Lean or AgileStacey Ryder

1. The Company2. Industry and Competition3. SWOT4. Supply Chain Transformation5. Move to a Leaner SC6. Cash-to-Cash Cycle7. Matrix8. Key Questions

Contents

First store opened in 1971 in Seattle.

Now have 17,018 stores worldwide (as of July 3rd 2011) in over 50 countries.

Started by selling freshly roasted coffee beans and brewing & roasting accessories.

Now expanded into: Over 30 coffee blends, Hand crafted beverages, Merchandise, Fresh food.

The Company

Starbucks Coffee Company, Company Profile, July 2011 (www.starbucks.com/assets/aboutuscompanyprofileq3201172811final.pdf)

Coffee is the 2nd most widely traded

commodity in the world.

$70 billion in retail sales globally.

Competition:

Industry and Competition

US• Peet’s Coffee• Caribou Coffee• McDonalds• Dunkin Donuts• Coffee Bean & Tea

Leaf

UK• Costa Coffee• Café Nero• Coffee Republic• Independent coffee

shops

TradeCommodities.co.uk, The 10 most traded commodities, 2011, (www.tradecommodities.co.uk/commodities/)

Strengths

• Established logo, developed brand, copyrights, trademarks.

• Many outlets in highly visible locations to attract new customers.

• Loyal customer base, loyal both to the product and the “atmosphere.”

Weaknesses • Too highly priced products.• Lack of internal focus, with too

much focus on expansion.• Ever increasing number of

competitors in a growing market.• Unhealthy product.

Opportunities• Launching new products/product

extension.• Expansions into retail operations.• New distributions channels

(delivery?).• Capturing emerging international

markets and new customer groups.

Threats• New competition from existing

outlets entering the industry i.e. McDonald's.

• US market saturation.• Coffee price volatility in

developing countries.• Lack of ownership of coffee farms.• Negative publicity from poorly

treated farmers in supplying countries.

SWOT

In 2008 the supply chain was not meeting the

needs of supplying over 50 million customers.

Operational costs were rising even though sales were cooling:

October 2007 Supply chain expenses: $750 million October 2008 Supply chain expenses: $825 million Sales drop during this period of 10%

WHY?

Supply Chain Transformation

Cooke, James A. From bean to cup: How Starbucks transformed its supply chain, 2010, (www.supplychainquarterly.com/topics/Procurement/scq201004starbucks/)

3 Step transformation:1. Recognise and simplify its supply chain

organisation. 2. Focus on reducing cost to serve its stores,

minimizing waste, and improving its day to day supply chain execution.

3. Lay the foundation for improvements in the future.

Simplified structure:

Move to a Leaner SC

Plan• Production

Planning• Replenishmen

t

Source• Coffee• Non-coffee

items

Make• All

manufacturing; in house or contracted

Deliver• Transport• Distribution• Customer

service

Cooke, James A. From bean to cup: How Starbucks transformed its supply chain, 2010, (www.supplychainquarterly.com/topics/Procurement/scq201004starbucks/)

Cash-to-Cash Cycle

(CCC)

DIO: Days inventory outstandingDSO: Days sales outstandingDPO: Days payable outstandingFY: Fiscal yearTTM: Trailing 12 months

Jayson, Seth. How Fast is the Cash at Starbucks, Nov 28 2011, (www.fool.com/investing/general/2011/11/28/how-fast-is-the-cash-at-starbucks.aspx)

Matrix

LeanPlan & optimize

AgileQuick response

KanbanContinuous replenishment

HybridDe-couple through postponement

Demand characteristicsPredictable Unpredictable

Supply characteristics

Long lead times

Short lead times

Q Push or Pull?A Pull, with replenishment driven due to the philosophy of having the highest

quality, freshly brewed coffee and the expectation of the customers.

Q Which is most common, lean or agile?A Lean, due to the commodity nature if the coffee trade, the order winner

being price, dominant cost is the physical cost.

Q Opportunity to become more agile?A It could become more agile in the distribution of merchandise, but not

coffee.

Q Opportunity to become leaner?A Could train staff to make the running of individual stores leaner.

Q Is vendor managed inventory common?A Not within Starbucks, sourcing, processing and distribution are all done

within the company.

Key Q’s

Any More Questions? Thank you