Brewed Coffee and Brown Sugar from Starbucks - Assignment Example

? Brewed Coffee and Brown Sugar From Starbucks: From Farm to the Table Insert Insert Grade Insert Executive summary Anytime we go for a cup of tea or a burger at our local restaurant or convenience store, it may look obvious that we are always going to find what we need oblivious of the distance or process it may have gone through before it is available. Supply chains are the major facilitators of providing commodities as and when required in today’s highly globalised business environment. This paper traces back the processes that take place in the supply chain and the people involved before brewed coffee and brown sugar is put on the table at the local Starbucks coffee shop. Generally, the value chain begins from the farm where there is tillage and thereby harvesting before processing, transportation and storage takes place. The coffee and sugar supply chains also involves distributors, agents, brokers and governmental bodies. Other ingredients in the final product may also follow a longer or shorter supply chains depending on availability. Other issue also discussed in this paper include technology use, the role of inventory, risks involved in the supply chains and the various environmental concerns arising from global supply chain. Table of Contents Introduction ...............................................................................................................................4 Star Bucks supply chain overview.............................................................................................4 Ingredients ..................................................................................................................................5 The supply chain process.............................................................................................................6 Value adding process...................................................................................................................9 Inventory management...............................................................................................................11 Role of technology......................................................................................................................12 Risks involved.............................................................................................................................12 Environmental impact.................................................................................................................13 Bibliography................................................................................................................................15 Brewed Coffee and Brown Sugar From Starbucks: From Farm to the Table Introduction It sounds pretty much easy to drop by a high street coffee shop and have a cup or two of your refreshing beverage. However, the processes involved in terms of logistics may not be as simple as shipping the end product. Sometimes, because of the value addition in the supply chain, the end product though seemingly simple, may be relatively expensive (Christopher 2010). A general overview of a supply chain is essential to be able to understand this. A supply chain is often an intertwined process that may involve several people, organizations, information channels, technological tools and massive resources so that a product is transferred from the original source to the desired destination (Nestle 2012). Along a given supply chain, there might be several processes that ensure that value is added into the product so that the end product is always of the required standards and quality depending on the end user. Technology as mentioned in the description is a very important component of the supply chain because sometimes it helps to shorten and create efficiency in the seemingly complex and long process. There might be issues that are bound to emerge in the various supply chain processes that may include risks and environmental impacts. Another important component in the supply chain is the management of inventory at various stages to be able to effectively control the flow in the supply chain. All these components, therefore, sum the total product that may not be necessarily noticeable to the end user (Mentzer2000). A supply chain therefore exists to be able to satisfy the varied needs of consumers who may have different tastes and preferences. Starbucks Supply Chain Background The company’s success story started back in the year 2008 when they realized that costs involved in the acquisition of the various products were on the rise while their sales were not consistent with that rise (Cooke 2010). A close examination found out that half of the delivery was always late and hence costly to the company. Another area was that of outsourcing that contributed to almost 70% of the company’s expenses in the supply chain process (Cooke 2010). The company’s main decision was therefore to engage the supply chain process to be able to reduce lead times and eliminate extra costs incurred when engaging third parties. This was achieved by the investments made in manufacturing and distribution besides creation of strong partnerships with other players such as third party logistics providers. This brief background explains how the company relies much on the supply chain that is of a global nature to acquire products that ensure customer satisfaction. This paper uses the brown sugar coffee purchased at star bucks as an illustrative case of the supply chain. It examines and analyses the various components and processes involved from the time the coffee and other ingredients are grown in farms, the processing, value addition and finally to the end user. Star bucks may source for different products that make up the brown sugar coffee from different locations in the various continents of the world. To be able to conclusively analyze the process it is important to understand the major ingredients used so as to trace them back to their origins and hence an elaborate supply chain analysis. The Ingredients A brown sugar coffee purchased from the coffee shop may sound pretty much as the name suggests. However, there might be variations because of the various flavors that make the coffee unique and distinct with the shop. The product may require two major ingredients that are; brown sugar and instant coffee. However, for variations, there might be additions like ice cubes or flavourings like cinnamon or ginger. All these may have not been obtained easily even though they sound simple. Brown sugar is a growing healthy alternative to the white sugar because of lower calorie content. An instant coffee undergoes several processes in the manufacturing and value chain process so that the final product is achieved. Flavourings like cinnamon might be sourced from the various locations of the world and also undergo processing (Cooke 2010). Another basic ingredient is water that is obviously sourced locally even though it may also involve some logistical implications. All these major ingredients will be analyzed in terms of the various supply chain processes and how they are processed to make up the final branded product. The Supply Chain Process To begin, the major product used in the preparation of the product in focus is obviously coffee. The growth of coffee requires special climatic conditions and hence it can not be grown in any place. The product grows in a warm humid climate with an optimum annual temperature of about 27 degrees Celsius. This in effect means that it is likely to thrive well in the tropical regions of the world (Nestle 2012). Major coffee producing countries are in the continents of Asia, Africa and South America. A coffee berry undergoes several stages upon maturity. The first stage is picking of the beans. This is mostly done through hand picking the ripe berries that are often red in colour. Sometimes, because of the labour involved, a whole tree containing both ripe and unripe berries may be striped. The next stage involves drying and removal of the husks of the picked berries. They are mostly sun dried but can also be mechanically dried. The outer coats are removed by hulling so that the inside part of the bean remains. Subsequently, in the next stage, the dried berries are sorted by removal of any foreign matter and broken beans; grading which is pegged on the quality of the beans and then finally the different grades are packed in definite quantities mostly in 60 kilogram sacks. The fourth stage involves the consolidation of the coffee or otherwise referred to as bulking. This is for the economy of scale purposes by the exporters. The consolidated coffee grades are then stuffed into containers or palletized before they are exported to the roasters. The next stage in whish is a value addition process is that of blending. The companies involved are able to identify coffee grades from the various destinations and mix them in certain proportions. Lastly, the blended coffee beans are then roasted to turn them from their original greenish colour to the brown and aromatic one. All the above stages involve flow of berries from the farmer to the blending and roasting company. Companies like star bucks may be involved at the different stages of the supply chain. The company owns several coffee plants in the United States and in European nations. Besides, it also collaborates with manufacturers in the different continents of the world. This in turn creates the need for a highly interconnected distribution, transport and logistics network. The company mainly ships the berries from Latin America, Africa and Asia into the manufacturing companies in the United States and Europe in the form of containerized cargo. From the various destination ports, the berries are loaded into trucks which transport them to different storage locations that are within or near the processing plants. After blending and processing, they are then transported to the distribution centres across the globe. The use of third party logistic providers is also important in this stage. The company also operates its own retail shops and that is where the brown sugar coffee is also served. Diagram summarising the supply chain process M Middle men Just like coffee, the brown sugar, milk and spices also follow the same process. First, there are growers or ranchers who take the labour intensive part of the crop production, animal rearing and harvesting. They are therefore the primary members in the general supply chain of the products. Next there are intermediaries who might help in consolidation and transport of the harvested produce to the processing plants and may also act as guides to the farmers. The processors may be involved in the sterilisation, sorting, grading and packing depending on the nature of the product. They may also be co-operative societies constituted by the farmers. The various governmental agencies may also come into play. The government may in the quest of protecting the interest of farmers, form various authorities, committees or boards to oversee the process of export, identify good markets and support the farmers with the various implements and inputs needed in the production of the various crops. There might be exporters who may also double up as the manufacturing companies like star bucks in this case. They arrange for the consolidation, refrigeration, packing, stuffing, loading and shipment of the commodities at pre arranged shipment deals. The dealers or brokers are also involved in the supply chain; they may be involved as intermediaries between the farmers and the shippers, or manufactures and shippers among other parties. They may also be involved in customs clearing and forwarding by helping exporters through the export procedures and payments. The last group in the supply chain is that of the manufacturers, distributers and retailers. Companies like star bucks as discussed earlier, may combine the roles of the three and sometimes may involve others through partnerships, licensing agreements or franchising agreements. This is because of the wider global network that may have huge logistical and cost implications. The last components are water and milk. Generally, water is provided by metropolis or a water vendor. The process of ensuring that the water is clean and purified also takes a logistical process. Milk may take a longer route in the supply chain depending on where it is sourced from. For example, milk from dairy farms or ranches in Brazil will have to transport the refrigerated product to airport where they are transported for packaging and further sterilization and delivery to coffee shops. Value Adding Process in the Supply Chain Value chain refers to the processes a company in this case; Starbucks has to follow in order to provide the final product to the consumer; in this case; the brewed coffee served with brown sugar. The farm or plantation is at the terminal end of the supply chain. Farmers should be able to use the required farm inputs and carry out the recommended tillage practices so that the final product for instance; the coffee beans are of the required grade. The harvested products must be well handled in the processing and transportation to minimize the damage of spoilage. This is achieved partly by the use of preservation measures. For example drying of the berries is on of the preservation measures that ensure that the berries retain the best flavour and aroma and are easily roasted. The value chain process is therefore reliant on the previous stages as noted in this case (Wisner et al 2008). Manufacturing process is another step in the value chain process. First, the berries must be delivered through shipment and therefore transportation is another important component of the supply chain value addition. Information supply is also important so that the transport department and the manufacturing communicate on delivery of the product as may be required. The manufacturing process ensures that the coffee shop can be able to easily use the coffee for brewing or preparation of other coffee brands. The preparation process is also another process that is essential in the chain so that the consumers enjoy the final product. Other related value addition processes involve the use of lean manufacturing to eliminate wastage and reduce the lead time in supply. The storage and distribution centres also help in the supply chain because they facilitate packaging, consolidation, breaking of bulk for distribution and ensuring steady supply of the ingredients used in preparation of the final product. Other management functions may also participate to ensure that value addition is maximized for the benefit of the consumer and to give the firm a competitive edge. A good example is the marketing function that needs to communicate availability of different brands to the potential consumers. There must be a close coordination of the various stakeholders in the supply chain so that the cost of acquisition is lowered and hence the benefit passed to the final consumer who determines sales volumes of the organization and hence a firm’s competiveness. Research and development is therefore important in the value addition process since it helps in the identification of the various adjustments that need to be made in the general supply chain process and thereby improve the final product. Technology use and inventory management are also essential components in the value addition process of the supply chain as discussed elsewhere in the paper. The highly educated and sensitized customer in today’s communication and information revolution is also a challenge. There are growing concerns among consumers about the healthiness of the products the consumers use and any indication that the company’s products do not follow required standards will result in massive reduction of sales volumes. It is important to for organizations to recognize the shift from only product success to product-process excellence (Christopher 2010). Inventory Management Inventory management is an important process of value addition in the supply chain process. The Starbucks model of distribution centres highly employees in the use of inventory management. It is important that wastage is reduced and products delivered to customers in good time and at required places and that is the work of inventory management. Time, documentation and accurate record keeping and flow of information are important to the company (Jian et al 2011). The customer orders, the date and times need to be accurately kept so that there are no delays in the supply chain. The storage facilities like warehouses or factory storage facilities need to have required stock so that there is no interruption in the processing and hence flow of goods. Moreover, the maintenance and control of stock volumes is essential to the company. In addition to the mentioned benefits of inventory management, it also facilitates accurate preparation and storage of records that are important for the purposes of accessing cumulated taxes on the various inventory categories (Axsater2006). Without accurate data regarding the unit quantities of each stage of the supply or the overall operation, the company cannot accurately calculate the tax rates. Consequently, this could result to either underpaying or overpaying of the taxes due and possibly resulting to penalties that might spoil the reputation of the company besides loses associated with the costs of settling the penalties. Inventory management is therefore an important element of value addition in the overall supply chain process of companies including Starbucks. Companies should use current modern inventory management information systems like the use of bar code scanners and other software that enable automation hence efficiency and accuracy in operations (Zhang 2010). Role of Technology in Supply Chain Technology use is important in the supply chain process. Inventory management, information flow, material handling and distribution all depend on the efficiency and reliability that technology offers. The coffee shops also use customer billing systems, order management systems and others that require modern technology (Eleni et al 2005). A good example is increased use or robotics and management information systems in the beverage industry. Laser guided pallets, for instance has reduced the problem of uncoordinated movement in large scale processing plants. Risks Involved In Supply Chain and How to Minimize Them Today, there are many risks associated with the supply chain process; first is the ever growing technology and innovation sector. As technology develops faster, the processes involved in the supply chain may need to keep up through regular upgrade to the new technology. The cost implications of the fast technological growth may mean that planning should be appropriate or companies are likely to loose out. Another area is that of competition, many companies exist for instance in the beverage industry that Starbucks operates in. There is need for the management to ensure that there is quality assurance to the end users or the competitors might have an added advantage. Another strategy is to encourage innovation through product differentiation and also the use lean methods to minimize waste (Subramanian2009). Globalization is a big challenge in the supply chain sector. Since products are sourced from different continents, there is the risk associated with the damage or loss in the process of transportation. Insurance has remained a viable option in this area. In addition, it is important to create strategic partnerships so that some of the problems associated with globalization are minimized. The supply chain sector is highly dependent on the work force because it has remained labour intensive despite the technological advancements. For instance, a strike by farmers means that the produce will take long in the farms and thereby delaying delivery to the companies. This is just an example of a stage because any disconnection in the stages involved in value addition will highly affect the final product. Environmental Impact There have been various concerns on the environmental implications of the various supply chain processes. The issue of carbon emissions has dominated the debate. Transportation of the products has greatly contributed to emissions. There are many trucks today serving the global network of the supply chain ensuring that there is faster distribution and supply of the products (Nakul et al 2010). In addition, the industries and processing plants of products such as the coffee berries emit a lot of gases in the processes of heating, roasting and drying. There have been concerns about the effluent into water bodies by the several plants. For instance, the washing of berries produces dirty water that industries, especially in the producing countries, have continued to emit into water bodies thereby polluting them. The issue of carbon emissions by the carriers has been a concern and hence the introduction of carbon credits to evaluate the pollution effects of production and shipment. The farms also use non-biodegradable supplements like inorganic fertilizers in addition to the use of pesticides that have also contributed in environmental pollution. The coffee shops should also use packages that are easily disposable and biodegradable so that there is reduced impact on the environment. The increase in use of plastics has been a major contributor in the pollution of environment that needs to be closely monitored. Bibliography Axsater, S 2006, Inventory Control, New York, Springer publishers. Christopher, M (2010) Logistics and Supply Chain Management 4th Edition, London, Pearson Education. Cooke, J 2010, From Bean to Cup: How Starbucks Transformed Its Supply Chain from the Quarter42010issue, viewed 19 November 2012, http://www.supplychainquarterly.com/topics/Procurement/scq201004starbucks/ Eleni et al. 2005, ‘The Changing Role Of Information Technology In Food And Beverages Logistics Management: Beverage Network Optimization Using Intelligent Agent Technology.’ Journal of Food Engineering, Oct2005, Vol. 70 Issue 3, p403-420. Jian et al. 2011, Optimal Inventory and Admission Policies for Drop Shipping Retailers Serving In-Store and Online Customers. IIE Transactions, May2011, Vol. 43 Issue 5, p332-347 Mentzer, J 2000, Supply Chain Management, Sage publications Inc., California. Nakul et al. 2010, ‘Unintended impacts of increased truck loads on pavement supply-chain emissions.’ Transportation Research Part A: Policy & Practice, Jan2010, Vol. 44 Issue 1, p1-15 Nestle supply chain case study, viewed 19 November 2012, Subramanian, A 2009, Supply Chain Risk Management: Minimizing Risk Exposure in Supply Chain, viewed 19 November 2012, Wisner et al 2008, Process Management: Creating Value along the Supply Chain, Thompsons learning, London. Zhang, Z 2010, ‘An Integrated Model for Vendor and Buyer.’ Modern Applied Science, Jul 2010, Vol. 4 Issue 7, p197-200 Read More