Supply Chain Management

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In 1997, Starbucks planned to increase its current 1,400 retail-chain operation to 2,000 stores by the year 2000 and to make sure that none of these locations is beholden to a distribution system backed by a fleet of employee cars, Starbucks found itself in the midst of overhauling its supply chain management system. Starbucks has chosen a best-of-breed approach over and integrated ERP solution wherein companies handpick the best software product for each piece of the supply chain process. In 1995, Starbucks became committed to revamping its technology to support its expanding supply chain. Its goal was to create a state-of-the-art, integrated system that would be cost-effective, improve customer relations and maintain consistent quality. As of today, Starbucks has implemented five of the nine programs outlined it its plan. These applications include Oracle's Global Enterprise Manufacturing Management System, Retek Information Systems' SkuPlan and tools from Manugistics and Numetrix. The best-of-breed approach has lowered overall inventory, overtime hours, inventory obsolescence and emergency orders has been maintained by Starbucks supply chain systems.

In the supply chain operations, the first area involved is the retail business organization, which runs all of the retail stores. The retail business operation also supports through the supply chain operations, their international business. The second area is the support of specialty sales and marketing where they support major restaurants, United Airlines, Nordstrom's, etc., and other specialty accounts that don't fall under their own retail business unit operations. The third area is their direct response where the functions handled are typically referred to as direct mail. Basically, a centralized supply chain operations organization that supports each of these three areas has been created. The company has recognized that there is a significant leverage in operating the supply chain operation in this way rather than having three totally separate business units. Starbucks believes that the whole concept of supply chain can be found in the term 'value added.' They are in the business of delivering the value and the marketing and retail organizations develop the value but the supply chain operations deliver it. Each unit of their supply chain is integrated by common objectives. They have a mission statement and they have strategic imperatives for each of their business units within supply chain operations which are shared by the heads of each of those business units to such a degree that much of their financial compensation is based on achieving objectives that cross boundaries.

The supply chain of green coffee to Starbucks is complicated. Coffee beans come from all over the world and about 50% is from Latin America while 35% from the Pacific Rim, and 15% from East Africa. Most coffee producers own small to medium-sized family-owned farms. Most sold their outputs to processors through local markets (exporters, mills or cooperatives) while others process their coffee beans. The processors turn coffee "cherry" into parchment or green coffee, and then sell them to suppliers who were also the exporters or distributors.

Starbucks uses ...