Starbuck Supply Chain Strategy

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STARBUCKS SUPPLY CHAIN STRATEGY Student’s Name Professors Name Institutional Affiliation Due date
2 Table of Contents Introduction ................................................................................................................................................. 3 Supply Chain of Starbucks ...................................................................................................................... 3 Evaluation ................................................................................................................................................... 4 Strengths .................................................................................................................................................. 4 Weaknesses .............................................................................................................................................. 6 Opportunities ........................................................................................................................................... 7 Threats ..................................................................................................................................................... 8 Resource-based View .............................................................................................................................. 9 Resource Dependence Theory ............................................................................................................... 10 Transaction Cost Theory (TCT) ............................................................................................................. 10 Recommendations ..................................................................................................................................... 11 Conclusion ................................................................................................................................................. 13 References ................................................................................................................................................. 15
3 Starbucks Supply Chain Strategy Introduction A supply chain is an end-to-end movement of products and information in an organization. According to Tjokrosaputro et al. (2020), how firms manage their suppliers affects the company’s product cost, capital requirements, service perception, and speed to market. An adequate supply chain strategy must account for the interaction of customers, suppliers, economic factors, and technological developments (Alcorn, 2020). However, an enterprise must have a unique worth or minimum requirement it has to meet for clients to consider it as an option (Sutton et al., 2021). The value proposal allows businesses to connect and combine supply chain drivers, such as products, expenses, management, and technology. Managers must ensure the strategies promote organizational efficiency (Lombardi et al., 2021). The analysis focuses on Starbucks' supply chain strategy in the UK. The purpose of the report is to discuss the Starbucks UK’s coffee supply strategy. I illustrated the supply chain scope and evaluated it through SWOT analysis and gap identification. Supply Chain of Starbucks Starbucks is a multinational coffeehouse and roaster chain located in different nations. The wave of coffee culture in the UK emanated from Starbucks’ varieties, such as espresso, instant coffee, and caffe latte (Leblanc, 2019). The company used an integrated supply chain, with representatives among coffee growers. The organization perceived that integration with farmers motivated the producers to produce identical flavour and quality standards (Neville, 2021). Nonetheless, Starbucks find it challenging to corporate with all coffee suppliers and make them feel integrated (Gaille, 2021). Moreover, competitors like Costa coffee force Starbucks to
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4 reduce its supply chain expenses (Kelso, 2022). The research conducts a SWOT analysis, assesses gaps, examines theories, and offers recommendations. Selected Supply Chain Diagram External Integration Upstream Internal Integration External Integration Down stream Upstream Focal Firm Downstream 4 th Tier 3 rd Tier 2 nd Tier 1 st Tier 1 st Tier 2 nd Tier 3 rd Tier Cup branding Solo Cup Co. Plastic Producer Distributors (Gist) Coffee Shops Consu mers Starbucks UK Coffee Supply Chain Coffee Beans Processor Coffee Farmer (Brazil, Guentemala) Cup Brandin g Internat onal Paper Co. Paper producers Product/Service Fund/Money Information
5 Table 1: Areas of Focus in the Starbucks UK’s Coffee Supply Chain Strategy Supply Demand Integrated vertical supply chain Training programs and cost saving measures Enterprise resource planning software Coffee from local distributors Partnership with Gist Company stores operation and workers retention Evaluation Table 2: Summary of the SWOT Analysis Internal Strengths Weaknesses - Sustainable sourcing - Coffee and farmers’ equity (CAFÉ) - Enterprise resource planning software - Adaptable and user-friendly system - Dependent on company-operated stores - Cannot attract price-sensitive consumers - Does not attract clients with dietary preferences - Vulnerable to price fluctuations External Opportunities Threats - Use multiple distribution channels - Partner with Gist, Solo Cup Manufacturers, and International Paper manufacturers - Expand into tea and specialty items supply - Adverse weather events - Government mandated-rules and policies - Stiff competition from coffee distributors - Economic uncertainties Strengths Starbucks uses sustainable sourcing to integrate ethical, social, and environmental performance into the strategies for creating long-term suppliers relationship. The organization established an integrated vertical supply chain that grows, harvests, dries, packs, blends, and roasts coffee beans. However, how does the company ensure the farmers yield high-quality products? According to Wang et al. (2022), Starbucks created Coffee and Farmer Equity (CAFÉ) standards to make coffee farmers comply with ethical guidelines for sourcing farm goods.
6 Moreover, Starbucks coffee uses Enterprise Resource Planning to track, collect, and analyze product and service data. The system updates purchases and billing at the point of origin, eliminating the need for emailing orders and paper forms. Cooper and Nguyen (2020) also reiterated that Enterprise Resource Planning lowers the lag time stores had to wait while Starbucks assessed suppliers’ legislative compliance. Starbucks is better positioned to handle sudden business fluctuations when receiving real- time information. On the contrary, Starbucks does not have practical artificial intelligence and transport management system to detect all the supply chain weaknesses (Mehrhoff, 2022). It forces the firm to wait to undertake manual data analysis on information linked to supply chain efficiency and business productivity. However, Starbucks can immediately update suppliers on order backlogs (Chen & Liang, 2021). The company uses the information to adjust logistics associated with cargo batches, product delivery, and consignments. Conversely, Starbucks should install an artificial intelligence system to manage the supply chain and address potential logistical inefficiency and redundancy. Weaknesses Starbucks UK depends on many company-operated stores, making it vulnerable to operational costs. Pereira (2023) stated employee turnover affects Starbuck’s ability to manage stores and offer high-quality services within the supply chain. Furthermore, the supply chain costs make Starbucks' prices higher than the competitors'. The weakness of the firm is it cannot attract price-sensitive clients. Stamford (2022) suggested the company justifies its expensive services with high-quality coffee. Alternatively, costs linked to stores, for example, utilities, rent, and labour, affect Starbucks' supply chain and profitability. Duque et al. (2019) claimed Starbucks implemented training programs and cost-saving measures to mitigate store costs. On
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7 the other hand, the firm still operates many storehouses (Yip, 2022). Using franchise-owner centers can assist the organization lower operational risks. Moreover, the main product supply in Starbucks is coffee; therefore, the company cannot attract clients with dietary preferences or restrictions. Pereira (2023) argued the organization attempts to expand its supply chain to plant-based options, such as low-calorie, gluten-free, and low-fat items. However, Starbucks still needs more product options compared to competitive beverage retailers. The company needs to appeal to buyers with dietary specifications or those seeking diverse services (Li, 2022). Coffee is vulnerable to price fluctuation due to weather conditions, economic conditions, and disease outbreaks. Starbucks is at risk of losing customers if coffee price increase (Pereira, 2023). However, the company has taken steps to mitigate the problems, such as diverse supply chain sourcing, surcharges reduction, and farmers' training. Opportunities Starbucks' supply chain concentrates on coffee but has opportunities to explore specialty items, including infused waters and teas. Gaille (2021) argued Starbucks could capitalise on beverage options and explore various products. The strategy can be a model for expansion into different markets. On the contrary, Starbucks will find it challenging to cater to the ever- changing demands of the client base (Hadleigh, 2020). The company will need to consistently gather customer feedback and rapidly develop the new product in the supply chain. The lessons Starbucks has learned while connecting with diverse coffee distributors are vital in building brand reputations. Partnerships enable Starbucks to access new distribution channels. According to Pereira (2023), Starbucks can use multiple distributors to meet its products' needs and demands. Starbucks can use the supply chain of established corporations in the UK to cut costs. The
8 partnership is fundamental for co-branding and cross-promotion. Starbucks UK can partner with Gist for cost-effective and flexible supply chain operations (Hadleigh, 2020). However, the disadvantage is Starbucks will be liable for Gist’s supply risks and debts. Furthermore, disagreements and friction between the partners may affect the supply chain operations. On the other hand, coordination with innovative distributors unlocks synergies, lower environmental impacts, and improves delivery schedules (Gist, n.d). Starbucks must look for partners that share its values, cultures, and goals in supply management. Threats Staff turnover and labour conflict may jeopardise Starbucks' capacity to run its stores and offer customer experience. Alcorn (2020) asserted competition among workers and strikes might negatively impact Starbucks. Moreover, high employee turnover can affect the firm’s ability to offer consistent client experience. However, Starbucks implemented training programs, competitive compensation, and worker retention initiatives to lower labour disputes. Nevertheless, economic uncertainties make it hard for Starbucks to offer high salaries because customers opt for lower-priced coffee (Hadleigh, 2020). Market instability due to natural calamities also affected the raw materials and input the organization used in production. The supply chain change associated with weather events and failed coffee beans can lead to significant problems for Starbucks. Alcorn (2020) indicated cost fluctuations in the coffee products had extensive risks of shortfalls in Starbucks. Furthermore, the post-COVID-19 effect on people’s buying habits leads to steep revenue drop-offs. However, by closing less significant stores, Starbucks limited the financial resources required for its supply chain activities. Neville (2021) stated Starbucks closed 100 stores in the UK in approximately 18 months. On the other
9 hand, Starbucks responded to government-mandated rules rather than monetary issues affecting its supply chain operations. Resource-based View Starbucks interprets firm behaviour based on the competitive gains in the market. The company supply chain focuses on production elements offering aggressive facets over competitors (Lukovszki et al., 2021). However, Starbucks’s primary resource is coffee, and feasible competitors can imitate the company's production process. The resource-based view assumes that a corporation’s resources are diverse and immobile (Bhat and Sharma 2021). Starbucks secures coffee beans from different suppliers as a strategy for owning the product’s competitive advantage. Conversely, a company can only guarantee its market share if it has a complicated supply chain (Sutton et al., 2021). Starbucks engaged in assets pooling to uphold a collaborative mindset with its coffee distributors. Nevertheless, the resources must create value for the firm and reduce the cost of supply chain operations. Resource Dependence Theory Resource dependence theory (RDT) advocates for inter-organisational governance as a strategic way of responding to uncertain conditions. However, corporations may rely on other companies for the required resources if they use the resource dependence theory. Durach et al. (2021) stated that uneven interdependence in the relationship is fundamental for decreasing environmental uncertainties. Starbucks forms supply chain relationships to fit the paradigm of resource dependence (Sutton et al., 2021). Resource dependency theory limits a company's focus on innovative actions to solve problems. Furthermore, transferring talents from one company to another may lead to a conflict of interest (Seuring et al., 2022). Conversely, a relationship with coffee growers and distributors can help Starbucks cope with economic instabilities.
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10 Transaction Cost Theory (TCT) TCT focuses on the efficiency and cost-minimisation rationales for the corporation. Starbucks engages in joint assignments to avoid opportunism and tracking expenses. Cooperative tasks help organisations avoid internalizing activities not aligned with their skills (Kayed et al., 2021). Starbucks collaborated with Uber eats to expand its service delivery to 11 cities in the UK (Rayner, 2019). The action was to meet the demand of customers in the digital market. On the other hand, Starbucks has to leverage Uber Eats' expertise to reach potential clients. The company must create unique beverage and packaging solutions to deliver the same quality menu to consumers (Rayner, 2019). Uber Eat lets Starbucks customers follow orders and track the supplier's progress using mobile apps. However, the Starbucks culture of interacting with customers at coffee stores conflict with Uber Eats technology-inclined business strategies. Gaps Rueda et al. (2017) argued Starbucks-associated CAFÉ concentrated on workers’ rights, safety, and minimum wages rather than coffee quality. CAFÉ should give Starbucks a platform to offer its suppliers special training and education. The company need to have close relationship with coffee growers and monitor plantation techniques its suppliers use. It should also maintain product quality and addresses worker shortage issues before it disturbs the supply chain. Tjokrosaputro et al. (2020) argued that technology is challenging to partners whose apps and websites are incompatible with Starbucks' systems. Nevertheless, the Enterprise Resource Planning software is customer-designed to uphold adaptable and user-friendly functionality (Goh et al., 2020, p.31). Moreover, the technology is upgradable; therefore, it grows with the company and supply chain needs. The gap in the evaluation is it did not test the company software’s ability to quickly and efficiently respond to changes. Starbucks undertakes real-time follow-up of its
11 supply chain and collects feedback using questionnaires to enhance its products. Chen and Liang (2021) stated organizations that employ new data sources within the supply chain offer insight into materials demand. Further, Starbuck does not use local coffee suppliers to promote its products. Starbucks selects suppliers in the local sales place with the intention of having low procurement logistics and enhancing its popularity. Huang et al. (2020) argued a company that develops a supply chain and products linked to local culture wins in customers’ favour. However, Starbucks may experience negative local publicity when it terminates distributors' contracts. Moreover, economic implications in a nation have high effects on the supply chain (Alibaba, 2020). The chosen suppliers may entirely depend on Starbucks as their primary source of revenue and resist the company’s innovative changes with the potential of affecting home-grown partnerships (Mappesona, 2020). Starbucks needs to increase its capacity to develop, manage, and inspect local suppliers to help them meet international standards. Starbucks has no standardized ways for cooperating with suppliers who deliver coffee to its UK stores. The action improved its bargaining power with distributors while negotiating contracts. Starbucks was attentive to information sharing to improve coordination and make consumers comfortable (Shrum, 2018). Conversely, a partnership involving asset allocation also includes loss sharing. Starbucks must still integrate its supply management team into its partners' business strategies (Kelso, 2022). The firm need to compromise its ways of undertaking business to accommodate different coffee suppliers. The desire for Starbucks to cooperate with more than 300 coffee bean suppliers affects its standard requirements (Chen & Liang, 2021). The organization must train all farmers to adhere to coffee sourcing guidelines (CSG).
12 Recommendations Starbucks need to reform CAFÉ’s emphasis on coffee quality and promote data exchange between the management and coffer farmers or suppliers. It should use the supply chain operations reference model (SCOR) as a management tool for communicating and improving decisions with customers and suppliers. The model addresses processes in the supply chain and the best strategies to satisfy clients’ demands. Miharja et al. (2020) affirmed SCOR model could assist Starbucks in fully leveraging capital investment, creating a supply chain roadmap, and aligning its business functions. Nonetheless, Duque et al. (2019) perceived the SCOR framework as time-consuming because it requires the company to elaborate the processes of planning, sourcing, making, delivering, and returning products in all supply chain units. However, Sunaryono (2022) indicated SCOR model determines business rules for measuring and improving supply chain efficiency. Likewise, Starbucks can apply the SCOR framework to manage suppliers’ networks, agreements, and performance. Second, Starbucks can use the Zone of Strategic Fit as a balanced model for helping the organization to meet design customer-friendly technology. According to Song et al. (2019), Strategic Fit ensures the Enterprise Resource Planning software align to customers’ needs, supplier’s requirements, and the company’s competitive approaches. However, Starbucks has to understand client’s need uncertainties, procurement capabilities, and responsiveness. Supply chain managers must comprehend clients’ scope, budget, and goals before executing products purchase (Chen and Bei 2019, p.7). On the other hand, customers can be uncertain about what they want; therefore, Starbucks should be able to guide clients within the procurement capabilities (Turner et al., 2019, p.8). Critical customer requirements (CCR) are vital in achieving strategic fit because they match customer needs with organizational abilities (Song et
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13 al., 2019). It is difficult for an organization to realise strategic fit, but the Starbucks supply chain team will align its objectives with business goals. Moreover, Starbucks can employ vertical integration and streamline its operations through direct ownership of production stages. Yip (2022) stated an organization achieves vertical integration by establishing distributors, suppliers, and retail locations. Starbucks can work with 300000 coffee growers and make sure the suppliers meet international quality standards (Yip, 2022). On the contrary, language barriers make it difficult for Starbucks to communicate with farmers. Consequently, a coffee producer who received training programs from Starbucks faces the challenges of overplanting or needing more workers to meet the company guidelines (Jacoba, 2022). A company requires financial means to buy small actors in the supply chain for the success of vertical integration. Nonetheless, partnerships with players at all levels of the supply chain encourage steady growth. Vertical integration also increases the production efficiency of an organization with significant resources. Furthermore, Starbucks should mix profitability and aspirations for sustainability. Starbucks Farmer Support Centers is assisting coffee growers in comprehending specific fertilizers and nutrients for effective productivity (Stamford, 2022). On the other hand, fertilizers act as sources of carbon emission and increase productivity only within a short period. Starbucks also initiated open-source agronomy, where it grows climate-resistant trees on the same land farmers cultivate coffee. Purcărea (2019) argued that employees and customers could resonate with Starbuck values when it makes distribution networks and retail outlets sustainable. The organization can green the supply chain through energy usage reduction and attain LEED certification (Tsai, 2020, p. 5). Starbucks can initiate a carbon-neutral coffee roadmap through investment in water conservation and regenerative agriculture.
14 Besides, Starbucks can establish megastores which will serve as an innovation laboratory for the supply chain system. Leblanc (2019) stated systematic innovation support is an opportunity to enhance customers’ experience. Starbucks set up Caring Unites Partners (CUP) Fund to assist farmers in donating to coffee growers who faced natural disasters (Gozdan & Sudolska, 2019). On the other hand, the company can start strategic partnerships which allow people to pick up food during closing hours rather than store time (Yip, 2022). Starbucks can also brand its stores in a way that connects suppliers with customers through local aesthetics integration. The dark side of Starbucks is the complexity associated with many outsourced relationships and reduced synergies. However, the organization can get on track by simplifying operations. Starbucks needs to organise its business and define roles and responsibilities in the sector (van Baarle, 2022). Yip (2022) argued employees could accomplish multiple supply chain duties instead of specialising in a specific unit. Nevertheless, Starbucks has to organise its supply chain and focus on essential issues for overall company success (Stamford, 2022). The application of scorecards will help the firm track the performance indicators in the supply chain. The scorecards can also enable Starbucks to determine emerging issues among suppliers (Pavez et al., 2021). Conversely, the company must align its supply chain activities with the third parties' interests. Conclusion Starbucks utilized sustainable sourcing approaches to ensure its supply chain strategies adhered to ethical standards. It created CAFÉ standards to ensure farmers maintained similar flavour and quality. The enterprise resource planning network also tracked, collected, and analysed data about its products and services. On the other hand, the technology was problematic
15 to partners who had incompatible applications. The weakness of Starbucks is it is not favourable to price-sensitive customers. On the other hand, the companies argue its products are expensive because they are high quality. Starbucks has the opportunity to use multiple distributors to satisfy consumer demands. The problem is it will be liable for the partner’s supply chain risks and costs. High staff turnover can also threaten the ability of Starbucks to operate its stores in the UK. The organization should be agile, adaptable, and aligned with other suppliers. Starbucks is well-positioned to tackle business fluctuations when it receives real-time data. Its alignment with coffee distributors enhances its bargaining power. Moreover, Starbucks' supply chain and products connect with local cultures to win clients’ interest. Conversely, there may be adverse publicity if the company disagrees with community leaders. Furthermore, Starbucks needs to focus on inter-organizational governance to respond to supply chain uncertainties. Its joint venture must minimise costs and add expertise to the business. The recommendation is Starbucks should utilise the chain operation reference model to improve customers’ decisions. On the other hand, the SCOR framework is complex because it requires planning, sourcing, and delivery of all supply chain units. Second, Starbucks can employ a zone of strategic fit to meet its goals. Nevertheless, managers need to understand consumers’ budgets before product execution. The organisation can initiate megastores as a laboratory for innovations relevant to supply chain strategies. Starbucks’ Caring Unites Partners (CUP) Fund can also promote how to interact with coffee growers and help them meet international standards.
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16 References Alcorn, C. 2020. Starbucks is closing up to 400 stores and expanding takeout options. CNN Business. https://edition.cnn.com/2020/06/10/business/starbucks-closing-400- stores/index.html (6 February 2023) Alibaba. 2020. Local vs global sourcing: The pros and cons. Seller Alibaba. Bhat, R. and Sharma, V., 2021. Dimensionality and consequences of service innovation: An empirical study of hospitality industry. Cogent Business & Management, 8(1), p.1924931. doi:10.1080/23311975.2021.1924931 Chen, A. and Liang, J. 2021. Analysis of Starbucks supply chain status based on 3A3S Model. Journal of Economics and Public Finance 7 (42). pp.52-58. Doi: 10.22158/jepf.v7n4p52 Chen, Y.S.A. and Bei, L.T., 2019. Free the brand: How a logo frame influences the potentiality of brand extensions. Journal of Brand Management, 26(4), pp.349-364. doi:10.1057/s41262- 018-0142-0 Cooper, M. and Nguyen, Q.T., 2020. Multinational enterprises and corporate tax planning: A review of literature and suggestions for a future research agenda. International Business Review, 29(3), p.101692. doi:10.1016/j.ibusrev.2020.101692 Duque, D.F.M., Ríos, J.R. and Gómez, J.C.O., 2019. Operational supply chain risk identification and prioritization using the SCOR model. Ingenieria y Universidad, 23(1), pp.1-13. doi: https://doi.org/10.11144/Javeriana.iyu23-1.oscr Durach, C.F., Kembro, J.H. and Wieland, A., 2021. How to advance theory through literature reviews in logistics and supply chain management. International Journal of Physical Distribution & Logistics Management, 51(10), pp.1090-1107. https://www.emerald.com/insight/content/doi/10.1108/IJPDLM-11-2020-0381/full/html
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19 Mehrhoff, J. 2022. How real-time data can help with decision making in supply chain. Orkestra. https://www.orkestrascs.com/blogs/how-real-time-data-can-help-with-decision-making- in-supplychain#:~:text=The%20value%20of%20real%2Dtime,business%2Denhancing %20decisions%20without%20delay . (6 February 2023) Miharja, R., Kaltum, U., Primiana, I. and Sarasi, V., 2020. Evaluation of SME Supply Chain Using Methods Supply Chain Operation Reference (SCOR)(Case Study on Borondong Industry SMEs). KnE Social Sciences, pp.1026-1033. doi:10.18502/kss.v4i6.6659 Neville, S. 2021. Starbucks UK extends losses as pandemic takes its toll. Evening Standards. https://www.standard.co.uk/news/uk/companies-house-government-middle-east- european-turkey-b941303.html (6 February 2023) Pavez, I., Kendall, L.D. and Laszlo, C., 2021. Positive-impact companies: Toward a new paradigm of value creation. Organizational Dynamics, 50(4), pp.1-11. Available at: https://www.researchgate.net/profile/Ignacio-Pavez/publication/347383839_Positive- impact_companies_Toward_a_new_paradigm_of_value_creation/links/61b36b2ffd2cbd7 2008ec525/Positive-impact-companies-Toward-a-new-paradigm-of-value-creation.pdf Pavez, I., Kendall, L.D. and Laszlo, C., 2021. Positive-impact companies: Toward a new paradigm of value creation. Organizational Dynamics, 50(4), pp.1-11. doi:10.1016/j.orgdyn.2020.100806 Pereira, D. 2023. Starbucks SWOT analysis. The Business Model Analyst. Available at: https://businessmodelanalyst.com/starbucks-swot-analysis/ ( Accessed 4 February 2023). Purcărea, T., 2019. Retailers’ Struggling to Adapt to the Changing Consumer, pp. 1-15. http://crd-aida.ro/RePEc/rdc/v10i3/4.pdf
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22 Yip, J. 2022. Vertically integrated businesses ensures stability in the market. Business. https://www.luxuo.com/business/vertically-integrated-businesses-ensures-stability-in-the- market.html#:~:text=Global%20coffee%20brand%2C%20Starbucks%20uses,nearly %20300%2C000%20coffee%20growers%20worldwide . (Accessed 4 Feb 2023).
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