OPERATIONS MANAGEMENT ASSIGNMENT

STARBUCKS CORPORATION

SUBMITTED TO – MS KARISHMA CHAUDHARY

SUBMITTED BY – TAVISHI BATRA

PRN – 19021021486

GROUP – B

BATCH - 2019-22
About Starbucks

Starbucks was founded by Jerry Baldwin, Gordon Bowker, and Zev Siegl , opening its first store
in 1971 near the historic Pike Place Market in Seattle. Today Starbucks is the largest coffeehouse
company in the world, with 32,938 retail locations as of the first quarter of 2021. Based on the
company's positive, sustained operating results, it is ranked among Forbes' Top-500 world's
biggest public companies. Starbucks operates two types of stores: company-operated and
licensed. Currently, the store count is almost equally distributed between these two types - 51
percent of stores are company-operated and the other 49 percent are licensed - even under
continuous expansion.

Why do I like the product

The unique selling proposition for Starbucks is simple enough: “Love your beverage or let us
know. We’ll always make it right”. Starbucks don’t define themselves as the cheapest, most
luxurious coffee around. Instead, they focus on drilling down into the ultimate desire of all coffee
connoisseurs – finding their perfect beverage. However, the main driver behind their success is
the fact that they make your drink to your standards. No exceptions.

Starbucks hopes to personalise the service offered at its coffee shops by calling all customers by
their first name. So, instead of writing the name of the drink ordered on the side of cups,
Starbucks baristas write the customer's name. This makes them stand out from the other coffee
brands and has conquered a special place in the world of coffee.

Type of Operations in Starbucks

Design of Goods and Services. Starbucks emphasizes premium design for its goods and
services. The premium character is linked to the company’s broad differentiation generic
strategy, along with its premium pricing strategy. Other firms, such as manufacturers, are also
involved in the design of some goods like Starbucks mugs. In this decision area of operations
management, Starbucks ensures that its goods and services reflect the firm’s high-end brand
image.

Process and Capacity Design. Process and capacity efficiency is one of the contributors to
Starbucks’ success. The company’s processes are highly efficient, as observable in its cafés.
Starbucks optimizes capacity and capacity utilization by designing processes to meet fluctuations
in demand. For example, processes at the firm’s cafés are flexible to adjust personnel to a sudden
increase in demand during peak hours. In this decision area of operations management,
Starbucks aims to maximize cost-effectiveness though efficiency of workflows and processes.
Location Strategy. Starbucks’ location strategy focuses on urban centres, especially those with
large middle- and upper-class populations. Most of its cafés are in densely populated areas. Also,
Starbucks occasionally uses strategic clustering of cafés in the same geographic area to gain
market share & drive competitors away. This decision area of operations management shows that
Starbucks emphasizes areas with affluent consumers who could afford its premium priced
products.

Supply Chain Management. Starbucks Coffee’s supply chain is global, although the majority of
the company’s coffee beans come from farmers in developing countries. The company’s strategy
for its supply chain involves diversification of suppliers to ensure stability of supply. Starbucks
also uses its Coffee and Farmer Equity (CAFE) program to select and prioritize suppliers. This
program uses criteria for ethical practices, including emphasis on sustainability. Thus, in this
decision area of operations management, Starbucks integrates ethics and corporate social
responsibility with supply chain efficiency.

Inventory Management. Inventory management at Starbucks is linked with the firm’s supply
chain and various facilities. At the cafés, inventory management involves office automation and
manual monitoring. In Starbucks’ supply hubs, automation is more comprehensively used. The
company aims to minimize stockout and ensure continuous supply of coffee beans to its cafés.
Starbucks addresses this decision area of operations management by focusing on supply
adequacy and automation.

Type of Production System

Manufacturing

Shortly after the “green” coffee beans are harvested, they are immediately shipped to one of 5
manufacturing/roasting plants. The term “green” refers to a coffee bean that has yet to be
manufactured or refined in any way. The beans are then roasted until evenly browned and
removed from the roaster to be blended. After blending, the beans are immediately packaged and
packed to be shipped. Starbucks controls 4 U.S. manufacturing/roasting plants and 1 European
manufacturing/roasting plant.

Productivity of Starbucks Coffee

Starbucks’ operations management uses various productivity criteria based on the area of
operations. Some notable productivity measures in the company are as follows:

1. Average order filling duration (Starbucks café productivity)

The layout design of Starbucks cafés maximizes workflow efficiency. It also supports a warm
and friendly ambiance to match the company’s organizational culture. This layout strategy does
not maximize space utilization for tables and seats because Starbucks’ focus is on premium
customer experience, which involves higher prices for more leg space in cafés. In this decision
area of operations management, Starbucks prioritizes customer experience over space utilization.

Each new and renovated store uses one of four design concepts: Heritage coffee houses with
Large community tables; Artisan stores echoing the industrial past of urban markets; Regional
Modern trend-setting style that is comfortable and welcoming along with being bright, loft-like,
light-filled spaces and Concept stores called “design sandboxes”that are created by designers to
explore innovations within the coffeehouse.

Innovation Management in Starbucks

The company began to implement several changes in many areas of its business model. The
following ones are related to the logistics management:

A problem-solving attitude The company’s traditional approach led to covering problems and
resolving issues with as little attention as possible. Its shift in leadership direction now focuses
on highlighting problems. Employees understand that their job is to know what’s broken and
what needs to be improved, changed or fixed.

Inbound Logistics refers to selecting the finest quality of coffee beans by the company
appointed coffee buyers from coffee producers in Latin America, Africa and Asia. In the case of
Starbucks, the green or unroasted beans are procured directly from the farms by the Starbucks
buyers. These are transported to the storage sites after which the beans are roasted and packaged.
The company does not outsource its procurement to ensure high quality standards right from the
point of selection of coffee beans.

Outbound Logistics There is very little or no presence of intermediaries in product selling.

Procurement - Starbucks agents travel to Asia, Latin America and Africa for the procurement of
high grade raw material to bring the finest coffee to its customers. The agents establish strategic
relationships and partnership with suppliers which is built up after reconnaissance and
communication about the company standards. High quality standards are maintained with direct
involvement of the company right from the base level of selecting the finest raw material. The
results of these and other improvements have strengthened the brand, the loyalty of their
customers and even the happiness of their employees.

Technology- In 1998, it was one of the first companies to launch a website; in 2002, it began
offering WiFi to its customers, helping to start the transition from quick coffee stop to all-day
hangout; and a full decade ago, Starbucks was establishing its social media presence. Looking
toward the future, Starbucks has already become more interesting to millennials with its gamified
Starbucks for Life and Bingo promotions, which allow loyalty members to play games and earn
points toward free products. And, following an expanding trend in A.I., in 2017 a Starbucks
Reorder Skill was added to the Amazon Alexa platform letting users order their favorite coffees
using simple voice commands.

Quality Management System

Starbucks also uses the premium character in quality management. For instance, the company
carefully sources its coffee beans from coffee farmers who comply with Starbucks quality
standards. The firm also prefers to buy coffee from farmers certified under the Starbucks Coffee
and Farmer Equity (CAFE) program. Premium quality service is ensured through servant
leadership and a warm friendly culture. In this decision area of operations management,
Starbucks implements high quality to align with the firm’s premium brand image.

Maintenance Management

Starbucks maintains its physical assets through dedicated teams of employees trained for
maintaining facilities and equipment, as well as third parties that offer maintenance services.
These third parties include local businesses that provide equipment tune-ups for Starbucks cafés.
In addition, the company maintains its human resource capacity through training and retention
strategies that include relatively high compensation. Thus, Starbucks addresses this decision area
of operations management through the involvement of café personnel, dedicated maintenance
teams, and third-party service providers.

Video link about operations of Starbucks

https://www.youtube.com/watch?v=RlPI5IDTJC8 - Operations Management - Starbucks

https://www.youtube.com/watch?v=6yXcx_eQ8Fo - How Starbucks Really Became A Coffee

https://www.youtube.com/watch?v=XUBeH7VQaFY - How Starbucks Became An $80B