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The Coffee industry makes billions of dollars in revenue a year, coffee companies around the world try everything they can to distinguish themselves from their competitors. One company has stood out from the rest for decades and has even become a household name. The very first Starbucks store was opened in Seattle, Washington, on March 31, 1971, by three partners Jerry Baldwin, Zev Siegl, and Gordon Bowker. What made Starbucks so different from other coffeehouses and companies, is its priority to serve great tasting quality products while focusing on customer experience and satisfaction.
By providing customers with the products and service they want, Starbucks became an instant obsession. Baldwin, Siegl, and Bowker realized they had a golden opportunity with their newly formed coffee company and decided to expand their store to other locations. In the early 1990s, Starbucks made its appearance for the first time in California, to no surprise the store was very prosperous. With all the success Starbucks was having in the United States, Baldwin, Siegl, and Bowker took a chance with the company and placed a store outside North America for the very first time.
In 1996 a new Starbucks store was opened in Tokyo, Japan. This risky move ended up being one of the best business decisions Starbucks could make because today overseas operations contribute to almost one-third of its stores. Starbucks which started off as one store, now operates over 28,218 locations around the world, making itself present in 6 continents and in 76 countries. Starbucks now has over 238,000 employees and makes over .
387 billion dollars in revenue. The company’s products can even be found sold at any grocery or convenience store. Starbucks has not only grown a reputation for its coffee, but for its brand too.
Even though Starbucks was growing in size and popularity with each year since it was established, Starbucks wasn’t even apart of the Gartner Supply Chain Top 25 until 2011. When Starbucks finally made an appearance on the Top 25, the company was only placed at number 22 of the 25. But this placement wasn’t good enough for the company and they made it their mission to make their way further up the list each year. It was obvious that Starbucks had to make a statement to not only move up the Gartner Supply Chain List but stay on it. In the year 2012 Starbucks jumped up 6 spots to be ranked number 16. This large increase came from Starbuck’s focus on bettering the community, along with its coffee supply chain. The Starbucks Company uses a self-made approach called Coffee and Farmer Equity (C.A.F.E), which focuses on responsible purchasing practices, farmer loans, and forest conservation programs. The farms and mills Starbucks purchases their coffee beans from are evaluated by third-party verification organizations that are run by Scientific Certification Systems. In 2011 86 percent of Starbucks coffee was C.A.F.E Practice verified, and by 2015 this number plans to be at 100 percent.
Starbucks continued to rise by a few numbers on the Top 25 list every year, until 2014 when it dropped by two, making it ranked number 17 out of the 25. This drop was contributed by complications in the supply chain and employee training. Since Starbucks expanded its menu in 2013, this lead to more employee training so the company could provide a consistent menu at every location. This menu expansion ended up being an issue because customers showed they preferred a menu with fewer choices rather than many. This resulted in an overstock of inventory since they were unable to sell the unwanted drink specials. Along with being over budget since Starbucks paying employees to do unneeded training to make the drinks they weren’t even successfully selling. After this slight fall, Starbucks realized they needed to make some changes, including cutting the menu back to its original best sellers and well-known specialty drinks. In addition to this, Starbucks started making some drastic changes that were not only beneficial to the company but focused on the customer’s needs.
Over the next few years heading into 2016, Starbucks had a three-year weighted average ROA of 16.9% and growth rate of 13.8%. Starbucks has also become extremely successful with its strong supply chain that was capable of speedy delivery to over 25,000 locations. Starbucks stores around the world have even picked up on the innovative trends in technology and started offering customers the option of ordering food and drinks on the Starbucks App, that could then be picked up in the store to avoid time-consuming lines. Starbucks has also proved itself to be a socially conscious company by implementing programs to reimburse employees’ college costs and to donate leftover food in the U.S. stores to charity. Through all these improvements over the years, Starbucks has earned its place on the Gartner Supply Chain Top 25 Companies as number 10 out of the 25 as of 2018.
The growing size of Starbucks as a corporation comes with many responsibilities to effectively provide quality products and service to its customers. Starbucks is responsible for over 70,000 outbound deliveries a week. In order to ensure these deliveries are carried out Starbucks has an amazing supply chain that is fit for a giant global company like itself. Starbuck’s supply chain expands across nearly nineteen countries and works with nearly 300,000 coffee growers worldwide. This allows Starbucks to provide the best ingredients to its customers for a low price. These ingredients start off as raw materials which are then sent to roasting, manufacturing, and packaging plants before they are shipped off to Starbucks locations and stores around the world. Starbucks has six roasting centers, located in the U.S and Europe, where their famous coffee beans are prepared. Even though this number seems small for such a large company, this system is extremely effective. Each center makes sure every group of beans is roasted, manufactured, and packaged the same way to ensure constancy for the Starbucks brand. The size of the Starbucks company and the number of deliveries it is responsible for should make the supply chain extremely complex, but instead, they rely on simple operational structures and metrics that are not only effective but are cost efficient too.
To ensure Starbuck’s supply chain runs effectively, the company has a number of well-established roasting plants and warehouse locations. Some of these locations being California, South Carolina, Amsterdam, Oregon which is the main loose leaf tea distributor, and York, Pennsylvania which is Starbuck’s largest distribution center. York, Pennsylvania was strategically chosen to build Starbuck’s largest distribution center for a variety of reasons. Some of the most crucial being that the York location is in close proximity to a Starbucks coffee roasting plant that creates over 3 million pounds of coffee a week. Along with this, Pennsylvania is becoming an ideal location because of its closeness to many Northeast hubs. This expansion will maximize Starbucks’s distribution size by 35%, helping its supply chain in the Northeast United States, Canada, and Europe, all while creating over 300 new jobs for people living in the York, Pennsylvania area. To maximize the space used in these new centers and warehouses Starbucks uses calculations to decrease the amount of unused space, saving the company money and creating more profit.
With the continuing success and growth that Starbucks was experiencing, the executives of this company knew they would be at risk if their supply of specialty beans ever fell short. To ensure this would not become an issue for the company they implemented programs to protect its coffee supply. In 2001, Starbucks launched a preferred supplier program that identified and rewarded farmers that met their quality standards. Suppliers that were apart of the program were awarded points for meeting Starbucks’s quality needs, the more points they earned the more they would get paid for their coffee. The preferred suppliers that had the most points would receive a 5% premium on each pound of beans they sold. Suppliers could also earn long-term contracts with Starbucks to ensure security and even receive a credit to fund improvements on their farms. Today, the program implemented into the Starbucks supply chain has been so effective that 99% of their coffee now comes from trusted preferred suppliers.
Keeping up with the demand of a company as large as Starbucks incorporates a lot in order to effectively predict the needs of the company for the future. Starbucks goes beyond just forecasting what may happen, to using predictive analytics and artificial intelligence for more precise measurements. These innovative techniques focus on insights directly from the customers, stores, Starbucks loyalty cards, and Starbucks mobile apps. This information is retrieved and recorded from over the last 12 months in order to produce the most effective data analysis. Predictive analytics is known to increase the company’s revenues by 21% because it takes information directly from the source. Starbucks now has a more confidence in what you’re going to do next and why.
Starbucks also implemented an Enterprise Resource Planning (ERP) System which has become a reliable tool in simplifying and maintaining their supply chain. Annually Starbucks spends about $600 million on coffee and $2.5 billion on dairy and paper goods. Purchasing supplies for a company this large are crucial for its success, by using their ERP system Starbuck was able to improve its supply chain. The system is able to manage all the purchasing being done all over the world, along with automatically updating the company when purchases are received, billed, and paid for. Starbucks was also able to eliminate the use of paper forms and emailing orders, making their supply chain more efficient. The ERP system also integrates other areas of the company like the financial system, once again cutting down unnecessary paperwork and improving the communication for both parties involved. This means less room for human errors and faster delivery times, ultimately making their supply chain more effective.
Starbucks as a company has been fortunate enough to experience the utmost success in the coffee industry. However, this company doesn’t take its fortune for granted especially because it takes a strong team to make the business run smoothly. Along with this, Starbucks relies on agricultural products to sustain itself, ultimately making the planet one of their most important business partners. Since the planet’s health is so important to the future of Starbucks as a company, they have adopted many green strategies to help do their part to save it. Starbucks is actively working to bring all of its stores up to LEED® building standards, along with conserving energy and water on a daily basis. The company as a whole is also working to shrink their environmental footprint by increasing recycling, encouraging the use of reusable cups, and using less waste in their packaging. Starbucks has even taken the initiative to work with their farmers to reduce the impact of climate change on their farms. These few green strategies are just the beginning of the impact Starbucks wants to make to improve the planet.
The Starbucks Coffee Company is undoubtedly one of the most well-known coffee names in the world. They have earned their place on the Gartner Supply Chain Top 25 for many reasons, one being their efficient supply chain. Over the years of trial and error, they have been able to form a supply chain that can successfully deliver products to their stores all over the world. All while having strong and trusting relationships with their many suppliers. Along with this, Starbucks has shown their passion for the community, people, and environment through their many efforts to give back. Starbucks has become the household name that it is today through the many developments it has made to become a better business overall and only continues to grow through the years.
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