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Universiti Utara Malaysia
Lecturer: Professor Dr. Premkumar Rajagopal
Prepared by:
Soon Chee Hong 802435
Rosni Ab Rahim 807817
Tan May Leng 807821
Lim Soon Yu 808696
Koe Siew Chan 810xxx
JMP 6213: Supply Chain Management
Table of Contents
1.0 Company Background 3
2.0 Starbucks Supply Chain Management Characteristics 4-5
3.0 Coffee Supply Chain Process 6
4.0 Stakeholders Analysis 7-8
5.0 Starbucks Sustainability Phase Model Analysis 8-10
6.0 Recommendations 10-11
7.0 Summary 11
Reference 12
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1.0 Company Background
Starbucks is an international coffee company and coffeehouse chain starts in Seattle in
1971. The company buys coffee beans from around the world and roasts, blends and sells fresh,
rich- brewed, Italian style espresso beverages, a variety pastries confections and coffee –related
accessories and equipment primarily through company-operated retails outlet. In addition, the
company also sells whole bean coffees through specialty sales group and supermarkets.
The company's objective is to establish Starbucks as the most recognized and respected brand
in the world. All employees of Starbucks is working towards one common goal set as the
company mission statement and apply the below given guiding principles in their oprations.
Starbucks currently have more than 17,000 stores in over 55 countries worldwide. A total of
149,000 employees worldwide company has set up its mission not only to serve finest coffee, but
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also providing a great working environment for employee and create positive impact to
communities they served. Starbucks has consistently ranked as one of “100 Best Companies To
Work For” for 1998-2000 and 2002-2010 and is also recognized as one of the Global 100 Most
Sustainable Corporations in the World” by Corporate Knights in 2010 for its positive effort
towards its employee, communities and environment.
2.0 Starbucks Supply Chain Management Characteristics:
To understand how Starbuck customize the initiatives to fits its business it is important to
understand the characteristics of its supply chain. Below are the characteristics that supporting
Starbucks supply chain management.
2.1 Two way information flows:
Starbucks uses several targeted internal communication tools to educate partners
about these efforts and to encourage them to help. The company communicates
through its weekly Scoop operations bulletin that goes to all retail stores, plus the
monthly Siren’s Tale newsletter, which is distributed throughout the entire
organization. Starbucks also disseminates internal information online via its
Partner Portal. For major announcements of environmental programs, Starbucks
executives use the company-wide voicemail system. At Starbucks, internal
communication is a two-way channel. Mission Review, an on-going opportunity
for partners to provide feedback on projects or programs at Starbucks, allows
partners to question whether a decision, action or program adheres to the
Starbucks Mission Statement or Guiding Principles.
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2.2 Customer service:
The managers at Starbucks put tremendous attention into hiring good “people
people.” People who enjoy interacting with and pleasing others. Their hiring and
training process is designed… systematically… to produce events as described
above. It isn’t an accident. It isn’t left to chance. And it’s part of why they win.
2.3 Supply Chain Relationships:
Starbucks actively supports the sustainable production of coffee through its
C.A.F.E. (Coffee and Farmer Equity) Practices program, which is a supplier
program that promotes improvements in product quality, economic transparency,
social responsibility and environmental leadership at the producer level. The
Cocoa Practices is designed to enhance buying companies’ ability to work with a
diversity of suppliers to foster deeper sustainability throughout the cocoa supply
chain from farm to factory to final product. Ultimately, the goal of the scoring
system is to establish a long-term relationship with preferred suppliers by
awarding the strategic supplier with better pricing or financial premium (share
reward), eliminating uncertainty and volatility (or share risk) of prices that
dominates the industry.
2.4 Inventory:
There is no clear indication of the Starbucks in term of the supply chain Pull or
Push systems, but, by referring to the nature business of the Food and Beverage
(F&B), I believe Starbucks is using the push system to promote the varieties of
the products to the downstream market. Nevertheless, in accordance to the strong
participation of Starbucks under the C.A.F.E. program, the visibility of the supply
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chain upstream networks is much easier as the partnership among the farmers or
producers until it reach Starbucks, are recorded under the C.A.F.E indicator and
will be evaluated by the 3rd parties in the yearly basis. In additional, the entire
supply chain network is managed by the 3rd party logistic (3PLs) company to
handle the shipment for the global distribution centers.
2.5 Landed Cost:
In referring to the Starbucks C.A.F.E. (Coffee and Farmer Equity) Practices
program towards the supply engagement towards the entire supply chain to build
the long term strategic supplier, Starbucks can have a good coordination of supply
chain activities which may lower the landed cost. The long term customer-
supplier relationship was built and evaluated yearly to further establish and
develop the 2nd tier of suppliers in the future. The Starbucks C.A.F.E. which
promote the share rewards or risks towards the suppliers will further improve the
supplier participation in the overall supply chain costing, including the landed
cost.
3.0 Coffee Supply Chain Process
Supply chain is the sequence of activities and processes required to bring a product from
its raw state to the finished goods sold to the consumer. It takes a well-run supply chain to
ensure that a barista pours a good cup of Starbucks coffee. That's because the journey from bean
to cup is a complicated one, which includes several activities such as coffee planting, cultivation,
harvesting, extraction, selection, roasting, blending, grinding, packaging and finally turns into a
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cup of coffee that are enjoyed by many. Coffee and other merchandise must be sourced from
around the globe and then successfully delivered to the Starbucks Corporation's retail stores. To
ensure effective supply chain, Starbuck have reorganized its supply chain structure and simplify
it to fall into the four basic supply chain functions: plan, source, make, and deliver. Starbuck also
have developed an efficient distribution model to enable the distribution of the coffee beans to its
processing plants, with the goal of manufacturing in the region where the product is sold.
As part of Starbuck sustainability effort initiated C.A.F.E. (Coffee and Farmer Equity)
Practices to evaluate, recognize, and reward producers of high-quality sustainably grown coffee.
C.A.F.E. Practices is a green coffee sourcing guideline developed in collaboration with Scientific
Certification Systems (SCS), a third-party evaluation and certification firm. C.A.F.E. Practices
seeks to ensure that Starbucks sources sustainably grown and processed coffee by evaluating the
economic, social and environmental aspects of coffee production against a defined set of criteria,
as detailed in the C.A.F.E. Practices Guidelines. C.A.F.E Practices also enable smallholder
coffee farmers to sell their beans directly to importers, roasters and retailers at favorable
guaranteed prices by eliminating few middlemen layers.
Starbuck also implemented GPS tracking system using the RFID technology to track
cargo containers used to ship coffee after the suppliers drop off raw materials at the designated
collection centers. This system is use to monitor its shipment progress to Starbucks joint roasting
plants till they gather in the distribution center and later distributed to its licensed stores, outlets
and its joint business partners, like supermarkets and grocery stores.
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4.0 Stakeholders analysis:
Stakeholders are individuals or organization who are actively involved in the
organization and whose interest may be positively or negatively affect the result of the company.
Stakeholder analysis is important as through this analysis we can understand what stakeholders
want from the company and what are the company’s expectations towards them. But having
deeper understanding with stakeholders, the company can then develop engagement strategies to
gain their interest and support
In this study, we will focus Starbuck’s stakeholder analysis to five of its key stakeholders,
which are shareholders, employee, retailers, customers and coffee farmers. Shareholders and
employees are internal stakeholders while retailers, customers and coffee farmers are external
stakeholders.
In this study we measured Starbucks stakeholders based on 4 dimensions which is power,
commitment, interest and impact. Power is defined as the stakeholder’s ability to influence
company decision, commitment measuring the stakeholder’s obligation to the company, interest
depicts the level of concern towards the company decision/performance and lastly, impact
measures the effect of their actions towards the company.
The table below shows the measurement of the stakeholders and their degree of power,
commitment, interest and impact to Starbucks. Shareholders have high power because they can
easily influence the company’s decisions. They have high commitment and high interest because
the well being of the company will ensure that they get good returns. For big shareholders, if
they decide to sell their shares, this may impact the company ie. Change in management.
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Employees have low power because they cannot easily influence the strategic decisions
of a company. However, they have high commitment and interest in the company’s well being
because it will influence their future development and job security. Employees have high impact
on the company because they are the working force and if any union or strike occurs it may
cripple the company’s day to day operations.
Coffee farmers are the main suppliers of Starbucks. They have high power because
Starbucks is dependent on them to provide consistent supply of good quality beans. On the other
hand, they have high interest and commitment to Starbucks because Starbucks provide consistent
demand to the coffee farmers and take care of their well-being through programs such as the
C.A.F.E. Coffee farmers have high impact to Starbucks because they can choose to supply
Starbuck’s competitors if they are not happy with the business agreement with Starbucks.
Retailers have high power and high impact because they are the end of Starbuck’s supply
chain and are directly dealing with Starbucks customers. Hence the service provided by retailers
will reflect on Starbucks company image. They have high commitment and interest in Starbucks
decision because it will also influence their business decisions ie. promotions and CSR efforts.
Lastly, Starbucks customers have high power and impact to the company. Customers can
influence the decisions of Starbucks because they can demand what they want and Starbucks will
try to fulfill customer needs in order to make profit. They also have high impact because the
switching cost to other coffee providers is almost free. Customers have no commitment or
interest in the company’s well being because there are other alternatives which can provide
coffee.
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Stakeholder Chart
The table below lists down Starbuck’s main stakeholders, what they contribute to the company,
what they expect from the company and what the company expects from them. The table below
also lists the strategic implications that these stakeholders have over Starbucks.
Now that Starbucks understands its stakeholders and its stakeholders strategic
implications over the company, Starbucks can think of ways to keep them engaged. Keeping
stakeholders engaged will benefit the company by ensuring loyalty, morale, close collaboration
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etc. There are certain communications strategies that Starbucks can adopt to engage its
stakeholders such as face to face interactions and focus groups. This will ensure Starbucks
include them in decision making that involves or impacts them. For example, Starbucks can
include coffee farmers in focus groups to discuss decisions about C.A.F.E. This will make the
coffee farmers feel that they are part of the decisions and also ensure their voice is heard. It is
also important for Starbucks to create a communication channel for customer feedbacks. This
way the company and gage the market trends and if their products are pleasing the customers.
Starbucks can collaborate with its retailers to rollout strategic programs to ensure that they are
aligned on the company goals and direction in these programs. This is especially on the CSR
programs that Starbucks is trying to achieve. Without the corporation from its retailers, it would
not be possible. To ensure engagement and loyalty from its employees, Starbucks should
empower them and involve them in the company’s decision making. All these are examples of
engagement strategies Starbucks can take on to manage their stakeholders well and as a result all
stakeholders who are fully engaged will be interested to help make Starbucks supply chain
flawless.
5.0 Starbucks Sustainability Phase Model Analysis
In today’s business environment, supply chain sustainability is increasingly recognized as
a key component of corporate responsibility. Sustainability is key maintaining the integrity of a
brand, ensuring business continuity and managing operational costs. It helps to create, protect
and grow long-term environmental, social and economic value for all stakeholders involved in
bringing products and services to market.
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At Starbucks, its sustainability programs are also known as Social Responsibility. The
mission statement is to inspire and nurture the human spirit – one person, one cup and one
neighborhood at a time. They believed that businesses should have a positive impact on the
communities they serve. So ever since the first store in 1971, Starbucks dedicated to earn the
trust and respect from customers, partners and neighbors by being responsible and doing things
that are good for the planet and each other.
Starbucks Social Responsibility breaks down to 4 main areas listed below:
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Starbuck sustainability phase model falls under phase5, strategic proactively. The mix
and diversity are seen as integral and vitally important aspects for the business. Intellectual and
social capitals are used to develop strategic advantage through innovation. Proactive and seek for
stakeholders to involve environmental strategies supporting ecological sustainability are seen as
strategic business opportunities to provide competitive advantage. The organization seeks
competitive leadership through spearheading environmentally friendly products and processes.
6.0 Recommendations
Even though Starbucks is running the business in a good shape, nevertheless, there are
some recommendations which cover different areas like Corporate Social Responsibilities;
Product & Service and Marketing Strategies.
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6.1 Corporate Social Responsibility
Starbucks face challenges to achieve 25% reusable cup serve in store by year
2015. As of Y2010, the reusable cup serve is 1.8%, vs 2009 1.5%. Major
challenges are due to 17,000 stores in over 55 countries world wide. Different
countries have difference practice/focuses on recycling. Our group
recommendation on this is to have more campaign to promote customer
awareness in recycling. Beside, Starbucks could also provide more attractive
compensation for customer who use recycle cup. This will help to encourage and
promote reusable cup usage at the store.
6.2 Product & Service Related Areas
Starbucks could try to extend its menu selection to include drinks related to
particular cultures. For example, the Chinese culture products which focus more
on tea than coffee by introducing boba, a drink that incorporates little balls of
jelly called tapioca while introduce more “Matcha” (green tea) latte and
Frappuccino based in Japan. Besides, Starbucks should increase the varieties of
the bottle drinks like bottled Frappuccinos which is available in supermarkets and
specialty stores, which remain extremely popular among consumers. In additional,
Starbucks should increase the children’s drinks that aim to be a family
environment and cater the needs of all family members, including bakery or
cookies for children and etc.
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6.3 Market Strategies Related Areas
The market strategies recommended to Starbucks are offer mini-meals; increase
worldwide existence and localized products rates. Firstly, increase the mini-meals
set combo would encourage the working group to buy the snacks or meals during
the daily busy schedule. Besides, Starbucks need to improve the products by
aligning it to the local market rates in order to capture bigger groups of the
populations. Lastly, Starbucks can increase the popularity of the company
products towards more rural or outskirts areas which can be reach by allocating
the vending machines around the said areas
7.0 Summary
Starbucks is progressively improving since it’s downfall in 2008. In 2011, for the first
time, Starbucks was ranked 22nd in the Gartner Supply Chain Ranking. According to Gartner,
“Starbucks is transforming its supply chain into a strategic differentiator”. According to our
group observation, Starbucks has a very strong Sustainability Strategy, if they continue to take
strides in this area they will protect and grow long-term environmental, social and economic
value for all stakeholders.
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Reference
http://en.wikipedia.org/wiki/Starbucks
http://www.gartner.com/id=1709016
www.starbucks.com
http://starbucks.com.my/en-US/_Social+Responsibility/
http://www.starbucks.com/thebigpicture
http://inhabitat.com/all-starbucks-cups-will-be-recyclable-or-reusable-by-2015/
Starbucks Global Responsibility Report Goals & Progress 2010
From bean to cup: How Starbucks transformed its supply chain By JAMES A. COOKE Q4 2010
"Starbucks Corporation: Overview". Hoovers.
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