Supply Chain Strategy of Starbucks

Starbucks is one of the most successful industries in the United States and this could be attributed to its supply chain strategy which helped them to make huge profits a few years after its foundation from the competitive market share it commands.

Criteria

With Starbucks, all stages of the production process are controlled by the firm, from coffee bean cultivation through the delivery of a hot beverage to the user. Starbucks, in many cases, oversees most of the coffee producers around the world because of its vertically integrated approach.

The production process

Growers store and package the unroasted coffee beans, and then trucks transport the beans to freight vessels that send the beans to storage locations in the U.S. and Europe. In these facilities, the beans are roasted, packed, and then sent to the main distribution centers as well as the minor ones.

Marketing

As Starbucks' main competitor in the world coffee business, Dunkin 'Donuts has emerged as a major threat. Unlike Starbucks, which controls all the components of its supply chain, Dunkin 'Donuts uses third-party suppliers to handle its production procedures

Transportation

Starbucks' primary transportation goal is to foster a proficient model for conveying non-espresso items and espresso beans to its potential preparing. The conveyance of the merchandise to the foreordained objective is to advance effective assembling measures in the commercial centers.

Supply Chain Strategy of Starbucks

Starbucks is one of the most successful industries in the United States and this could be attributed to its supply chain strategy which helped them to make huge profits a few years after its foundation from the competitive market share it commands (see the market allocation chart in the appendix). This strategy made it rise among companies that could double their profits in the span of a year. Despite the challenges from the initial draft, the company managed to restructure its components and come up with one of the most vigorous campaigns ever witnessed.

Criteria

With Starbucks, all stages of the production process are controlled by the firm, from coffee bean cultivation through the delivery of a hot beverage to the user. Starbucks, in many cases, oversees most of the coffee producers around the world because of its vertically integrated approach. The firm argues that having direct contact with growers results in consistent quality and flavor for all of its coffee beans (Tien, n.d).

Like Starbucks, whose goal is to solely offer ethically sourced Fair Trade coffee, the firm works directly with producers. Coffee and Farmer Equity (C.A.F.E) standards and Coffee Sourcing Guidelines (CSG) apply to all suppliers. To guarantee its farmers meet and adhere to these requirements, Starbucks has a rigorous verification procedure in place. C.A.F.E. methods and CSG give both advantages and benefits for Starbucks' suppliers. Guidelines guarantee that all farmers are guaranteed a working condition that is safe and humane, and they also safeguard employees' rights. Suppliers must also comply with minimum wage laws and follow an ethical sourcing policy that prohibits child or forced labor.

Additionally, Starbucks promises to provide its suppliers with special programs in training and education (which support the agenda of the C.A.F.E.). Starbucks' close working relationship with its farmers, together with its focus on sustainability and corporate responsibility, make suppliers feel like part of the Starbucks organization (Nair et al., 2021). Starbucks has a long-standing connection with its suppliers, which lowers the risk of supply chain disruptions like as overproduction or a lack of workers.

The production process

Growers store and package the unroasted coffee beans, and then trucks transport the beans to freight vessels that send the beans to storage locations in the U.S. and Europe. In these facilities, the beans are roasted, packed, and then sent to the main distribution centers as well as the minor ones. Starbucks only uses a small number of facilities, so it can supervise the operations of its locations very closely while guaranteeing that all beans from the field are roasted evenly and packed in a similar manner. Starbucks carefully controls the roasting process to guarantee that all of the coffee sold in its stores tastes the same. As a result, all distribution centers will always have the items they require in the chain to fulfill customer orders and make an on-time supply of around 70,000 orders every week (Herningsih et al., 2019).

Starbucks' supply chain will inevitably be complicated due to the company's size and scope (see the growth in size of the company from the outlets approximation in the appendix). A streamlining of the costly, ever-growing supply chain was initiated in 2008 by Peter Gibbons. First, he organized all supply chain positions into four groups: preparation, acquisition, production, and delivery. The following concept also saw the introduction of a centralized logistics system that makes it easier for the organization to manage and coordinate its global network. To help accomplish the goals above, he implemented a "scorecard system" in which the activities of the supply chain are assessed using four metrics: the ability of operations to ensure their safety; the availability of timely and efficient delivery and order fulfillment; total supply chain costs; and business savings.

Starbucks also employs the feature of digital technology to manage its supply chain, which could be used with other basic tools and processes. Real-time demand, inventory, capacity, and scheduling are all maintained through the usage of an automated information system. This means that, because of this, Starbucks is able to alter its plans and operations swiftly and efficiently. By virtue of having basic organizational design and simple management tools and the usage of digital technologies, Starbucks is able to increase both its operational efficiency and its agility.

Marketing

As Starbucks' main competitor in the world coffee business, Dunkin 'Donuts has emerged as a major threat. Unlike Starbucks, which controls all the components of its supply chain, Dunkin 'Donuts uses third-party suppliers to handle its production procedures. Dunkin 'Donuts works with an intermediate firm called National DCP, which takes care of the Dunkin' Donuts supply chain. While Dunkin' Donuts owns and operates all of its locations, the majority of its manufacturing operations, as well as many of its retail locations, are franchised. Starbucks, on the other hand, is observed to own no more than 50% of its retail stores, and no longer accepts new franchise applications (Purkayastha et al., 2019). A large number of middlemen are not used while doing business with Starbucks, which results in an efficient supply chain.

Dunkin 'Donuts pledges to make their coffee as sustainably as possible. To achieve this, the Rainforest Alliance together with Fair Trade USA are working with the firm on a project that will help in developing a sourcing procedure that is sustainable in addition to having educational procedures for the farmers involved. The only two permanent menu products offered by Dunkin 'Donuts are Fair Trade-certified: the Dark Roast Blend, which is 30% Rainforest Alliance Certified and 100% Fair Trade Certified espresso.

Critics of Starbucks' supply chain and social responsibility initiatives may attempt to claim that these initiatives do not have a unique impact on the firm. However, the data clearly shows otherwise. Dunkin 'Donuts was created almost twenty years after Starbucks, yet it is already many times larger. The average annual income generated by Starbucks in 2016 was $16.8 billion, while Dunkin 'Brands brought in just $828.9 million. While Dunkin 'Donuts has more sites outside the US (11,500 total locations in 60 countries), Starbucks has a worldwide footprint, with approximately 26,000 retail outlets in 75 countries.

While Starbucks focuses on selling quality coffee to higher-income clients, Dunkin 'Donuts primarily targets blue-collar clients who seek fast, cheap coffee. Customers will thus be ready to pay more for coffee they believe is of greater quality, as well as for coffee that they believe is produced from socially responsible sources. In order to get the benefits that Starbucks offers in its coffeehouses, consumers must pay extra for their coffee. During economic downturns, Dunkin 'Donuts' consumers are more likely to cut back on their spending, whereas Starbucks' consumers can maintain their spending levels. In other words, since Starbucks is less vulnerable to big revenue swings because of negative macroeconomic changes, it is not nearly as prone to losses as Dunkin 'Donuts.

Transportation

Starbucks' primary transportation goal is to foster a proficient model for conveying non-espresso items and espresso beans to its potential preparing. The conveyance of the merchandise to the foreordained objective is to advance effective assembling measures in the commercial centers. The established transportation goal would enable Starbucks Company to choose the expense drivers, ensure convenient conveyance to all of its stores, and increase the benefits from the deals.

Starbuck Company has been utilizing various methods of transportation to convey its crude materials and handled items to different stores. The kind of transport applied by Starbucks relies upon the topographical distance and the market influences in light of the fact that an increment sought after for the items in the commercial centers makes the organization utilize a quicker conveyance model. To begin with, Starbucks uses sea delivery to move espresso beans from various parts of the world. For example, the organization imports espresso beans in sea holders from Latin America, Asia, and Africa. The raw materials are transported to the United States of America and Europe for further processing. The other kind of transport is shipping through the streets. Following the roasting and packaging of the espresso beans, the finished items are shipped to appropriations stores or centers in the United States of America or other European nations. Air transport is a fitting model to be suggested for Starbucks. The utilization of planes gives the quickest methods for transport; accordingly, empowering Starbucks to build its exhibitions when the market requests for the completed items is high.