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Supply chain management

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Hira Awan

on 1 April 2013

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Transcript of Supply chain management

Redesigning the supply chain THANK YOU FOR LISTENING!

ANY QUESTIONS? Coffee and other merchandise must be sourced from around the globe.

Successfully delivered to the Starbucks Corporation's 16,700 retail stores each week. Starbucks SCM goal Why did Starbucks need a new global logistics system? Hira, Zaqea, Julie, Lesley, Ines, Antoniya Starbucks background Began in 1971.

In 1981, Howard Schultz became Starbucks chairman, president and chief executive officer.

More than 15,000 stores in 50 countries.

Starbucks is the premier roaster and retailer of specialty coffee in the world. Why redesign? Sustained by unprecedented success and focused on rapid expansion in the early 2000s.

Economic downturn set in, forcing Starbucks to re-engineer its supply chain.

In 2010, the company removed more than $700m from its supply chain costs. SCM issues - what happened? In 2008, Starbucks was not sure that its supply chain was meeting that goal.

Operational costs rising, sales cooling, and rapid expansion of stores.

Howard Schultz appointed Gibbons to run the company's supply chain.

Gibbons began visiting Starbucks' retail stores to see the situation. Findings "The visits were made to confirm that our supply chain could improve significantly.“

Less than half of store delivered arrived on time.

A cost analysis revealed excessive outlays for outsourcing – leading to cost inflation. SCM redesign objectives To transform its supply chain, the coffee retailer established three key objectives:

1. Reorganise its supply chain organisation.

2. Reduce its cost to serve stores and improve efficiency.

3. Lay the foundation for future supply chain capability. Redesign objective 1 Starbucks began redesigning its supply chain in 2008.

Simplified jobs into four categories:

1. Plan

2. Source

3. Make

4. Deliver
Second step of the transformation plan.

To achieve this, the sourcing group worked on identifying the cost drivers that were pushing up prices.

Gibbons: "We went out to understand the contracts we had, the prices we were paying, and the shipping costs, and we began breaking items down by ingredient rather than just purchase price." References Outline -What is a supply chain?

-Starbucks background

-Why redesign?

-Starbucks product sourcing

-Starbucks SCM goal

-What happened? + Findings

-Redesign objectives 1-3

-New logistics system?

-Challenges faced implementing new SC

-Future factors affecting SC

-Link between costs and performance


-Financial performance


-References What is a supply chain? Management of multiple relationships.

Not a chain of businesses with one-to-one, B2b relationships.

Network of multiple businesses and relationships. Behind the scenes: Starbucks Supply Chain Operations Cooke, J.A. (2010), “From bean to cup: How Starbucks transformed its supply chain.”, http://www.supplychainquarterly.com/topics/Procurement/scq201004starbucks/
[Last accessed 6th March 2013]

Costa Coffee (2013), “Official Website”, http://www.costa.co.uk/
[Last accessed 6th March 2013]

EasierLifestyle (2008), “Costa Coffee goes sustainable”, http://www.easier.com/31953-costa-coffee-goes-sustainable.html [Last accessed 6th March 2013]

Starbucks Coffee Company (2007), “C.A.F.E. Practices Generic Evaluation Guidelines”, http://www.scscertified.com/retail/docs/CAFE_GUI_EvaluationGuidelines_V2.0_093009.pdf [Last accessed 6th March 2013]

Starbucks (2013), “Starbucks on the Issues”, http://www.starbucks.com/responsibility/learn-more/ca-supply-chain-act
[Last accessed 6th March 2013]

Writepress Journal (2012), ''Supply Chain Management in Starbucks''. http://writepass.co.uk/journal/2012/11/supply-chain-management-in-starbucks-and-its-impact-on-company-performance/
[Last accessed 6th March 2013]

Business News (2011), ''Starbucks mulls future coffee supplies.'' http://www.upi.com/Business_News/2011/10/14/Starbucks-mulls-future-coffee-supplies/UPI-27621318618674/#ixzz2NG1LprWj [Last accessed 6th March 2013]

Harvard Business Review (2004), ''Supply and the Brand.'' http://hbr.org/2004/06/supply-and-the-brand/ar/1 [Last accessed 6th March 2013]

Starbucks Annual Report (2012), “Annual Report 2012”, http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NDkxNTE3fENoaWxkSUQ9NTI4OTE2fFR5cGU9MQ==&t=1 [Last accessed 12th March 2013].

Starbucks Annual Report (2009), “Annual Report 2009”, http://media.corporate-ir.net/media_files/irol/99/99518/SBUX_AR.pdf [Last accessed 12th March 2013]. Starbucks Product Sourcing Meanwhile, the manufacturing group developed a more efficient model for delivering coffee beans to its processing plants.

Reduction in transportation costs and lead times. Redesign objective 3 Foundation for future supply chain capabilities by reducing operating costs and improving efficiency.

Previous supply chain was too broad.

Creation of single, global logistics system.

Delivery costs and execution intertwined.

Scorecard assessments for 3PL’S performance.

"The scorecard ensured transparency in how we were improving the cost base while maintaining a focus on looking after our people and servicing our customers," Gibbons says. Number of metrics for evaluating supply chain performance.

Four high-level categories to create consistency and balance across the global supply chain team:

1. safety in operations

2. service measured by on-time delivery and order fill rates.

3. total end-to-end supply chain costs.

4. enterprise savings. The Supply Chain Process:

Brings coffee beans from Latin America, Africa, and Asia to the United States and Europe in ocean containers.

Unroasted beans trucked to six storage sites.

Finished product is trucked to regional distribution centres (including 3PL’s).

Main product held at warehouses.

Depending on their location, the stores are supplied by either the large, regional DCs or by smaller warehouses called central distribution centres.

Frequent deliveries via dedicated truck fleets to Starbucks. Challenges faced implementing new SC Services rely mainly on bulk operating expenses.

Gathering all supply chain costs by region and by customer was extremely time-consuming and costly.

Delivery costs and execution are intertwined. Future factors affecting their supply chain. Severe climate change.

Price unpredictability.

Win long-term contracts; decreasing the market risk.

Economies of scale.

Technical systems failure.


Recession Link between costs and performance
Porter (1980): two basic competitive approaches are cost advantage and differentiation.

(Parasuraman et al, 2004) strong relation between increased levels of service
and customer maintenance.

Decrease in inventory positively impacts on the cash-to-cash cycle.

Therefore more liquidity (Christopher and Ryals, 1999; Farris and Hutchison, 2002). Competition Main competitor: Costa Coffee

Costa aimed to redesign their supply chain. Financial performance
of Starbucks Costs were reduced in 2009 by $580 million.


More competition
Lacking innovation
Customer service Conclusions Redesigning the supply chain was a complex process.

Successfully implemented supply chain.

Four functions (plan, source, make and deliver).

Cut costs worldwide without compromising service delivery.

Overall net revenue increase in two years.

Employ future graduates of supply chain education programmes. Redesign Objective 2
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