Pom A1.1
Pom A1.1
Pom A1.1
To
optimize enterprise resources, operations management plans, coordinates, and
monitors manufacturing, production, and service delivery.
Starbucks employs operation management to assist businesses in achieving
success. This study will elucidate the operations and supply chain effectiveness of
Starbucks. Overproduction and inventory management issues at Starbucks will also be
investigated.
Part 1: Company review
1. About Starbucks
Starbucks, founded by Jerry Baldwwin in Seattle on March 30, 1971, is today a
global coffee brand with millions of customers in 76 markets. Starbucks employs
151,000 people worldwide and owns 34,000 (Statista,n.d, 2022). Starbucks is proud of
its great, ethically sourced coffee. Starbucks sells smoothies, teas, pastries, mugs,
accessories, bagged coffee, and over 30 premium coffees. (Chang, 2020)
2. Vision, mission, values
Starbucks' aim is "to establish Starbucks as the premier purveyor of the world's
finest coffee while maintaining our unwavering principles as we grow." The
company's goals and this vision help it grow forward.According to their website,
Starbucks' aim is "to inspire and nurture the human spirit - one person, one cup, and
one neighborhood at a time." This statement shows how the corporation maintains the
vision through conducting the business. Starbucks' core principles ensure that the
corporation follows its goal and vision (Starbucks Coffee corporation, n.d.).
Starbucks' success has helped it communicate its vision, mission, and values.
3. Product
Starbucks emphasizes coffee drinks including Americano, Espresso, Machiato,
instant coffee, and roughly 15 more. Starbucks also sells juices, cakes, sandwiches,
etc. Starbucks cups, vases, towels, and other goods also generate significant revenue.
4. Transformation process
Starbucks buys beans from roughly 30,000 coffee plantations worldwide. Starbucks
carefully selects suppliers using CAFE and CSG standards (Starbucks Coffee
corporation, n.d.). Raw beans are roasted at a storage facility, ensuring uniform
roasting standards across countries. Starbucks distributes roasted and packaged beans
to large, regional, and small warehouses. Starbucks regulates operations and roasts
and packages all coffee beans the same due to limited storage (Croom, 2017).
Starbucks' supply chain engagement guarantees that distribution centers obtain the
supplies they need to complete requests and deliveries. The certificate is subsequently
sent to Starbucks' distribution center and retail outlets (Starbucks Coffee Company,
n.d.). According to Croom (2017), Starbucks also produces fresh food, tea, cocoa,
coffee mugs, accessories, books, presents, and coffee and tea making supplies. The
business has developed a distinct brand identity.
2.2.1. Suppliers
Starbucks sources its beans directly from John Parry of Hawaii, Lintong of
Sumatra, Yirgacheffe of Ethiopia and Baumann of Mexico. Each Starbucks supplier
needs to meet rigorous standards and requirements. The business maintains a very
good relationship with its suppliers, Starbucks continuously works with suppliers, the
business ensures that each coffee bean meets the requirements (Akcam, 2022).
This is the first stage in the supply chain – External suppliers. The influence a
supplier has over a product's pricing and exclusivity is known as supplier power. By
establishing a sourcing team as part of its supply chain approach, Starbucks has come
to terms with this. Starbucks is a highly well-run company with a big network of
coffee bean suppliers. This has reduced the chance that suppliers, who are known for
producing high-quality products, may abuse their influence.
2.2.2. Manufacturers
The company has six central storage facilities that streamline logistics across
25,000 stores in 69 countries. The coffee processing steps at Kent-Washington's
largest factory are as follows: roasting, mixing, brewing, packing, and then being
shipped to Starbucks distribution centers and then to major warehouses and final
destinations. Retail store. In addition, there is a Bay Bread Bakery-California plant to
prepare, test and develop new products (Starbucks, 2022).
This is the second stage – Internal function – Starbucks coffee tastes the same
everywhere its products are sold thanks to the company's strict control over the
roasting process. This time frame gave rise to a distinctive and uncommon flavor for
Starbucks. Because of Starbucks' active participation in the Manufacturers chain,
distribution centers obtain the supplies they require to fulfill orders and make the
70,000 weekly deliveries that are scheduled on time.
2.2.3. Distributors
First off, Starbucks sells its goods directly to customers inside the establishments
it owns. They import, prepare, and sell coffee through their own network of coffee
shops under their own brand names. Because they are frequently the first locations
where customers can access the company's goods and services, Starbucks outlets play
a significant role in their marketing strategy. According to reports, Starbucks has a
very extensive distribution network and very clever product and marketing
methods.This is the final stage – External distributors. Starbucks because the company
ships a lot of different products around the world. However, Starbucks always ensures
that goods are delivered to the right place and on time thanks to a strict management
system. With as few errors as possible, stores almost always receive enough
ingredients to serve customers. It can be said that the distribution stage is not the most
important stage, but it is crucial.
2.2.4. Customers
Starbucks' Italian-style coffee may taste different (Starbucks, 2022). Young
people are the only clients who can readily change and adapt. Starbucks targets high-
earners, notably college-educated young adults, in Vietnam and worldwide.
To sum up, Supply chain efficiency is assessed in different ways. A good supply
chain still requires internal system activities. You can offer the lowest pricing with a
strong supply network. Improving manufacturing processes will also take into account
company-supply chain interaction Koberg (2019). Starbucks' supply chain improved.
Starbucks lowered supply chain expenses by $500 million in each of the two years
after the shift approach. Starbucks forecasts $27,500 million global revenue in 2021
and 375,000 employees (Starbucks, 2022).
2. Quality management
Starbucks strives for quality throughout product development to give customers
a good experience. Each geography and altitude produces distinct coffee flavors, such
as Asian coffee trees, which are robust (Starbucks, n.d.). Even at selection, beans must
be ripe (Starbucks, n.d.). Starbucks tests over 1000 cups of coffee a day to meet
customer expectations (Starbucks, n.d.). To assure customers' favorite Starbucks
coffee, each batch is tested at least three times before approval.
Both use Differentiation and focus on coffee. Their strategic and tactical goals differ.
Two businesses succeed with 10 OM decisions. Starbucks and Phuc Long have
always prioritized product design, location strategy, layout design, and strategy. The
10 OM decisions enable two businesses maximize profitability despite having
conflicting short-term and long-term aims.
For example, deciding on Supply chain management, Starbucks aims to create
the best and most perfect product possible, so Starbucks' suppliers are all over the
world, so the price of the product is often high. Unlike Starbucks, Phuc Long's
products are aimed at the local standard, so the coffee beans and tea leaves are taken
from the highlands of Vietnam, so the price is 50% cheaper than Starbucks.
Regarding Layout design and strategy, instead of choosing luxurious and high-
class furniture like Starbucks, Phuc Long focuses on the number of chairs and tables
to accommodate as many customers as possible. The interior and design of Starbucks
are relatively expensive and promote inside decoration, but Phuc Long aims for an
open environment, most of the tables and chairs are placed outdoors, in order to easily
attract the attention of office workers and student. This happens because they have
different client files
Regarding Job design and human resources, in order to join Starbucks,
employees undergo many specialized training courses and the jobs are clearly divided.
In Phuc Long, they give priority to those who have creative thinking and are easy to
adapt to the young environment. For employees at the store, the staff can flexibly
change roles, for example, the bartender can serve as a waiter, to promptly respond to
customer needs.
P- System (Periodic Review System) - is a method that does not regularly and
continuously monitor the movement of raw materials, goods and products, but
only reflects the inventory value at the beginning or the end of the period through
actual counting (De Jonge, 2020). .
ABC analysis Models (ABC) - The ABC inventory management approach is
often used to value inventories. The Pareto principle underpins this strategy: 20%
of products sell 80%. Goods should be divided into three groups: Group A -
companies with the highest annual value (70-80%), Group B - stocks with an
average annual value (15-25%), and Group C - stocks with a low annual value
(5%). (2016) (Ziukov).
ABC( ABC Simple to find out which items Lack of flexibility -. Without
analysis Models ) in stock are the most important ongoing analysis, a company's
current ABC classification can
• Determine safety stock levels
quickly become obsolete.
to maintain
ABC analysis Models are not suitable for Starbucks because the claim model is
constantly updated and product sales can be erratic, items can go from C to A very
quickly. Constantly re-evaluating and reclassifying between the three groups can be
very time-consuming for a business. This will ultimately lead to effects in the general
interest of the company.
To fully manage their store-level inventory, Starbucks uses an EOQ system and
a P system. Businesses divide their inventory into two categories, long lifespans (like
spoons, cups, paper, etc.) and short shelf life like milk, sugar, etc) uses P – system and
EOQ. The first part of the business is dedicated to selling P-system products to
customers. This order is placed once a week with a three-day lead time before it is
fulfilled. Throughout the entirety of the store, variable pars have been designated for
each stock-keeping unit (SKU). To ensure that there is sufficient retail for clients, the
overstock level for the entire inventory is set at 15%. The daily processing of the
second order is performed by EOQ. The delay period for this order is currently two
days. This order contains all of the necessary components, such as milk, espresso, and
cups, for preparing beverages and pastries with a short shelf life. These items have a
limited ability to be stored. The demand for Starbucks' products follows a pattern that
is steady throughout the weekdays. The demand shifts slightly but only sometimes.
This occurs at the same time as the change in seasons as well as school breaks.
The amount of money made by Starbucks is not dependent on the day of the week,
however demand does fluctuate occasionally. This occurs about the same time as the
transition between seasons, holidays, and school vacations.
Using a combination of the two systems described below, Starbucks is able to
efficiently manage a vast selection of inventory at all of its stores around the globe,
ensuring that customers have the same experience at any Starbucks location.
4. Recommendation
Starbucks can use JIT (just-in-time) technology in addition to EOQ to solve
business problems. Since Starbucks' problem was a problem of excess inventory, the
technology was chosen because it aligns with Starbucks' workflow. It is also in line
with the company's goal of leading the trend of the coffee industry, while always
being receptive and creative to rise up. JIT, being a key element in Lean
Manufacturing, which is a production management system that plans the movements
of raw materials, items, and products during manufacturing and distribution in detail
so the next process can begin immediately. Thus, no production item sits idle,
awaiting processing, and no workers or equipment wait for input.
Strenghths Weaknesses
Minimize inventory, capital High risk
stagnation. A supplier having problems and not
Reduce warehouse space. being able to supply the materials a
Increase product quality. company needs can disrupt or stop the
Reduce scrap, defective products. entire production process. In addition,
Workers are deeply involved in Workers must take their work seriously
This system is proven to be highly effective because many large companies are
applying it, such as McDonald's - a rival of Starbucks. Thanks to the JIT model,
McDonalds' inventory, waiting time and overhead are almost zero (Setiawan, 2023).
Theoretically, if an item is sold, the market will pull the replacement item into the
system. "This triggers an order for the plant's production line, after which a worker
pulls another piece of equipment from the upstream station in the stream to replace the
picked equipment" (Aquilano et al. 2004). For this pull to go more smoothly, JIT
needs high quality in every process, a close relationship with the supplier, and very
clear requirements for the end product.
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