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Company background
Starbucks is worlds number one coffee and coffeehouse company; it has outlets in more than 55 countries. Jerry Baldwin, Zev Siegl, and Gordon Bowker established the first outlet at Seattle, Washington on March 30, 1971 (Starbucks Corporate website, 2011). To maintain the leadership role, the company adopts an effective total supply network. This paper discusses the total supply network adopted by Starbucks.
Total supply network
In the hospitality industry, more specific in the coffee sector, the need to have an efficient supply of materials cannot be overemphasized.
Starbucks adopts an integrated supply chain management where an internal department that pioneers the process; in the market, there are some coffee beans collection points managed indirectly by the company. The system aims at ensuring the company gets adequate supply of coffee and other material used in production at the right time, at an appropriate cost and quality.
The company does not only fetch products in the United States where it has its head quarters, but it has diversified its team to coffee producing countries like in the East African countries where quality coffee is grown.
To maintain good relations with suppliers, the company has a favorable buying price and bases the buying on the quality and the production method as adopted by the farmer. In countries like Ethiopia and Kenya, the company has implemented farmers education programs with the aim of facilitation the production of environmentally friendly coffees.
Quality and efficiency in delivery of coffee beans and other material in the company has the main concern in the system.
The company total supply chain has the following goals:
Objectives SCM;
- Quantity goals: Adequate supply of materials in a company when they are needed
- Supply of quality materials for various purposes in a business at all times (quality objective)
- Supply of materials at a competitive price (price objective) (Ketchen & Hult, 2006)
They should be managed effectively for a smooth running of business.
To ensure that all the goals have been taken care effectively, the company has outsourced some of the services. However, before outsourcing it ensures that the company outsourced has been vetted for integrity, transparency and reliability.
Factors that have affected the organizations decisions regarding which parts of the network to outsource or keep in-house
When outsourcing the company considers the following:
Costs
The company outsources services which if provided internally would not be economical in cost and management.
Risk
Areas that are risky when outsourced are operated internally; such areas include value determination and quality checks. The companys warehousing and quality teams undertake the task on behalf of the company.
Reliability and availability of an outsourcing company
The outsourcing business has a number of players however, the rate of their reliability, varies. The company ensures that it uses the most reliable company operation in an economy. For example, it uses DHL and UPS Logistics Company to transport some commodities from or to other countries (Simchi-Levi, Kaminsky and Simchi-levi, 2007).
How has the organization planned for the location of capacity?
Starbucks has invested heavily in building and maintaining good supplier relations; the company is engaged in farmers empowerment programs and sets its prices slightly higher to its competitors. The approach ensures that the company has quality and adequate coffee supply throughout the year.
Starbucks procurement department looks into five main areas aimed at building capacity within the system, the areas are forward logistics, reverse logistics, international logistics, inward logistics and outwards logistics (Starbucks Corporation, 2010).
References
Ketchen., G. and Hult, T.M., 2006. Bridging organization theory and supply chain management: The case of best value supply chains. Journal of Operations Management, 25(2),pp. 573-580.
Simchi-Levi, D., Kaminsky, P. and Simchi-levi, E., 2007. Designing and Managing the Supply Chain. New York: Mcgraw Hill.
Starbucks Corporation.,2010. Starbucks and Fairtrade Labelling Organizations International (FLO) Announce Next Step in Commitment to Small-Scale Farmers Web. Available from https://stories.starbucks.com/ .
Starbucks Corporate website.,2011. Starbucks Web. Available at https://www.starbucks.com/ .
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