US-based coffee company and coffeehouse chain Starbucks Corporation (Starbucks) was popular for giving its customers a highly enjoyable experience through its hand crafted cold and hot beverages. The coffee company, spread out globally, sourced its supplies from different corners of the world and offered customers what was known as the unique ‘Starbucks Experience’. Every customer who visited Starbucks in any of its stores in 76 countries enjoyed a similar experience of great coffee and service, thanks to its highly agile supply chain.

In 2008, after a wave of rapid expansion, Starbucks witnessed a downturn in its fortunes. On examining the reasons, Starbucks found out that its existing supply chain was unable to cope with the massive development and needed an overhaul. Starbucks then went about eliminating the complex procurement, transportation, warehousing, and distribution systems and substituting it with highly responsive systems, which made Starbucks a company with the most admired and efficient supply chain in the world.

Case (A) is about the evolution of Starbucks, its principles, and strategies. The operations are described in detail along with different types of coffee and how Starbucks procured the best coffee in the world and how it was processed and sent to stores across the world to give customers ‘the Starbucks Experience’ in each of its more than 20,000 stores.

The case also details the rapid expansion of Starbucks, which came to a halt in 2007. The main reason for this was said to the economic recession in the US. Howard Schultz, who was instrumental in the expansion and growth of Starbucks, returned to the company (which he had left in 2000). He started looking at the main reasons for the problems and found that one of the most important factors was the supply chain, which was unable to keep pace with the company’s growth. The case ends with Schultz looking for massive changes in the supply chain to support growth Case (B) deals with the supply chain transformation initiated in the company by Schultz with Peter D. Gibbons, Vice President of global supply chain operations. Gibbons started the process by studying the existing supply chains, and its ability to serve the stores. He also found that the supply chain was inadequate, poorly manned, expensive to run, and most of all, unable to provide customers what they wanted on time.

The huge system that was spread across continents, included coffee, milk, other items like cups, furniture, machines, distribution centers, and warehouses. He planned to integrate all these into a global logistics system. The case then describes the steps initiated to bring about changes in the system, the results, and the impact these changes had on Starbucks.

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Issues

The case is structured to achieve the following teaching objectives:

	Understand how the company’s strategy should be aligned with the supply chain strategy.
	Appreciate how changes in one part of the organization can have an impact on the others
	Understand implementation of lean principles in store management
	Appreciate the transformative nature of supply chains and the roles played by managers in making changes in the supply chain

Contents

Keywords

Starbucks; Supply Chain; Procurement; Warehousing; Distribution; Process Innovation; Leadership; Ethical sourcing; Logistics; Store management

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