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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