SCOM in Restaurants: Case Study Starbucks Corporation The Starbucks Corporation, founded in 1971, is one of the world’s
Posted: Thu Apr 28, 2022 2:23 pm
SCOM in Restaurants: Case Study Starbucks Corporation The
Starbucks Corporation, founded in 1971, is one of the world’s
largest coffee house chains, with more than 17,240 coffee shops in
over 50 countries. Starbucks’ product portfolio consists of food
items, as well as coffee specialties, tea, and other refreshing
drinks. Starbucks Corporation also offers roasted beans and several
merchandise products. However, Starbucks’ main product is coffee.
Therefore, and because of Starbucks’ large and complex global
supply SC, this case focuses only on the coffee bean. In particular
the company’s production and sourcing strategy and its
transportation network are considered. Like most restaurants,
Starbucks uses the production strategy “Make-to-Stock,” which means
production is performed in expectation of a customer order. Reasons
for choosing this strategy include scale effects which result in
lower transportation and manufacturing costs and higher flexibility
compared to other production strategies. To decrease the lead time
of coffee deliveries and to further decrease transportation costs,
Starbucks aims to manufacture in the region where the coffee is
sold. To regionalize coffee manufacturing, Starbucks owns five
coffee roasting plants, four of them located in the United States
and the fifth in the Netherlands. In addition to its company-owned
coffee roasting plants, Starbucks works with 24 contract
manufacturers in the United States, Canada, Europe, Asia, and Latin
America. Starbucks has spread its production across a wide
territory. Nevertheless transportation, logistics, and distribution
are still the biggest parts of Starbucks’ operating expenses. The
existence of an efficient and effective single, global logistics
system is essential for the company. Figure 2.3 shows the SC of the
Starbucks Corporation. The company has a multiple sourcing concept.
The suppliers of the coffee beans are mainly located in Latin
America, Asia, and Africa. To ensure ethical sourcing of the high
quality coffee beans, Starbucks uses Coffee and Farmer Equity
(CAFE) practices. CAFE is a set of guidelines which evaluates the
social, economic, and environmental aspects of coffee production.
This allows Starbucks to address sustainability issues which have
become very important in SCM. Starbucks uses ships and trucks for
transportation. The Starbucks Corporation normally delivers the
unroasted beans in ocean containers to the United States and
Europe. From the port of entry, the goods are trucked to a storage
site close to one of the coffee roasting plants. Once the beans are
roasted and packaged, the coffee is delivered to regional
distribution centers by trucks. In total, Starbucks runs nine
regional distribution centers, five in the United States, two in
Europe, and two in Asia. Each of the distribution centers covers
200,000 to 300,000 square feet. Other goods needed for running a
coffee shop are also stored there. From the distribution centers,
the products are delivered either directly to the store or to
central distribution centers, which are smaller warehouses. In
total, the Starbucks Corporation has 48 central warehouses
worldwide. From there the coffee beans and other products are
frequently trucked to retail stores and retail outlets. Discussion
1. What kind of production strategy does the Starbucks Corporation
use and why? 2. What kind of sourcing strategy is Starbucks using
in terms of numbers of suppliers and geography? 3. Which mode of
transportation does Starbucks use? 4. What kind of transportation
network does Starbucks use—direct shipping or via distribution
centers?
Starbucks Corporation, founded in 1971, is one of the world’s
largest coffee house chains, with more than 17,240 coffee shops in
over 50 countries. Starbucks’ product portfolio consists of food
items, as well as coffee specialties, tea, and other refreshing
drinks. Starbucks Corporation also offers roasted beans and several
merchandise products. However, Starbucks’ main product is coffee.
Therefore, and because of Starbucks’ large and complex global
supply SC, this case focuses only on the coffee bean. In particular
the company’s production and sourcing strategy and its
transportation network are considered. Like most restaurants,
Starbucks uses the production strategy “Make-to-Stock,” which means
production is performed in expectation of a customer order. Reasons
for choosing this strategy include scale effects which result in
lower transportation and manufacturing costs and higher flexibility
compared to other production strategies. To decrease the lead time
of coffee deliveries and to further decrease transportation costs,
Starbucks aims to manufacture in the region where the coffee is
sold. To regionalize coffee manufacturing, Starbucks owns five
coffee roasting plants, four of them located in the United States
and the fifth in the Netherlands. In addition to its company-owned
coffee roasting plants, Starbucks works with 24 contract
manufacturers in the United States, Canada, Europe, Asia, and Latin
America. Starbucks has spread its production across a wide
territory. Nevertheless transportation, logistics, and distribution
are still the biggest parts of Starbucks’ operating expenses. The
existence of an efficient and effective single, global logistics
system is essential for the company. Figure 2.3 shows the SC of the
Starbucks Corporation. The company has a multiple sourcing concept.
The suppliers of the coffee beans are mainly located in Latin
America, Asia, and Africa. To ensure ethical sourcing of the high
quality coffee beans, Starbucks uses Coffee and Farmer Equity
(CAFE) practices. CAFE is a set of guidelines which evaluates the
social, economic, and environmental aspects of coffee production.
This allows Starbucks to address sustainability issues which have
become very important in SCM. Starbucks uses ships and trucks for
transportation. The Starbucks Corporation normally delivers the
unroasted beans in ocean containers to the United States and
Europe. From the port of entry, the goods are trucked to a storage
site close to one of the coffee roasting plants. Once the beans are
roasted and packaged, the coffee is delivered to regional
distribution centers by trucks. In total, Starbucks runs nine
regional distribution centers, five in the United States, two in
Europe, and two in Asia. Each of the distribution centers covers
200,000 to 300,000 square feet. Other goods needed for running a
coffee shop are also stored there. From the distribution centers,
the products are delivered either directly to the store or to
central distribution centers, which are smaller warehouses. In
total, the Starbucks Corporation has 48 central warehouses
worldwide. From there the coffee beans and other products are
frequently trucked to retail stores and retail outlets. Discussion
1. What kind of production strategy does the Starbucks Corporation
use and why? 2. What kind of sourcing strategy is Starbucks using
in terms of numbers of suppliers and geography? 3. Which mode of
transportation does Starbucks use? 4. What kind of transportation
network does Starbucks use—direct shipping or via distribution
centers?