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Sustainability & Social Considerations

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Question:

Describe and critically evaluate the initiatives undertaken by the case organisation to address environmental and/or social issues and the impact on supply chain operations. You are also required to provide recommendations for the organisation for a more effective sustainable supply chain.
 
 

Answer:

Introduction

In the modern era, the advent of globalisation is considered to be one of the most of important concept for majority of the companies and for their development. It has also notified that with the advent of globalisation the competition within the business environment has been raised. Modern customers are now focusing towards receiving sustainable products as well as services from their preferred companies.    In order to attract majority of the customers towards them, the companies are now paying utmost attention towards enhancing their operational process. In order to enhance their operational process majority of the companies are now paying attention towards the attaining sustainable growth (Verbeke, Vanhonacker, Sioen, Van Camp & De Henauw, S., 2007).

In order to attain sustainable growth in their operational process, most of the companies are now focusing towards conducting various CSR activities for enhancing their operational process. It has also noted that in the recent scenario majority of the companies has initiated to take proper initiatives towards focusing social consideration by reducing the pollution level (Giovannucci and Ponte, 2005). Majority of the environmental scientist are identified that the conduction of environmental pollution has been caused due to the lack of operational efficiencies within the organisation. Therefore, while managing sustainable working environment, the companies are focusing towards their supply chain management process. Simultaneously, in this particular study the main focus has been paid towards Starbucks, which is considered as one of the most famous coffee house around the world (Clift, 2007).

The prime intention of the study is to highlights about the Supply Chain Management (SCM) process applied by Starbucks. Correspondingly, it also paid attention towards highlighting the sustainable initiatives adopted by Starbucks for attaining success. On the other hand, Starbucks is also paid utmost attention towards assessing the issues associated with the supply chain management process and its impact over the company’s overall process.

Description of the Sustainability Initiatives taken by Starbucks

Starbucks is considered one of the famous global Coffee Companies that mainly deals in providing coffee delivery services. Likewise other global fast food retail chain based outlet, Starbucks has also expand its business outlets within various parts of the world. Starbucks is a coffee company not only serves its customers with high quality coffee but it also provides a great ambience for its customers (Dauvergne & Lister, 2012).  Moreover, in order to provide proper as well as adequate services to its customers the company has decided to bring large sets of changes in their operational process. In order to manage the quality of the products the company has decided to adopt new programme as well as practices it in its operational process. The adoption of Coffee and Farmer Equity (C.A.F.E.) practice programme is a primary approach of the company towards the sustainable development. The prime reason behind the adoption of this particular strategy is to enhance the product quality (Simpson, Power and Samson, 2007).

Apart from this, the adoption of C.A.F.E. practice programme is also useful in managing economic development, environmental leadership as well as social development within the organisation. Apart from this, C.A.F.E. practice programme is also useful in maintaining economic transparency, social development through managing the quality of the product. This particular programmes are mainly includes the suppliers of the coffee and provide ranking system to them. This particular ranking system will enhances the quality of the products. Besides, it also enhances the activities of the company towards corporate social responsibility (CSR) for attaining sustainable development (Carter and Rogers, 2008).

It has also notified that people belonging to that particular era are forcing majority of the companies, especially food production companies to paid utmost attention towards performing their social responsibility. This is quite beneficial for the Starbucks to add various advantages in their operational process. Apart from this, the company has adopted various other strategies related with sustainable approach and gain huge profitability in its business process. Apart from this, the recycling process along with waste reduction approach has also adopted by Starbucks during its working tenure. The waste reduction process is mainly recognised as an important strategy that could enable the company to attain huge success in their operational process (Reed and Wilkinson, 2005).

Apart from this, recently the company is also paying attention towards converting the energy for reducing the carbon footprint. The outlets of the Starbucks are primarily responsible for creating carbon footprint up to 80%, which reduces the energy efficiencies in a systematic manner. With the implementation of energy efficiency practices majority of the company will be able to contribute in the sustainable development. Along with energy efficiency the water conservation is also played an important role behind developing the overall profit of the company (Seuring and Müller, 2008).

It has also notified that Starbucks is not paying attention towards enhancing their operational strategies through unsustainable manner, but recently it has also paid heed upon sustainable development. Starbucks has also focuses towards enhancing their community based services for contributing towards the development within the society. In this regards, as a CSR activities the company has launched Planet Green Game, which is noted to be prime instant of the CSR related activities. With the help of Urban Coffee Opportunities the improvement in the employment condition has also been increased. It has also notified that through this particular process the discrimination that mainly observed will be performed efficiently (Blowfield, 2003).

In the supply chain management process the sustainable approach has been involved by the Starbucks. Starbucks mainly performed their SCM process as per intentional basis for maintaining the overall quality of its coffee and other food products. Therefore, in this regard, the company has performed the fair trade system by introducing various programmes associated with community projects as well as farmer loan system. Apart from the advent of technical agronomic supports, organic as well as shades grown are also considered as one of the most important aspects (Perez-Aleman and Sandilands, 2008). 

 

Assessment of the issues and impact on the supply chain

Issues in Starbuck’s Supply Chain

Cost

Delivering great coffee is quite hard, because it necessitates a strong supply chain. In order to maintain quality coffee with reasonable cost, Starbucks has to face pressure from rivals and the local government. Starbucks is popular for its premium quality, where other organisations such as Biggby and Kroger provides cheaper coffee or similar products with low cost. Starbucks can possibly lose customers owing to high prices of its products. Nevertheless, Starbucks provides quality coffee products which sophisticated in-store environment for extensive variety of customers (Krikorian, 2014).

Sustainability

Moreover, sustainability is another issue faced by Starbucks. The company uses considerable amount of water in order to clean the machineries such as coffee blenders and coffee makers and the raw met arils. Nevertheless, the organisation has made significant improvement in minimising water consumption in recent times. By applying high pressure to clean the coffee blender, rather than tap water, Starbucks can minimise the degree of water utilisation (McKinsey & Company, 2016).

Single Logistics System

Starbucks have streamlined logistically across six continents. The raw materials are housed in regional distribution centres. There are five large distribution centres in the US among them two are possessed by the organisation itself, and other three are controlled by third party logistics organisation. With respect to foreign distribution, there are two large centres in Europe and two in Asia, which is run by Third Party Logistics Company. Starbucks require to constantly evaluate the effectiveness of the logistic system in order to maintain supply chain efficiency. There are four key aspects which required to be considered by Starbucks in order to maintain supply chain performance such as safe and secure operation, on time delivery of products, complete end-to-end supply chain expenses and enterprise saving (Starbucks Corporation, 2016).  

Green Supply Chain

Starbucks attempts to balance supply chain demand with green and sustainable business practices, which comprise maintaining quality while purchasing sensibly grown and morally traded coffee. The organisational effort comprise responsible coffee purchasing, delivering farmer support services, farmer loan facilities and green conservation. The organisation also sets corporate social responsibility standards for the suppliers and cooperate with them in order to enhance the business practices. If issues appear with the suppliers, Starbucks stop doing business with them unless the issues are solved. In the year 2015, Starbucks has accomplished a landmark of 99% morally sourced coffee by its association with Conservation International, a US non-profit environmental institution. It is the outcome of Starbucks embed sustainable practices in sourcing structure (Starbucks Corporation. 2016).

Globalisation

One of the key issues facing by Starbucks is the minimisation of supply vain expenses. In order to satisfy the price expectations of customers, Starbucks require to relocate production to low cost nations. However, having international suppliers contributes significantly to the complexity which appears from lengthy delivery lead times. Most customers in various nations, not only prefer affordable prices, but also want the product on time (Geereddy, 2013).

Customers’ Preferences

The international supply chain is complex which is facilitated by content changing of customers’ preferences. Customers always put pressures on organisations to come up with new product or services. Innovation is vital for any organisation since it permits them to remain competitive in the industry, however it also bring challenge to the supply chain. In order to enhance the product performance, Starbucks need to redesign the supply network and satisfy the customers’ demand (University Alliance, 2016).

Supplier Relationship Management

It is equally vital for Starbucks to create, comprehend and follow commonly agreed principles to better understand existing performance and opportunities for development. At times, the differences in values, cultures and objectives create issues between the organisation and the suppliers which result in wastes of time and effort. In order to make the supply chain performance better, there is need to have trust between the business associates and to have better supplier and partners relationships (Berrios, 2014).                                           

Impact of the Issues on Supply Chain 

Economic Sensitivity

Starbucks carved itself in the supreme quality segment in coffee industry which is characterised by high number sellers. The supply chain activity selected by Starbucks make the company to high priced premium products to the customers. Such market segment is favourable during economic growth and prosperity. However, Starbucks will face issues when economic face downturn or household income reduces.it will make customers to switch to low price alternatives. For example, Starbucks has faced a net loss during the economic recession of 2009. Its share performance fallen hand-in-hand with customer confidence during recessionary periods. During that time, many US consumers changed towards inexpensive substitutes, such as instant coffee and other inexpensive brand such as Dunkin. Other coffee making companies for example, Folgers and Nestle did well constantly during recessionary periods (Cooke, 2010).

Coffee Price

Coffee price volatility is another issue which can impact on the supply chain of Starbucks, even if the company hedge against price hikes. The movement of price and direction. Can influence on operational expenses of the organisation along with the profit margins. There are many aspects which lead to increase in coffee prices. For example, most of the coffee products for the company are sourced from South American and Asian nations. Instability in the national political environment in these nations can certainly impact on the coffee prices. Similarly, weak crop yield owing to weather can also increase the rate of coffee, depending on the level of damage (Benzaken, 2007).

International Expansion Barriers

International substitutes prevent Starbucks from obtaining strong market share. For instance, in Indian market Starbucks have associated with Tata group, with the anticipation of securing a stable supply chain in that market. Nevertheless, the middle income group consumers have not grown rapidly to accommodate the expenses of Starbucks products. There many customers who live on the money which is equivalent to one coffee product of Starbucks. On the other hand, the small tea vendors are more preferred by Indian masses who can effectively provide tea or coffee for only a portion of Starbucks’ product offering (Kasireddy & et. al., 2012). 

 

Recommendations

From the overall analysis, certain recommendations can be made with regard to the topic of the study which directly links with the manner in which the company can be able to conduct its business efficiently within the market. Starbucks as all known is one of the most widely recognised companies in the present day era. It can be termed as a market leader of the global coffee chain industry. However, there certain specific issues that has been identified in this particular study with regard to the operations of the company within the global marketplace. Correspondingly, it can be seen that the management of Starbucks has been dealing with key issues relevant to the environmental concerns along with the issues of logistics at large. In this context, certain key approaches can be identified with which the management of the company can be able to deal with the issues identified in social and environmental domain of the business along with reducing the issues of logistics associated with the overall unit at large. Though Starbucks has been seeking to conduct its business operations mainly in a socially and environmentally responsible manner, still there are certain key issues that the management will need to overcome. In this regard, the management of the company will need to make sure that it is assuring maximum depth in the internal control of the business further ensuring that each of the business processes is not harming the overall environment and community in which conduct its business in. The company must also involve itself in new initiatives and campaigns regarding social responsibility and a step towards contributing positively to the external environment altogether. This can be done by the management of the company with regard to contributing to the community with regard to its pillars of social responsibility that further includes Community, Ethical Sourcing, and the Environment altogether. The company must need to ensure to ensure hygiene and nutritional value of the food or beverage that it is being offering to the customers in the market (Catka, 2004). This is also one of the primary means through which Starbucks could be able to attain its social and environmental goal to a considerable extent. This aspect will one way or the other will lead to the overall establishment of the CSR of the business. It can also be recommended that the company will need to improve its logistics operations as well as a part of its home delivery services in various markets of the world. This can be done by the management of the company through aligning business operations with some of the most notable logistics companies in various parts of the world. This will add to the service efficiency of the company (Dolcemascolo, 2006). It must also be depicted that the management of the company can be able to improve its overall supply chain management within the global marketplace since it relates with the service efficiency of the business in the long run. Hence, it is apparent that with these approaches, the management of the company can indeed be able to meet the demands of the customers in the most efficient manner altogether. 

 

Conclusion

By reviewing the overall study, it could be identified that the Starbucks is one of the most famous coffee company around the world. The company is highly focusing towards enhancing its supply chain management process for gaining adequate prominences within the industry. In the global coffee market, the reports analysis   over the respective industry the environmental pollution is considered to be a major issue for the company. In order to reduce the impact of global warming as well as carbon foot print the Starbucks has paid utmost attention towards its strategic development. In order to bring the strategic development the company is paying attention towards the sustainable development. The sustainable development has been able to reduce the impact of carbon footprint over the human supply chain management   process of the company. Recently, the supply chain management of the company is intended to adopt the sustainable process for developing the sustainable approach within the organisation. The adaption of C.A.F.E. practice programme has also includes the suppliers of sustainable development and gain huge attention regarding the energy efficiency. Through the energy efficiency the company has also able to highlights the positive way that could enable them to reduce the environmental pollution. The carbon footprint reduction as well as water conservation is a part of the waste management and waste reduction process. In this regard, the waste management as well as waste reduction is also played an important part of recycling process. Therefore, it could also conclude that recycling process is important for achieving sustainable development efficiently. 

 

References                       

Benzaken, T. S., 2007. Starbucks’ Responsible Sourcing: Social Guidelines From The Farm To The Coffeeshop.

Berrios, D., 2014. Challenges in Supply Chain Management. University of Wisconsin System.

Blowfield, M., 2003. ‘Ethical supply chains in the cocoa, coffee and tea industries’, Greener Management International, vol. 2003, no. 43, pp.14-24.

Carter, C.R. and Rogers, D.S., 2008. ‘A framework of sustainable supply chain management: moving toward new theory’, International Journal of Physical Distribution & Logistics Management, vol. 38, no. 5, pp.360-387.

Catka, P. 2004. Implementing Effective Corporate Social Responsibility and Corporate Governance: A Framework. BSI British Standards Institution.

Clift, R., 2007. ‘Climate change and energy policy: the importance of sustainability arguments’, Energy, vol. 32, no. 4, pp.262-268.

Cooke, J. A., 2010. From bean to cup: How Starbucks transformed its supply chain. 

Dauvergne, P. & Lister, J., 2012. ‘Big brand sustainability: Governance prospects and environmental limits, ‘Global Environmental Change, vol. 22, no. 1, pp.36-45.

Dolcemascolo, D. 2006. Improving the Extended Value Stream: Lean for the Entire Supply Chain. CRC Press.            

Geereddy, N., 2013. Strategic Analysis Of Starbucks Corporation. 

Giovannucci, D. and Ponte, S., 2005. ‘Standards as a new form of social contract? Sustainability initiatives in the coffee industry’, Food Policy, vol. 30, no. 3, pp.284-301.

Kasireddy, P., & et. al., 2012. Starbucks Coffee Distribution Network. 

Krikorian, M., 2014. Business overview: Why Starbucks deserves your attention. Market Realist.

McKinsey & Company, 2016. The challenges ahead for supply chains: McKinsey Global Survey results. 

Perez-Aleman, P. and Sandilands, M., 2008. ‘Building value at the top and the bottom of the global supply chain: MNC-NGO partnerships,’ California Management Review, vol. 51, no.1, pp.24-49.

Reed, R.G. and Wilkinson, S.J., 2005. ‘The increasing importance of sustainability for building ownership,’  Journal of Corporate Real Estate, vol. 7, no. 4, pp.339-350.

Seuring, S. and Müller, M., 2008. ‘From a literature review to a conceptual framework for sustainable supply chain management,’ Journal of Cleaner Production, Vol. 16, No. 15, pp.1699-1710.

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