Essay supply chain management starbucks supply chain management

The company is able to ensure a sufficient supply of its raw material, by managing its 240-hectare coffee farm Hacienda Alsacia in Costa Rica and working directly with more than 400,000

THUONG MAI UNIVERSITYInstitute of International Training

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SUPPLY CHAIN MANAGEMENT

Starbucks Supply chain Management

Class code : 24100BLOG0417E Group : 05

Hanoi, 2023

GROUP MEMBER

Lê Nguyễn Nhật Minh Lương Thế Minh Nguyễn Đức Minh Nguyễn Hà My Đinh Hoàng Nam Ngô Quang Nguyên Lê Vũ Uyên Nhi Khuất Thị Minh Phương

I.Introduction

Starbucks Coffee is a leading American multinational coffee retailer that has 30 626 stores, in 76 countries around the globe, and employing just over 300 000 employees (Smith, 2020) A concept that was born out of a passion for coffee by three friends in Pike Place Seattle Washington in 1971, and named after a character from the Moby Dick story, has grown to an annual turnover of around 25 billion US Dollars The Mission statement: "To inspire and nurture the human spirit — one person, one cup and one neighbourhood at a time." And the Vision statement: "To establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow." The Mission and Vision statement show Starbucks objective of prioritising the customer while remaining a premium product From this objective Starbucks has designed its supply chain model around the concept of “from bean to cup” From this concept, the "Bean” is the premium product and “Cup” is the customer experience.

II.Participants

a Suppliers

The procurement process of raw materials is the first stage of Starbucks’ supply chain process Being a specialty coffee retailer and coffeehouse chain, coffee beans are the company’s primary raw material The company is able to ensure a sufficient supply of its raw material, by managing its 240-hectare coffee farm (Hacienda Alsacia) in Costa Rica and working directly with more than 400,000 coffee growers across 30 countries (Latin America, Africa, Asian)

Hacienda Alsacia is Starbucks’ first and only company-operated coffee farm, located on the slopes of Poas Volcano in Costa Rica1 The farm serves as the headquarters for the Starbucks Costa Rica Farmer Support Center and the Starbucks Global Research and Development team1 One of the goals of the farm is to help solve challenges facing coffee-farming communities around the world, such as climate change, aging farmer populations, and coffee rust1 To achieve this goal, Hacienda Alsacia has developed new disease- and climate-resistant coffee varietals, which are distributed for free to coffee farmers in Costa Rica who participate in C.A.F.E (Coffee and Farmer Equity) Practices1 Starbucks has

donated nearly 90 million seedlings to farmers in Colombia, El Salvador, Guatemala, and Mexico1 Hacienda Alsacia is not only a Starbucks farm but also a supplier of seedlings to its coffee suppliers.

Apart from the whole bean coffees and coffee beverages sold in Starbucks stores, the company also offers tea, ready-to-drink beverages, and food items like pastries, breakfast sandwiches, and lunch items which it purchases from several national, regional, or local specialty suppliers under long-term supply contracts.

The company also purchases paper and plastic products, like cups and cutlery, from several companies to meet its retail stores' needs.

Starbucks gets its supply of coffee beans directly from coffee growers in Latin America, Africa, and Asia; in countries like Brazil, Kenya, Columbia, Mexico, Guatemala, Kenya, Mexico, Saudi Arabia, Tanzania, etc.

Also, Starbucks doesn’t make the food products it sells, rather it outsources them It gets its supply of baked products through partnerships with small-scale bakers across the United States and Europe.

Even though Starbucks does not manufacture its food, it has instilled strict legal and ethical guidelines for its suppliers regarding food safety and transportation The company obtains a particular food item from one company to ensure that all its food tastes and looks the same anywhere you go.

Some of the suppliers involved in Starbucks’ supply chain management process include:

● Premium Brands Holding Corp supplies breakfast sandwiches

● Steven Charles dessert company (SROriginals) supplies baked goods like cakes and desserts.

● Nestle supplies Teavana tea

● Starbucks gets its silk soymilk, creamers, and milk from Local farmers ● Pepsico supplies most of the company’s ready-to-drink products ● International Paper supplies paper cup

Ulrich Honighausen is the unsung hero behind the everyday convenience of Starbucks As the supplier of a wide array of essential items, including mugs, tumblers, and various

merchandise, he plays a pivotal role in ensuring that Starbucks' iconic products are readily available to customers around the world His commitment to quality and reliability ensures that each coffee lover can savor their favorite brew in a Starbucks mug or take their drink on the go with one of their signature tumblers Ulrich's dedication to meeting the demands of one of the world's most beloved coffee chains underscores the importance of suppliers in the global business landscape, enabling us all to enjoy our daily caffeine fix with style and convenience.

Starbucks, the world-renowned coffee chain, uses Mastrena espresso machines by Thermoplan AG These super-automatic machines are designed to be efficient and convenient, allowing Starbucks to serve high-quality espresso in high volumes The machines feature a large hopper for holding beans and a built-in burr grinder for fast grinding As Starbucks continues to grow and innovate, they have begun to replace their older Mastrena CS2 machines with the newer Mastrena II model, ensuring that they can keep up with demand while maintaining the quality of their coffee.

b Producer

The next stage in Starbucks’ supply chain management process is the manufacturing stage The company owns and uses a handful of manufacturing/roasting facilities It closely manages its sites’ operations to ensure that all beans are roasted and packaged in the exact same way.

After the coffee beans are harvested, they are packaged and taken to ocean liners that ship them to any of these roasting plants in Europe and the U.S:

1 Carson Valley Roasting Plant and Distribution Centre in Carson Valley, Nevada 2 Augusta Roasting Plant in Augusta, Georgia

3 Sandy Run Roasting Plant in Gaston, South Carolina 4 Kent Flexible Roasting Plant in Kent, Washington

5 York Roasting Plant and Distribution Center in York, Pennsylvania

Each of these manufacturing plants is capable of producing about 1.5 million pounds of coffee beans per week.

The distribution process of Starbucks involves several steps to ensure the quality and consistency of their coffee products The first step is receiving the coffee beans from various sources around the world The beans are then stored in a controlled environment to preserve their freshness and flavor Next, the beans are sifted to remove any foreign materials or defective beans The beans are then sorted by size, density, and color to create different assortments of coffee Some of the beans are sent to the next step, while others are subjected to a decaffeination process that removes most of the caffeine without affecting the taste Both caffeinated and decaffeinated beans are then roasted at different temperatures and durations to achieve the desired roast level The roasted beans are then tested for quality by trained experts who check for aroma, flavor, acidity, body, and uniformity If the beans fail the quality test, they are discarded Otherwise, they proceed to the cooling stage, where they are rapidly cooled to stop the roasting process and prevent overcooking The cooled beans are then blended according to specific recipes to create different types of coffee products The blended beans are then tested again for quality by sensory and chemical analysis If the beans pass the final test, they are ready for packaging The packaged beans are then palletized and labeled as finished goods, ready for distribution to various Starbucks distribution centers

c Distributor

Companies distribute their products to consumers through various distribution channels like stores, wholesalers, retailers, online platforms, etc Starbucks distribution centers are, therefore, a huge part of the company’s supply chain.

The company employs an effective distribution strategy by establishing four regional distribution centers and smaller warehouses called central distribution centers (CDCs) which has helped to streamline the company’s transportation and warehousing operations.

Starbucks products are held at these distribution centers and shipped from there to retail stores around the world Depending on their location, these retail stores are supplied by either the CDCs or regional distribution centers.

Starbucks’ distribution system consists of 33 warehouses (CDCs) in the United States, seven in the Asia/Pacific region, five in Canada, and three in Europe; all of these CDCs except one are controlled by third-party logistics companies.

The company operates a global network of regional distribution centers to deliver its products efficiently and reliably In the United States, it has seven locations: Auburn, Harbor island, Carson valley, Nashvile, Cinram, York, and Dallas In Asia, it has two locations: Singapore and China In Europe, it has two locations: UK and Germany These regional distribution centers help the company meet the diverse needs and preferences of its customers across different markets.

d Retailer

Starbucks’ supply chain management process is not complete without its end-user consumers In order to reach its customers in a cost-effective and timely manner, the company has a wide range of retail outlets, both physical and online.

The company has its own stores, and partners with third-party businesses and physical stores at ideal locations This enables the brand to have a greater reach to consumers The retail objective of Starbucks’ supply chain management process has always been to provide a unique experience for its customers.

According to the words of the company’s former CEO, Howard Schultz, Starbucks is not in the coffee business serving people but is in the people business serving coffee The company offers quality products and customer service to its customers using its store’s design, location, and the expertise of its baristas When its baristas make drinks for customers, a substantial amount of value is created.

Hence, the company supply chain management is a people-centered approach It focuses the customer’s attention on the quality of the experience, where customers are served a cup of coffee with their name on it, from their favorite flavor and size, within a beautiful space.

Digital adoption to offer convenience and improve customer experience is also part of Starbucks’ supply chain management process This involves integrating mobile ordering to reduce in-store congestion and establish more contactless pick-up experiences Starbucks’ Mobile Order and Pay app allow customers to pre-order food and drinks from the comfort of their homes or workplace Customers are then able to pick up their orders from the pickup-only stores established in various locations.

e Shipping units

One of Starbucks’ supply chain management processes is its efficient logistic system This stage involves the commercial activity of transporting the company’s products The company uses different modes of transportation to deliver its raw materials and processed products to various stores.

The type of logistics system used will depend on geographical distance and market forces For instance, an increase in product demand in the marketplaces prompts the company to use a faster delivery model.

Generally, the company uses ocean shipping to transport coffee beans from different parts of the world That is, the company imports coffee beans from Africa, Latin America, and Asia in ocean containers From the port of entry, these coffee beans are then trucked to the company’s manufacturing plants.

Starbucks is a global coffee chain that offers a variety of products and services to its customers One of the ways that Starbucks delivers its products is through its own mobile application and third-party food delivery applications such as ShopeeFood, Beamin, and others Customers can order their favorite drinks and food items from the nearest Starbucks store and have them delivered by Starbucks employees or by the delivery partners of the third-party applications This way, Starbucks ensures that its customers can enjoy their products conveniently and safely.

f Recycle

Starbucks has long been committed to sustainable practices, and one of the ways it contributes to environmental stewardship is by repurposing coffee grounds from its stores While the specific details of how Starbucks uses its waste in roasting farms may not be readily available, it's well-known that the company strives to minimize waste and maximize the utility of its byproducts Coffee grounds are a valuable resource that can be converted into nutrient-rich fertilizer for farmers, which in turn promotes eco-friendly agriculture and reduces the burden on landfills By diverting coffee grounds from the waste stream, Starbucks demonstrates its dedication to both sustainability and responsible waste management.

In Japan, Starbucks takes its commitment to recycling a step further by repurposing coffee grounds as cattle food This innovative approach not only reduces waste but also highlights the company's determination to create a closed-loop system within its operations By supplying coffee grounds to cattle farms, Starbucks not only contributes to sustainable livestock farming but also creates a unique connection between its coffee production and the food supply chain This approach exemplifies Starbucks' dedication to holistic sustainability and showcases how waste materials can be transformed into valuable resources, even in unexpected ways, such as becoming a supplier of meat products for the Starbucks chain Starbucks' initiatives in Japan serve as a noteworthy example of how businesses can creatively and responsibly manage their waste while making a positive impact on the environment and local communities.

III.Flows

Starbucks, like many other companies, relies on a complex supply chain to ensure the availability of its products and services to customers The supply chain of Starbucks involves three main types of flows: physical flow, information flow, and financial flow.

a Physical Flow

The physical flow in Starbucks' supply chain encompasses the movement of tangible goods and materials from suppliers to stores and ultimately to customers It starts with the sourcing of coffee beans from various coffee-producing regions around the world These beans are transported to processing facilities for roasting and packaging After processing, the coffee is distributed to Starbucks retail locations, which can be company-owned stores or licensed stores operated by partners Other physical flows include the delivery of food items, merchandise, and equipment to stores Lastly, customer purchases at Starbucks stores involve the physical flow of products from the store's inventory to the customer's hands.

b Information Flow

The information flow in Starbucks' supply chain is critical for coordinating and optimizing operations It involves the exchange of data and information between various stakeholders in the supply chain Information flow helps Starbucks track inventory levels, demand forecasts, and sales data at each store Point-of-sale (POS) systems at Starbucks stores collect data on customer orders and transmit this information to the central database Supply chain partners share information related to inventory levels, shipping schedules, and