Starbucks was founded in the year 1971. So far it has over 23, 000 that operate in 64 countries (Starbucks, 2014). Its corporate headquarters are located in Seattle, Washington in the United States (Hoovers, 2007). These outlets provide food items, coffee drinks, teas, coffee beans and also coffee accessories. The company owns the best coffee brands in Seattle. This paper focusses on the purchasing management of Starbucks including supplier selection and the analysis of purchasing cost.
Currently, Starbucks purchases coffee from more than 300,000 growers globally (Leslie & Gruley, 2014). There exists an internal program known as C.A.F.E (Coffee and Farmers Equity) that assists in the selection process. It comprises of environmental, economic and social guidelines that offer support to the farmers and buyers ensuring that high quality is maintained, and there are long term business relationships. Failure to meet the minimal requirements set out in the guidelines, the supplier is not selected. Some of the issues that Starbucks is concerned with include full transparency by the suppliers of their ventures, processes, policies and company records. The suppliers should also comply with the local environmental regulations and laws conducting their operations in ways that preserve the natural resources.
Seeing that Starbucks has over 50 million customers, and 23, 000 that operate in 64 countries, their costs are bound to be complex (Starbucks, 2014). Due to their rapid worldwide store expansion policy, their costs grew very high, and they had to come up with a strategy to put their costs and supply chain fundamentals in place. It made changes to its operations by reorganizing the organization of their supply chain, reducing costs to be able to serve and better execution and also lay a firm foundation for its future supply chain capability (Allison, 2010). The reorganization assisted Starbucks to make easier the supply chain functions. They were divided into four groups of planning, sourcing, making or delivering. Each of this groups was assigned duties to minimize costs and to improve on efficiencies. The group on sourcing identified the cost drivers, contracts in place with suppliers, prices they were paying for commodities and the logistic cost they were paying. The group on manufacturing rearranged their internal coffee processing plants. Their aim was to manufacture in the area where the product was sold. This would reduce transportation costs. A worldwide map of Starbucks’ transportation expenditure was built to form a single worldwide logistic system that allowed monitoring of the diverse supply chain.
Starbucks continues to purchase coffee from self-reliant coffee growers. They have an aim to support coffee growers in research and development and also to share advancements and improvements in the production of coffee with their suppliers. The precise supplier selection process, the internal program known as C.A.F.E (Coffee and Farmers Equity), makes sure that the entire supply chain follows the environmental, ethical and social goals that Starbucks has established and requires from its suppliers. To attain the greatest cost benefits, Starbucks views the entire supply chain breaking it down into smallest constituents that can be handled efficiently and effectively.
Allison, M. (2010, May 15). Starbucks new growth strategy — more revenue lower costs. Retrieved from Seattle Times: https://seattletimes.nwsource.com/html/businesstechnology/2011861321_starbucksstrategy16.html
Hoovers. (2007, FEbruary 24). Starbucks. Retrieved from https://www.hoovers.com/starbucks/–ID15745–/free-cofactsheet.xhtml?cm_ven=Paid&cm_cat=GGL&cm_pla=MST&cm_ite=starbucks_market
Leslie, P., & Gruley, B. (2014, February 14). To Stop the Coffee Apocalypse, Starbucks Buys a Farm. Retrieved from Bloomberg: https://www.bloomberg.com/news/articles/2014-02-13/to-stop-the-coffee-apocalypse-starbucks-buys-a-farm
Starbucks. (2014). Global Responsibility Report. Retrieved from Seattle: Starbucks: https://globalassets.starbucks.com/assets/ea2441eb7cf647bb8ce8bb40f75e267e.pdf
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