mode of transport is cheap and safe enough to meet the company’s requirements. However, the timely arrival is crucial as delays might cost $1million per day and cause severe damage to the company. For this reason, the following risks should be evaluated and managed to avoid any issues:

Risk	Likelihood	Severity	Risk Score	Management
Delays in loading cargo at the Houston port	3	3	9	Observing the major protocols, renting the necessary equipment on time.
Stormy weather on the day of loading	2	2	4	Consideration of the weather forecasts to avoid such risks.
Offloading from the vessel at Point Lisas port	1	2	2	Analysis of the current conditions at the port and creation of backup plans.
Damage at Houston port	1	2	2	Using trained and skilled specialists to perform major operations.
Proper lifting protocol is not followed	2	3	6	Monitoring of the process; penalties for not observing the protocol. Using proper equipment.
Sea blast during inclement weather	1	1	1	Using the weather forecasts, following the major guidelines.
Industrial unrest at the Port of Guaira	2	2	4	Monitoring the situation in the region to avoid delays due to this factor
Unsuitable incoterms for the shipment	2	2	4	Establish suitable incoterms and insist on their observation
Injury of workmen causing delay in loading	1	3	3	Observation of the major safety requirements and protocols
Poor choice of shipper leading to damaged ship and incompetent crew	2	4	6	Finding reliable partners with a solid reputation and trained crew capable of performing major tasks.
Berthing delay due to rough seas	2	4	8	Controlling the weather forecast and organizing shipments regarding weather conditions.

Managing the outlined risks should also consider the following incoterms:

Pickup and inland – 1 day
Sailing – around 15 days
Local clearance and delivery – 2 days

Additionally, specific delivery dates outlined in the agreement should be followed to avoid penalties and severe harm done to the company. As far as the selected transport mode is the sea, it is possible to devote much attention to the specific risks. First of all, the delays in loading cargo at Houston port should be considered. The problem has a high risk score as it might impact the schedule and existing incoterms and precondition the additional spending (Hugos, 2018). For this reason, it is vital to address it by observing the existing agreement and current protocols and renting the necessary equipment to ensure it is available when needed (Hugos, 2018). The delay due to the rough seas is another critical problem with the risk score of 8 as it also might affect the existing incoterms, precondition severe delays, and result in extra spending necessary to cover all losses. It is vital to consider relevant forecasts and plan the delivery process.

Poor choice of shipper is also a critical problem that should be considered as it might ruin the schedule. For this reason, it is critical to find reliable partners and guarantee they can meet the outlined requirements. Altogether, the analysis shows that using sea transport might imply specific challenges and risks that should be considered. The delays because of the rough seas, loading cargo, and unskilled shippers might be crucial. They should be addressed by discussing the incoterms and signing the agreement regulating the significant aspects of the would-be cooperation. It will also help to avoid uncertainties and possible issues because of the lack of transparency and understanding between parties.