The current business situation at this Starbucks shop and management operations aspects - Assignment Example

Operations Management Outline Operations Management ……………………………………………………………………… 3 0 Introduction ………………………………………………………………………………. 3 1.1 Transformation model ……………………………………………………………………. 3 1.2 Aim of work ……………………………………………………………………………… 6 2.0 Management of the current process…………………………………………………….… 6 2.1 Key Points ………………………………………………………………………………... 8 3.0 Illustrate a process ……………………………………………………………………….. 9 4.0 Failure points (Relate to aim) …………………………………………………………… 10 4.1 Measure and see how major or minor of these failures ……………………….………… 11 5.0 Lean Approach ………………………………………………………………….………. 11 5.1 Key areas in illustration …………………………………………………………...……. 12 5.2 Measure point …………………………………………………………………………… 13 5.3 New illustration……………………………………………………………..…………… 13 6.0 Conclusion …………………………………………………………………………...…...13 6.1 Recommendation for future work ………………………………………..……………… 13 References …………………………………………………………………………….…...… 15 Operations Management 1.0 Introduction Operations is a term used to refer to an area under the corporate that is responsible for the production of goods and services in an organization. The activities carried out under operations include selection of raw materials and suppliers and managing the supply chain in an organization. Operation management is the process through which inputs, in form of raw materials and labor, are transformed to finished goods and services (Gupta & Starr, 2014). The main impact of operations management in a firm is positive perceived value that the customer feels has been added to a product, which will make him come back every other time (Alon, 2012). Since operations management determines the quality of products and services, it is a key basis in the determination of success and long-term sustainability of the company. To ensure a firm is successful currently and in future, operations management have to be the best practices for high quality and efficiency in a production or service industry firm. This paper aims at analyzing operations management at Starbucks with an emphasis on the ability of Starbucks to manage its operations management wing of the firm to achieve success in the service industry through high profitability and revenue flows. The focus of the assignment will be on Starbucks Coffee Company and the specific branch will be the Starbucks coffee shop on 91 Clarence high street in Kingston town (Kingston Upon Thames, London, United Kingdom). This report will analyze the current business situation at this Starbucks shop and management operations aspects. In 1971, a delicate coffee and tea vendor was founded and named Starbucks. The company began operations through offering coffee to restaurants and espresso bars. The chairperson and CEO Howard Schultz in 1985 transformed the business by altering it into an international coffee brand involved in coffee service, high quality goods, and augmented desire to teach clients on the importance of coffee and tea. From the Seattle roots, Starbucks has expanded internationally to market imported coffee, Italian style espresso, food products, cold beverages, fine teas, and coffee fixtures. Currently, Starbucks has developed a good brand image with its 176,000 employees and has created lasting relationships with coffee farmers and manufacturers (Clark, 2007). Starbucks consists of 17,000 stores situated in 49 countries globally with a high brand demonstration in the United States. 1.1 Transformation model A transformation model is a framework used to aid leaders in understanding their organizations and guide in successful redesign of organizations. The complexity of an organization is reduced to eight variables that have to be understood and aligned for business success. These variables need attention and understanding to augment customer service, efficiency, quality, profitability, cycle time, and employee satisfaction. The relation between the various variables in transformation model is shown by the image presented in the following page: Retrieved from http://www.centerod.com/framework/ on 21st April 2014. The inputs of the transformation process at Starbucks include transformed resources; those resources converted through transformation process and include materials, information, and customers. The inputs at Starbucks include environment that gives the location of Starbucks and the ability to reach a high number of people owing to its optimal location on 91 Clarence Street in Kingston town, the second input is resources in terms of coffee beans, water, capital equipment, and labor. The third input is the rich history of Starbucks coffee, which is known to be the best producer of quality coffee making clients to expect quality, and the Starbucks shop at Clarence Street in Kinston has to produce quality. The output of Starbucks Coffee Company is high quality coffee and other food served at the restaurant as well as quality service that has been synonymous to Starbucks for a long time. This makes clients to visit Starbucks for their food needs owing to high quality provision and great customer service due to the management of the variables of the transformation process by Starbucks in an excellent way. 1.2 Aim of work This study aims at reviewing the strategy of Starbucks and analyzing the five performance objectives aimed at reaching greater customer satisfaction to aid in improving the performance, communication, efficiency and reliability on the delivery of quality service process at Starbucks. 2.0 Management of the current process Operations management currently at Starbucks are aimed at ensuring the customer experience is great and employees are involved in any step of the way as they determine the success of the company through customer interaction (Jones & Robinson, 2012). Location strategy- superior real estate locations is the other way through which Starbucks manages its operations ensuring access by customers after work for relaxing and hanging out. The strategy at Starbucks is to set up shop at locations that are accessible to a high number of people, provide advantage in terms of supplies and ability to command a good image through its operations over the community. This ensures the clients can easily access Starbucks, relax themselves and ability to reach a high client base to augment sales and profitability. Factors considered in the choice of location of Starbucks shops include customer preferences, weather conditions, and client behaviors (Larson, 2008). Comfortable furnishing- Starbucks ensures all stores including the Kingston shop are furnished for comfortable seating, no-smoking policy, and provision of outlets for electronic equipment to improve the Starbucks’ experience of the customers. Comfort increases time spent by a customer in the store increasing the likelihood of him/her taking more of products and services offered at Starbucks. This ensures the clients have a cool, cozy feeling in the Starbucks coffee shops (Mahadevan, 2010). Design of goods and services- Starbucks’ strategy is to provide high quality coffee and provide a great customer satisfaction through the Starbuck’s experience famously identical with Starbucks. This allows customers to be willing to pay high prices for coffee at Starbucks and provides them a destination after their jobs and away from their homes. Starbucks has developed a good reputation and image in all its 17,000 stores owing to the experience and quality demonstrated in these stores making it different from all fast food stores. This has allowed Starbucks to augment productivity, sales, and revenue and has been the main reason for the high expansion of Starbucks globally. Management of quality-quality maintenance has been the other strong point that Starbucks has been the main strongpoint of Starbucks in maintaining a leading position in the coffee industry. Starbucks puts a lot of emphasis on high quality provision through providing fresh coffee and great service provision making employees accepts to pay higher prices and augment the customer base of Starbucks. The baristas at Starbucks have the ability to switch between 100 brands of coffee and provide the client within 3 minutes of the brand they require without compromising on quality and freshness of the coffee provided with the customer. Layout strategy-the layout of Starbucks has always been one to ensure a high ability to meet comfort needs and satisfaction of the customers in the shops. There have been adjustments in the layout of Starbucks with introduction of drive through locations, increasing presence in non-urban locations, contracting with companies for supplying products, and increasing penetration of licensed products. Inventory management- Starbucks manages inventory through maintenance of an inventory stock records at all the stores for coffee berries to be adequate and ready when required in the production process. Adequacy of coffee berries in terms of quantity; quality and freshness are the main aims of inventory management at Starbucks. This allows Starbucks to ensure efficiency and effectiveness in the production process augmenting the ability to increase customer satisfaction and increase revenues and profitability of the firm. Human resources- Starbucks currently employs more than 60,000 “partners” known as baristas. A high number of baristas work in retail stores and Starbucks makes sure they are satisfied as they affect the satisfaction of consumers with high satisfaction reflecting through great service and satisfaction of the consumers. In the aim of cutting costs, reorganization in 2008 involved the removal of 600 positions making some employees redundant. This reorganization would enable regional managers and support teams to closely work with Starbucks employees and managers and listen more closely to the customer. Scheduling maintenance-Starbucks ensures maintenance of all the equipments and physical infrastructure used in the process of input transformation into output. The maintenance is scheduled often to ensure machines and infrastructure is working properly to ensure efficiency and effectiveness of the operations at Starbucks. The process of operations management at Starbucks, therefore, entail all the activities that aid in ensuring inputs are transformed to outputs through the coordination of various functionalities of Starbucks. 2.1 Key Points There key points emphasized by Starbucks in its operations management including scheduling maintenance, human resources, inventory management, layout strategy, management of quality, comfortable furnishing, design of goods and services, location strategy. These areas all work together in tandem to ensure high client satisfaction, efficiency, and effectiveness of operations and ability to meet demand as well as managing demand at Starbucks. The result is an ability to augment sales, increase customer base, and maintain its position as a global leader. 3.0 Illustrate a process The first facet of operations management is product development that involves the following activities in relation to Starbucks. Product development at Starbucks involves procurement of raw materials (coffee beans) from the suppliers, keeping the coffee beans well to keep them fresh, keeping an inventory for stock maintenance, and distributing berries to all outlets but maintaining their freshness. Other activities in operations management including managing stores, marketing and promotion, sales and delivery, customer service. The second facet of operations management is supply chain, which entails all the activities that ensure all the raw materials, and other inputs required for production are available and cheaply sourced. Starbucks makes a very conscious effort in the selection of the best supplies of quality coffee and plans according for the distribution of coffee beans to each shop with an aim of maintenance of freshness. The suppliers are chosen in regard to fair pricing, high quality and there has to be evidence of ethical social responsibility by the suppliers as Starbucks respects the farmers and all producers of their coffee. The third facet of operations management is process design and management that entail management planning, legal work, designing an efficient process, human resource management, technological development, and accounting. Human resource management activities include determining employee salaries, benefits and emoluments, and training of employees. Coordination of activities through excellent procurement management system, low cost product creation, and better product quality, increases the competitive advantage of an organization (Larson, 2008). The different facets of operation management are illustrated in the following image. 4.0 Failure points (Relate to aim) There are however, some failure points in the operations management of Starbucks. One of the main failure points is the implementation of the lean system of production that ensures time saving, efficiency, and lower inventory in the organization. These actions employed by lean production aim at reducing costs and lowering customer waiting time in the organization. However, this has a downturn of turning employees into coffee-making machines through losing the human touch and interaction between the customers and the employees at Starbucks. The other disadvantage evident is the loss of clients’ experience at Starbucks where customers have a relaxing moment and take a break from their lives for a creative and enjoyable moment, enjoy the atmosphere, enjoy the great background music, and coffee and other foods (Raissa, 08/09/2009). With lean management, this feel-good experience is lost as there is high emphasis on efficiency and time saving, compromising on human interaction for Starbucks making lean management suitable for manufacturing firms, if Starbucks is to maintain its sport in the hospitality industry. The second failure in the operations management of Starbucks is that there has been no clear attention to strategic marketing. There has been a clear failure by the management of Starbucks to set a clear strategic marketing plan. This is clearly demonstrated by the little amount of funds dedicated for strategic marketing at Starbucks (Clark, 2007) and this has negatively influenced the ability of the firm to its recognition and brand image (Bradley, 2001). The other impact of lack of a strategic marketing plan at Starbucks is that Starbucks has lost its competitive age in the market recently. This is due to the effect of lack of strategic marketing plan on the long-term activities of the firm as it influences the direction and scope of the firm. A good strategic marketing plan affects positively on the firm through creation of additional value to an organization’s brand and sets the relationship between the firm and customers (Bradley, 2001). This has led to the loss of a competitive advantage and being challenged by Dunkin’s Donuts and Mc Donald’s. 4.1 Measure and see how major or minor of these failures The first failure on the operation of lean marketing system of production is not a major failure owing to the advantages that have been accrued from the implementation. These benefits in terms of reduced cost of production, increased efficiency, and better resource utilization reduce the negative influence of the failure. The second failure is in terms of lack of a clear strategic marketing plan is a major failure owing to the negative impacts it has had on the competitive advantage and market leader position of the Starbucks. Lack of a strategic marketing plan for Starbucks has led to a loss of competitive advantage leading to McDonalds and Dunkin’s Donuts closing the gap and taking huge strides in the coffee industry market (Weihrich et al, 2013). 5.0 Lean Approach Lean approach is the process of maximizing the value added to the customer of by the products offered and services by an organization. Lean approach was inspired by Toyota production system and many firms have followed suit owing to the high competitive advantage benefits it brings to a firm. Lean production approach ensures the needs of the clients are met at a lower cost, within the shortest time possible, and with a higher quality (Starbucks Corporation 2008). Lean approach aims at ensuring high customer satisfaction and time saving while augmenting the productivity and success of a company through provision of best service and high product quality with minimal time wastage (Motley, 2007). Lean approach aims at ensuring high efficiency and flexibility in the operations of a company for it to be able to meet high customer satisfaction needs. The benefits of lean production approach include delivery of products and services within a short lead time; augment productivity, reduction of work in progress and inventory, and improving product quality. The other benefits of lean production approach are decreased resource consumption in production, augment simplicity of processes, and light documentation in terms of paperwork. Starbucks has employed lean management in its operations process with the stores partners of the company and most of the branches reaping the benefits of lean production. The various ways through which lean marketing has been introduced at Starbucks is where orders are taken for preparation when the client is still queuing, ensuring least time is wasted before the client gets their orders, ensuring timely delivery of supplies and efficiency augmentation by all the employees at Starbucks. Benefits reaped from lean production include cost saving of $ 175 million, increased service speed, customer satisfaction, improved customer service, and an enhancement of Starbucks experience for the customers. 5.1 Key areas in illustration Lean processing has been used in a number of areas at Starbucks including increasing efficiency in the production process through taking customer orders as fast as possible, getting the client’s orders within a short period and augmenting timely delivery of supplies. The other way lean production has been implemented is reducing work in progress and inventory of finished goods at the organization reducing holding costs for Starbucks. 5.2 Measure point The measures are shown by a reduction of $ 175 million attributed to lean system of production and the augmented revenues that the CEO and Chairman Shultz gives credit to these new processes implemented in the firm. Increased employee satisfaction and customer taking minimum period at Starbucks waiting for orders with efficiency in serving having increased are the other measures for the success of lean production system at Starbucks (Starbucks Corporation, 2008). 5.3 New illustration Starbucks introduced a new concept to lean production where the employees are trained to augment their skills for the better performance of their duties and fit well in the lean production system. The employees for example baristas, servers, managers and other personnel are equipped with skills to equip them to augment their efficiency and productivity and save time to benefit in customer and employee satisfaction at Starbucks. This ensures employees are not afraid of being turned to coffee-making automations, keeping the company different from other fast foods outlets. 6.0 Conclusion In conclusion, the operations management principles of Starbucks include scheduling maintenance, human resources, inventory management, layout strategy, management of quality, design of goods and services, comfortable furnishing, and location strategy. These operation management principles aims at ensuring the employees are satisfied with working at Starbucks, giving the employees great satisfaction, and ensuring Starbucks maintains high sales, profitability, and revenue. Choice of Starbucks as a destination for the customers are the coffee (high quality and served in a clean, conducive, comfortable environment), the people involved in serving the coffee, and the experience at the stores. 6.1 Recommendation for future work The recommendations given for future work include a study on the measures to implement at Starbucks in its lean production system to ensure the aims of lean production are met without the negative impact on the human interaction aspect. This is because Starbucks depends more on human interaction for its business success and profitability and this may not be fully replaced through costs and time saving through lean production. Such a study will enable Starbucks to gain from lean production while maintaining the Starbucks experience and uniqueness on the customer for success and profitability currently and in future. The other recommendation made is for Starbucks to work on the creation and implement a strategic marketing plan to be able to determine and control the future sales and profitability of the company. A good strategic marketing plan will enable Starbucks to have a good competitive advantage and remain a leader in the coffee industry fending off the increasing competition from Dunkin’s Donuts and McDonalds (Rushe, 2006). References Alon, I., 2012, Global franchising operations management: cases in international and emerging markets operations. Upper Saddle River, N.J., FT Press/Pearson. Bradley, F. 2001, Strategic Marketing: In the Customer Driven Organization, Wiley, Chichester, England. Clark, T., 2007, Starbucked: A Double Tall Tale of Caffeine, Commerce and Culture, Little, Brown and Company, New York. Gupta, S., & Starr, M. K., 2014, Production and operations management systems. CRC Press, Taylor & Francis Group. Jones, P., & Robinson, P., 2012, Operations management. Oxford, Oxford University Press. Larson, R. 2008, ‘Starbucks a Strategic Analysis: Past Decisions Future Decisions’, Brown University Economics Department, Providence, RI. Marketing, December, p. 43. Mahadevan, B., 2010, Operations management: theory and practice. Upper Saddle River, Pearson. Motley, L.B. 2007, ‘Learning About Customer Satisfaction from Starbucks’, ABA Bank Proctor, T. 2000, Strategic Marketing: An Introduction, Routledge, London. Raissa, C. 08/09/2009, Starbucks’ Lean Ruins the Experience. Quality Insider. Rushe, D. 2006, ‘Coffee Rivals Give Starbucks a Wake-up Call’, Times Online [Online] Available at: http://business.timesonline.co.uk/tol/business/industry_sectors/retailing/article673462. ece [Accessed March 20, 2009]. Starbucks Corporation 2008, ‘Annual Report Fiscal 2008’, Starbucks website, [Online] Available at: http://www.starbucks.com [Accessed on March 20, 2009]. Weihrich, H., Koontz, H., & Cannice, M. (2013). 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