Management of the Current Processes at Starbucks - Assignment Example

Operation management Contents Contents 2 0 Introduction 3 1 Transformation model 4 2.0 Management of the current process 5 2 Key points 6 3.0 Illustrate a process 6 4.0 Failure points 7 4.1 Measure and see how major or minor these failures are and its consequences 8 5.0 Use lean approach 8 5.1 Key areas in illustration 9 5.2 Measure 5po 9 5.3 New illustration 10 6.0 Conclusion 10 6.1 Recommendation 11 References 12 1.0 Introduction Operation Management can be defined as designing, controlling and executing of operations in order to convert the resources into goods and services so as to implement on the business strategy set by the company. Operation management is a very important area in management that encompasses the responsibility of the business operations being as efficient as possible so that minimum resources are utilized in order to meet the requirements of the customers. Operation management is concerned with controlling and executing the process through which inputs in the form of raw materials, energy, and labour are converted into outputs that can be either goods or services. Operation management is important for two main reasons – firstly it can improve the productivity and secondly it helps to meet the competitive priorities of the customers. Productivity can be defined as the ratio of the output to input. It is rather a measure through which the efficiency of the employees or managers is utilized to convert the scarce resources of the organization into products or services. The more is the numerical value of this ratio the higher is the level of efficiency. The importance of operation management is increased in the recent years due to stiff competition, quality conscious customers, new technologies, and service life cycles which imposes pressure on the organization’s operations so as to improve productivity and provide a better quality of the goods and services. This assignment will put focus on Starbucks Corporation which is the largest coffee company across the world and is based in Washington. The brand is a part of the booming restaurant industry and operates through 20,891 stores in almost 64 countries. The company was founded in the year 1971 as a Seattle retailer of coffee beans and from then it has expanded very rapidly. The company is well known for selling coffees but also has extended its product range to pastries, sandwiches, hot and cold beverages, snacks, etc. The inputs of its operations are mainly coffee beans and milk that comes from across nineteen countries, once the beans are collected it is then send to its manufacturing, roasting, and packaging plant. The output is the finished product that is then delivered across its stores and supplies adequate amount of coffees to each of the stores. 1.1 Transformation model The input/output transformation model describes the process through which the inputs such as capital, labour, equipment, land building, information, and materials are converted into outputs such as products or services that provides value addition to the customers. The transformation system is the most important element in the models that states how much effectively does the organization produces the goods or services so as to meet the needs of the customers. Which industry the organization belongs to it needs to maximize the quality of the transformation process so as to meet the needs of the customers? The diagram below describes the transformation model – (Bamford and Forrester, 2010, p. 145) The transformation model states the optimal utilization of the resources to produce and deliver high quality products or services. The supply chain of Starbucks is expanded to nineteen countries where milk is procured from some of the countries and the coffee beans are sourced from the rest. The company has its own roasting centres, manufacturing and packaging plants. The coffee beans once sourced is send to the roasting centre’s where each of the bean is prepared efficiently through a well structured and designed manufacturing process. The beans once prepared are sent out through the delivery process and supplied to each of the Starbucks stores. The main input of the company’s operations is raw materials, suppliers, labour, equipment, capital, and information (Chan and Lee, 2005, pp. 96-97). The output as per the transformation model for Starbucks are the products that are offered to the customers in its stores in the form of best coffee that makes a strong base of their goal that they are in the people industry serving coffee and not in the coffee industry serving people. 1.2 Aim of work The aim of the report is to improve upon the performance, quality, and to deliver the products to its customers without any delay. The focus of the report would be to highlight some of the areas in the supply chain that needs further improvement so that it attains and competitive and even meet the five performance objectives that are speed, cost, dependability, quality, and flexibility. The report would even comprise of some strategic changes in the business model of Starbucks that would facilitate more of customer satisfaction. 2.0 Management of the current process The current process at Starbucks is divided into four major parts that is planning, sourcing, making and then delivering. The people in the company that are a part of the planning process may that be replenishment, production planning or any new product launch are involved in the planning group. The sourcing activities of the company are divided into two major parts one is the coffee procurement and the other is the non-coffee procurement. The company spends almost $600 million each year on coffee. The company spends $2.5 billion annually on purchases of items such as baked goods, dairy products, paper goods, store furniture, etc (Chopra and Meindl, 2007, pp. 151-152). The ‘make’ functional unit of the operations at Starbucks comprises of all manufacturing activities may that be through contractual manufacturer’s or through in-house. The ‘deliver’ group of the process comprises of all the people that are involved in transportation, customer service, and distribution. The entire process at Starbucks is handled by the four different units with a common objective to improve on the efficiency level and to reduce the costs (Greasley, 2013, pp. 106-107). The management even set out benchmarks on the process and ingredients so that the possible cost drivers could be identified and controlled. The company has its own three coffee production plants in the United States which it expanded to one more at Columbia and this regionalizing of the coffee plants enabled the company to reduce the lead times and the transportation costs (Gattorna, 1998, pp. 115-116). The coffee beans are sourced from Africa, Latin America, Asia, Europe, and United States in ocean containers and are then send to sic storage sites to the nearby roasting plant. The roasted beans are packed and trucked to the regional distribution centres. The company has its own two distribution centre and the other three distribution centre is operated by the third party logistics. 2.1 Key points The key points of the process at Starbucks are that the company aims at following a centralized and one global logistic system. The company has divided the major supply chain operations into four main categories and they are handled as separate groups. This approach reduces the complexity of the business operations. The transformation of its supply chain has enabled the company to curtail its cost without any kind of compromise in the delivery of service (Johnston, Clark and Schulver, 2012, pp. 95-96). It takes effective measures so that the values of the customers are aligned with corporate culture at Starbucks and this would help in imparting the required training to the employees so that they can deliver quality service to its customers along with high quality coffee. 3.0 Illustrate a process The process of Starbucks is to transform the input that it procures from various suppliers into finished products for end consumption. Starbucks procures the coffee beans from some selected countries which forms the first step of its supply chain process. The beans that it procures are from one of the best coffee plantations in the world. In order to reduce on the cost that is associated with the transportation of the procured raw material the company has acquired its own four coffee plantations in the United States so that it can reduce on the lead time for delivery and even the transportation costs (Kasilingam, 1998, pp. 123-124). The main process flow of the operations in Starbucks is described in the diagram below- (Li, 2007, p. 56) The process starts with sourcing of the coffee beans which is then trucked and sent to six roasting plants. In these plants each of the coffee beans are properly roasted, and the quality of the roasting process is checked through quality inspection method. The roasted beans are then packed and the final product is ready to be delivered. The final products are then trucked and sent to five regional distribution centres from where the coffee beans are distributed to the nearest store location of Starbucks (Patton, 1986, pp. 125-126). The integration of the overall operations at Starbucks and even giving equal importance to its employee base who are one of the strongest pillars behind the success of Starbucks even forms a part of the process in the company. The process of the company even comprises of the approach of just-in-time inventory, repetitive operations, specialized equipments, and a strong team of well trained staff. 4.0 Failure points Starbucks believes in delivering exceptional quality to its customers in the form of taste and customer service. This quality has made the company a market leader in the coffee industry. The company has high brand equity and operates in over 40 countries across the globe. However there exist some major failures in the operational process of the company in terms of increased cost. The company is dependent on a few ranges of suppliers and is subjected to high cost and late deliveries. The company depends on some countries for the procurement of raw materials which can be subjected to various risks related to political, natural, geographical risks and hence can affect the supply chain of the company (Patton, Clegg, Hsuan and Pilkington, 2011, pp. 134-135). The market is subjected to change and the flexibility of the company is low which limits the company from launching new product line. The company has a large number of competitors such as Barista, Café Coffee Day, etc and its prices are very high compared to its competitors. The high operating cost has enabled the company to keep its price high which is a major failure in a saturated market place. The company fails to improve the efficiency level by reducing the costs and gaining more of competitive advantage. 4.1 Measure and see how major or minor these failures are and its consequences The failures of the company are low flexibility in terms of new product launch, higher prices compared to its competitors, the company is highly dependent on a few range of suppliers and since its operations are highly dependent on other countries so their macro environmental factors greatly affects the operations of the suppliers. The company has a high operating cost which mainly comprises of the transportation cost associated from the procurement to the delivery. The company’s main profit is through the coffee products which narrow down the scope of maximizing the revenues. These are some of the major failures out of which a few number of suppliers and the high operating cost has the most adverse consequences (Radhakrishnan, 2001, pp. 167-169). These two failures can affect the operations of the company in the long run. Particularly the dependency on a few suppliers increases the bargaining power of suppliers and can even affect the lead time of delivery. If there is subsequent delay in delivery then it would affect the quality of customer service for which Starbucks is famous. Since the company operates through JIT approach so it becomes very essential that it receives the inventory right on time so as to meet the demand of the consumer market. The high operating cost would not enable the company to set competitive prices for its product which would result into a major failure of gaining competitive advantage in the market place. 5.0 Use lean approach Lean approach is focused on the companies though process of analyzing the maximum value that its products or services can bring to its customer base. The approach states that the products and services should be delivered at a lower cost with higher quality level and the minimum delay possible in the operation process (Slack, Chambers and Johnston, 2010, pp. 176-177). It is a systematic approach that comprises of modelling of businesses as value streams and eliminating the barriers that may exist between the departments, to analyze and eliminate inefficiencies and wastage in the operational process so as to maximize the value to be offered to the customers, to ensure a continuous flow in the manufacturing of products or services and even the flow of information on demand, standardizing the work load level, and reducing the inventory level and the lot sizes (Ross, 2004, pp. 202-203). The approach even initiates to make the operations visible so that situations can be analyzed and corrective actions can be implemented, and even involves transformation of the business culture which would be focused towards providing optimal value and on continuous improvement of the business process. The major benefits of the lean approach is it increases productivity level, reduces the lead time, reduces the inventory levels, helps in enhancing the simplicity of the process, improves the quality level, and helps in reducing the consumption of the resources to be used in the manufacturing process. 5.1 Key areas in illustration Starbucks is facing some challenges in its supply chain due to an increased operating cost and higher dependency rate. Lean approach if incorporated into the system would make the operations very simpler and would even initiate zero work in process. The main concern of the company is to incorporate ways through which it can reduce the level of resource consumption and eliminate the huge cost that is associated with the transportation process. Lean manufacturing is the most common approach that is implemented by every other organization and some other systems involves Kanban systems, simple visual controls etc. The approach would enable the company to control the possible delays from the supplies and even would help to eliminate any kind of operational errors in the system. 5.2 Measure 5po The five performance objectives are speed, cost, quality, dependability, and flexibility. The speed factor can be measured through the time spend by the customers at the Starbucks stores. This would help to analyze how much efficiently the orders placed by the customer’s are delivered and the time spent by the customers waiting in the queue in relation to its competitors. The cost factor can be measured by analyzing whether the cost that is spend by the customers in the Starbucks store is high and what are the possible areas where the company can cut down its cost for instance incorporating energy saving devices, entering into some contracts, etc. The quality factor can be measured through proper analysis of the position of Starbucks in terms of quality level (Voortman, 2004, pp. 144-145). This can be facilitated through surprise quality checks to ensure the operational process meets the quality standards, and proper training to the employees with high motivational program which would ensure that the employees do not compromise on the quality and deliver the best of services to its customers. The dependability factor state to what extent the process of Starbucks can be considered to be reliable. This can even comprise of the new Delphi method of confirmation and dual line layouts to convert the system into a more reliable one so that the customer’s know that their orders would be delivered in the time frame with the least possible errors (Wincel, 2004, pp. 172-173). The flexibility factor can be measured on the basis as to what extent the operations of Starbucks are flexible so as to meet the changing needs of the customer’s. The best way to measure this objective is by collecting customer feedback. 5.3 New illustration The three performance objectives play a very important role in its success and sustainability for the long run. The company’s major failures in the operations management is its lack in maintaining the performance objectives. Though there is significant cost associated with being aligned with the performance objectives but it is very much important for the long term goal of the company. The company has already restricted its supply chain process and has incorporated four departments to handle four operations of supply chain such as planning, sourcing, making and delivery. This restructuring has made the company simplify its process but it can be further modified through incorporation of the lean approach and operating as per the set performance objectives. 6.0 Conclusion Starbucks is a market leader in the coffee industry. There are various factors that has enabled the company to offer the best quality coffee and customer service over the years. The company has gained a market presence through its best quality coffee beans and a warm and pleasant atmosphere that is created in each of its stores. The company operates in over 40 countries and generates high revenues. The supply chain of the company is expanded globally through which procurement is done through five countries and then it is transported to the distribution centres and finally to the retail outlets. The company has to be highly depending on some other countries for sourcing of the raw materials which indicates that the risk associated with the geographical, political and natural factors of the country can affect the operations of Starbucks. The number of suppliers has caused a delay in the lead time and this factor would affect the company in long run. The company has a high operating cost and it needs to manage the cost driver so that it can offer the most competitive prices for its products to its customers in relation to its competitors. 6.1 Recommendation The company is recommended to expand its supplier base this would not put any such constraint on the company. The company can even enter into some form of contract with the coffee plantation farmers who can deliver the coffee beans at a more competitive price then its other suppliers. The company can set up the distribution centre more close to the retails stores so that it can reduce the transportation cost. The product range of the company is very limited this reduces the chances of the company to maximize on its returns. The company has already included few more items in its product line such as sandwiches, snacks, other beverages, etc. and is recommended to add more items so that in future if the sale of one product goes down it can be balanced with the sale of another product. The company can co-brand its product with other manufacturers so that it can increase its profit margins. Starbucks can apply market penetration strategy in the international countries and even enter into some of the Asian markets such as Bangladesh, Pakistan, and India. References Bamford, D. R., and Forrester, P. L. 2010. Essential guide to Operations Management: concepts and case notes. New York: John Wiley Chan, C. K, and Lee, H.W.J. 2005. Successful Strategies in Supply Chain Management. Pennsylvania: Hershey. Chopra, S., and Meindl, P. 2007. Supply Chain Management: Strategy, Planning, &Operation. New Jersey: Upper Saddle River. Gattorna, J. 1998. Supply Chain Alignment. Great Britain: Gower Publishing Ltd. Greasley, A. 2013. Operations Management. New Jersey: John Wiley Johnston R., Clark, G., and Schulver, M. 2012. Service Operations Management: Improving Service Delivery. New Delhi: Pearson. Kasilingam, R.G. 1998. Logistics and Transportation: Design and Planning. Netherlands : Springer. Li, L. 2007. Supply Chain Management: Concepts, Techniques and Practices Enhancing the Value through Collaboration. UK: World Scientific. Patton, J. D. 1986. Logistics: Technology and Management the New Approach. New York: Jamaica. Patton, S., Clegg, B., Hsuan, J., and Pilkington, A. 2011 . Operations Management. USA: McGraw Hill. Radhakrishnan, P. 2001. Logistics and Supply Chain Management. New Delhi: Allied Publishers. Ross, D.F. 2004. Distribution Planning and Control: Planning and Control: Managing in the Era of Supply Chain Management. USA: Springer Slack, N., Chambers, S., and Johnston, R. 2010. Operations Management. UK : Prentice Hall. Voortman, C. 2004. Global Logistics Management. South Africa : Juta and Company Ltd. Wincel, J. P. 2004. Lean Supply Chain Management. New York: SAGE. Read More