Streamlining Starbucks: Operations Management Insights

Discuss about the Operations Management in Starbucks.

Starbucks Coffee is based in Seattle, Washington. The coffee chain has more than 20,00O stores across globe and target customers with high disposable income in major cities of the world. Howard Schultz is the CEO of Starbucks. The products of the organization include whole bean coffees, freshly brewed coffees, premium teas, pastries and confectionaries, Starbucks mugs and CDS. The organization follows differentiation strategy and premium pricing strategy. Operations play a strategic role in Starbucks because transformed resources of the organization can be converted to products and services which will add value to the customers. The raw materials that are coffee beans from suppliers across the globe and human resources of the organization are input resources and the operation management converts these input resources to the output, that are products and services of Starbucks which include coffee, snacks, coffee-mugs etc and services to customers latte (starbucks.in 2017).The operation management process includes four steps- steering of operational processes, designing of processes, products and services, delivering, planning and controlling of existing operations and developing and improving operational capabilities. The operations management team of Starbucks can be linked with core and supporting functional units of the organization like technical function, marketing function, product and service development, accounting and finance function , human resource function and Information Systems function. In the United Kingdom, Starbucks leverage the opportunity of high purchasing power of customers who are willing to pay £3 for a cappuccino or mocha (starbucks.in 2017).

The customers of Starbucks coffee can be categorized into internal and external customers.  The internal customers of the organization are the employees of the organization which include the Board of Directors and the supervisors, the team members, the store manager and the front-line executives of the organization. Since Starbucks is a retain organization, internal customers can be of two types- employees who work at the back office of the organization-the employees of functional units like the marketing team, operations team, sales team and finance team and employees at front end in the retail stores who are in direct contact with the customers. Communication and information flow will include flow of information from the Board of Directors to front line employees as well as feedback from customers should flow from front-line executives in store to the managers(Heizer 2016). 

The external customers of the Starbucks organization are the public who visit the retail stores of Starbucks in different countries across the globe. Teens, young adults in the age group of 18-24, Adults in the age group of 25-40 are main customers of Starbucks. These customers have huge disposable income and visit the coffee stores for business meeting, hanging out with friends and for relaxation with a cup of coffee. The customers of Starbucks also include the suppliers of coffee across the globe (Walker et al. 2014).

Quality Management

The operation objectives of Starbucks in the United Kingdom contribute substantially to the Triple Bottom Line of the business like People, Planet and Profit. Starbucks engage in CSR activities among community members and create value for Stakeholders by ensuring all raw-materials are sourced ethically, environmental sustainability is taken into account and Starbucks connect members of its community with CSR activities like promoting entrepreneurship among youth.  The five operational performance objectives of Starbuck Coffee are providing goods and services of premium quality to customers, fast and efficient service delivery(speed advantage), deliver the service promise( dependability advantage), embrace changes and achieve flexibility, and to achieve cost advantage while sourcing and manufacturing. As stated by Slack, Brandon-Jones and Johnston (2013), the order-winning factors are the prime reasons because of which customers of Starbucks purchase the coffee and avail services of the organization. These competitive factors are high quality, fast delivery, innovative products and services, wide range of differentiated and customized products and reliable services Qualifying factors in operations management are and operations management of Starbucks should always aim to raise the performance of the firm above the qualifying level.

Design of goods and services

Starbucks has adopted differentiation and premium pricing as the generic strategy of the organization and thus design of goods and services are highly customized, focus is often on addressing individual needs of customers who visit stores of the café, operational management ensures premium design of products for Starbucks, often manufacturers are involved in the design of products like coffee-mugs, the high-end brand image of the organization is reflected in the operational activities at store, for instance, name of customers are written on coffee mugs to incorporate tailor-made services(Hill and Hill 2012). 

Quality Management

Quality Management is a process that involves quality planning, quality assurance, quality control and quality improvement. The sourcing of coffee beans from farmers across the globe is in compliance with the standards of Starbucks Coffee and Farmer Equity (CAFÉ) and environmental sustainability and ethical sourcing is taken into account while sourcing the raw materials at Starbucks (Schultz 2012). 

Location Strategy

Starbucks target upscale consumers in major cities and towns across the globe. The location strategy adopted by Starbucks ensures the availability of large section of middle and upper class populations with high disposable income. In some places, Starbucks adopts the strategic clustering of cafes with the aim to gain market share and to keep competitors at bay.  Starbucks also adapts and embrace change in location strategy. For instance, in the United Kingdom the organization has planned to open drive-through stores because customers prefer roadside cafes (Slack, Brandon-Jones and Johnston 2013). 

Location Strategy

Layout Design Strategy

Layout design is important in Operations management to make the production process more effective and to meet the needs of employees. Starbucks café clearly reflects the culture of the organization and ambiance of the cafés is relaxing and amiable. The innovative design of the cafes across the globe ensures that the efficiency of workflow is maximized. Space utilization is not maximized in store design and layout process. Enough leg space and proper gap between tables and chairs ensure that experience of customers visiting the store is of premium quality. This operational strategy is in alignment with the generic strategy of Starbucks that is differentiation strategy for premium customers (Preiss 2012). 

Job Design and Human Resources

The culture and vision of the organization are aligned in all areas of business process. The human resource management ensures that strategies adopted by the organization are in alignment with the culture and vision of Starbucks. Functional teams are employed and it is ensured that there is proper performance management system for employees .Starbucks café ensures that during recruitment and selection process, employees are hired whose internal values are in alignment with the culture and values of organization (Sodhi 2015).  Performance appraisal, rewards, recognition, compensation, bonus, pay hikes etc are effectively designed to retain employees. An effective code of conduct is designed for front line executives of Starbucks who are in direct contact with customers and they are trained well so that they can deliver premium service to customers (Lewis and Brown 2012).

Supply Chain Management

Supply Chain Management involves flow of information, materials and finances from the point of origin to the point of consumption. The supply chain management can increase speed and efficiency of an organization by substantially increasing revenue, decreasing cost and thus impacting the bottom-line of an organization. The coffee beans of Starbucks are usually sourced from farmers of developing countries. There is stable flow of supply and to optimize the process of supply, diversification of suppliers is the strategy followed by Starbucks. For selection and prioritizing suppliers across the globe, a special program is used in the operational management of Starbucks; this program is Coffee and Farmer Equity Program. The supply chain management takes into consideration the people and planet concept of the Triple Bottom Line and thus the Starbucks focuses on sustainability factors. Efficiency of Supply Chain Management is integrated with Corporate Social Responsibility (CSR) and ethical sourcing (Ivanov, Tsipoulanidis and Schönberger 2016). 

Layout Design Strategy

Process and Capacity Design

As stated by (Gupta and Starr 2014), Production capacity must be planned by an organization to meet the changing demand of its products. Starbucks ensures that the capacity of the process is designed in a way so that fluctuation in demand can be met.  Demand during peak hours are met by adjustment of personnel, this adjustment is done by effective management of manpower in business process of Starbucks. Cost-effectiveness and cost advantage is obtained by efficiency of business process and optimum utilization of capacity. The process strategy of Starbucks ensures that staffs are adequately trained to serve customized needs of customers and specialized equipment like customized blenders and coffee machines are used in the store

Inventory Management

As stated by Krajewski, Ritzman and Malhotra (2013), Inventory Management is a component of Supply Chain Management that supervises the flow of goods from manufacturers to warehouses and then to the point-of-sale. In Starbucks, the office automation and manual management ensures effective management of inventory in Starbucks. Use of techniques like Just-In Time Management and Material Requirements Planning are used to manage optimum inventory of Starbucks.  Just-In-Time technology reduces waste related to excess inventory and overproduction by receiving goods only when it is required in the production process. The management of inventory is linked with other facilities like the Supply Chain. The stock-out is minimized in the organization and in the hubs of supply chain, automation and software tools are used. Continuous supply of coffee beans is ensured in Starbucks and adequate supply is ensured through proper monitoring and use of modern tools and software

Scheduling

In a production or manufacturing process, scheduling is used to arrange, control and optimize workloads. Flexible scheduling is the facility in Starbucks that can be availed by management teams. Automation and manual scheduling are using for scheduling various activities of the business process.  Streamlining of business process is focused but flexibility is provided to management personnel of the organization (Lee and Tang 2017).

Maintenance management

Maintenance Management is of paramount importance for an organization to reduce downtime from inefficient procedures of maintenance and broken equipment (Zurich 2017). Third parties are hired by Starbucks for maintenance of physical assets; also employees undergo training to carefully handle equipments and facilities at Starbucks offices and stores. Huge compensation is provided to employees to retain them so that skilled employees are available for maintenance of physical assets.

Job Design and Human Resources

The measures for productivity that are adopted by Starbucks are-

1) The productivity at Starbucks café is measured by measures like duration of average order filling.

2) The productivity at roasting plant of Starbucks is measured by measures like weight of coffee beans which are processed per time.

3) The productivity of maintenance is measured by measures like duration of equipment repair (Lemus et al. 2015).

 The operational activities of Starbucks are in alignment with the mission, vision and goals of the organization which is to build a Company with soul, sale of coffee beans without artificial flavors, customer satisfaction, to be an employee-centric organization and to oppose franchising model to control quality. The operational activities of Starbucks meet the operational objectives  of delivering finest quality of coffee to customers, to deliver service in a fast and efficient manner to achieve speed advantage, to deliver the promise of service so that customers find the organization dependable and reliable, to embrace changes in the business processes, to adapt to changes in external environment which will demonstrate flexibility and  to obtain cost advantage during sourcing from farmers across the globe. As stated by Bowen and Sisson (2013), the order-winning factors which enable Starbucks to achieve competitive advantage are innovative products and services, high quality, fast delivery and products and services which are of differentiated, customized and tailor-made to suit needs of customers

The coffee growers and suppliers are visited by the coffee buyers about 18 weeks every year and tools like Total Quality Management are adopted by the organization. Starbucks make use of innovation in reducing waste and to increase productivity. The organization improves its business processes to increase customer loyalty (Lansford and Mishra 2013). Digital technology is used and Digital Tipping, Starbucks Card, Mobile Order and Pay are some of the technology used by Starbucks (Schniederjans and Triche 2013). Starbucks constantly uses digital platforms to connect with customers across the globe and to build relationship with global customers who enhances the brand image and increased Customer Perceive Value (CPV) (Chua and Banerjee 2013).

Starbucks should spend more time in training the employees of the United Kingdom of the recently opened stores before they hit the floor. The organization uses only 20-25 hours of training the front-line executives which may not be enough because these executives are in direct contact with the customers and it is of paramount importance to ensure that they receive adequate training for delivering incredible experience for customers.

Supply Chain Management

Starbucks should dismiss employees in the United Kingdom who have a bad attitude irrespective of their seniority and the customers should be engaged more inside the stores of Starbucks. Coffee seminars should be conducted by Starbucks and customers should be involved to participate in the seminars, feedback from customers should be taken adequately by Starbucks. The suggestion is to have open-ended comment area which can be included in surveys so that customers can leave their feedback.

It can be recommendation to increase awareness among customers in the about the initiatives of Starbucks regarding Corporate Social Responsibility (CSR).Customers should know about Community stores of the organization and website for community services which will increase the Customer Perceived (CPV) and will enable the organization to achieve the operational objectives of customer satisfaction. The operational activities at Starbucks are instrumental for the organization to achieve operational objectives.

References

Bowen, S.A. and Sisson, D.C., 2013, March. Starbucks, Reputation Management, and Authenticity: A Case Study of Starbucks’ United Kingdom Tax Crisis & “# SpreadTheCheer” Campaign. In 16TH INTERNATIONAL PUBLIC RELATIONS RESEARCH CONFERENCE (p. 110).

Chua, A.Y. and Banerjee, S., 2013. Customer knowledge management via social media: the case of Starbucks. Journal of Knowledge Management, 17(2), pp.237-249.

Gupta, S. and Starr, M., 2014. Production and Operations Management Systems. CRC Press.

Heizer, J., 2016. Operations Management, 11/e. Pearson Education India.

Hill, A. and Hill, T., 2012. Operations management. Palgrave Macmillan.

Ivanov, D., Tsipoulanidis, A. and Schönberger, J., 2016. Global Suppy Chain and Operations Management. Springer,.

Krajewski, L.J., Ritzman, L.P. and Malhotra, M.K., 2013. Operations management: processes and supply chains (Vol. 1). New York, NY: Pearson.

Lansford, W. and Mishra, P., Offerpop Corporation, 2013. Social Networking Advertising Campaign Management. U.S. Patent Application 13/950,876.

Lee, H.L. and Tang, C.S., 2017. Socially and environmentally responsible value chain innovations: New operations management research opportunities. Management Science.

Lemus, E., von Feigenblatt, O.F., Orta, M. and Rivero, O., 2015. Starbucks Corporation: Leading Innovation in the 21st Century.

Lewis, M.A. and Brown, A.D., 2012. How different is professional service operations management?. Journal of Operations Management, 30(1), pp.1-11.

Preiss, K., 2012. Shop floor control-A systems perspective: From deterministic models towards agile operations management. Springer Science & Business Media.

Schniederjans, M.J., Cao, Q. and Triche, J.H., 2013. E-commerce operations management. World Scientific Publishing Co Inc.

Schultz, H., 2012. Pour your heart into it: How Starbucks built a company one cup at a time. Hachette UK.

Slack, N., 2015. Operations strategy. John Wiley & Sons, Ltd.

Slack, N., Brandon-Jones, A. and Johnston, R., 2013. Operations management. Pearson.

Sodhi, M.S., 2015. Conceptualizing Social Responsibility in Operations Via Stakeholder Resource?Based View. Production and Operations Management, 24(9), pp.1375-1389.

Walker, P.H., Seuring, P.S., Sarkis, P.J. and Klassen, P.R., 2014. Sustainable operations management: recent trends and future directions. International Journal of Operations & Production Management, 34(5).

www.starbucks.in/. 2017. Starbucks. [online] Available at: https://www.starbucks.in/ [Accessed 20 Oct. 2017].

Zurich, L.B., 2017. Service Operations and Management.