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Background of the Organization.


Starbucks: Rio Grande Valley

Starbucks is an American coffee corporation and coffeehouse chain.


The name Starbucks derived from the first mate in Herman Melvilles Moby
Dick, and its logo is inspired by the sea, which features a twin-tailed siren
from Greek Mythology. The company started in Washington in 1971. Its
success has enabled the company to expand and operate worldwide. In the
United States alone, there are about 13, 277 locations. Additionally,
Starbucks has expanded to China, Canada, Japan, South Korea, and Europe.
When Starbucks started back in 1971, it was a roaster and retailer of whole
beans and ground coffee, tea and spices. Today, it offers multiple products to
its customers in more than 24,000 retail stores in 70 countries. During the
80s, Starbucks started providing coffee to restaurants and espresso bars,
started testing the coffeehouse concepts, and established its name
Starbucks with about 17 stores in Chicago and Vancouver, Canada. During
the 90s, it became one of the first, privately owned U.S. corporation to offer
a stock programs to its partners, continued to expand nationally to 165
stores, opened its first drive-through location, continued expanding its
product portfolio, established the Starbuck Foundation, expanded the brand
to grocery stores, and opened stores in China, Kuwait, Lebanon, and South
Korea, with a total of 2,498 stores. Then, during the 2000s, it continued its
momentum and established the TransFair USA agreement with Canada,
introduced ethical coffee-sourcing guidelines, established Starbucks Coffee
Trading Company, continued expanding its portfolio by acquiring Seattle
Coffee Company and Ethos Water, opened the first Farmers Support Center
located in Costa Rica, and introduced the industrys first paper beverage cup
containing post-consumer recycled fiber. In 2010, more than 16,858 stores
were operating. At the time, Starbucks had reached South America, and
gained more market presence in more parts of Europe. In 2013, it
strengthened its ethical sourcing efforts with coffee farming research and
development center in Costa Rica. In 2015, it launched Cold Brew iced coffee
and Evolution Fresh handcrafted smoothies. Additionally, it committed to
hiring 10,000 employees in the youth sectors by 2018. It also offered

Starbucks College Achievement Plan giving back to its partners, its


employees. Moreover, it reached 99% ethically sourced coffee milestone,
strengthening its supply chain and management, and at this point it had
more than 22,519 stores, including stores in Central America in Panama.
Starbucks mission is to inspire and nurture the human spirit-one
person, one cup and one neighborhood at a time. Starbucks stores serve
hot and cold drinks, whole-bean coffee, micro-ground instant coffee such as
espresso, caf latte, full- and loose-leaf teas including Teavana tea products.
They also server Evolution Fresh juices, Frappuccino beverages, pastries,
and snacks including items such as chips and crackers. Additionally, some of
the products they offer are seasonal or specific to the locality of the store
like Pumpkin Spice Latte. Most of the stores sell pre-packaged food items,
hot and cold sandwiches, and drink ware including mugs and tumblers.
Some locations offer beer, wine, and appetizers. Starbucks-brand coffee, ice
cream and bottled cold coffee drinks are also sold at grocery stores. Our
team will focus on the Starbucks located at 1700 S 10th St, McAllen, TX
78503 by 10th and Expressway 83. It is the first Starbucks that opened in
the city of McAllen on August 20 of 2004. Its success, primarily due to its
location in one of the busiest avenues in the city, contributed to the
expansion of the company. Today, Starbucks currently lists more than 19 fullservice locations across the Rio Grande Valley.

The companys success is attributed to its Portfolio, which include


Starbucks Coffee, Seattles Best Coffee, Teavana, Tazo, Evolution Fresh, La
Boulange, Ethos Water, and Torrefazione Italia Coffee. Starbucks prides itself
for being a social responsible corporation, balancing profitability and social
responsibility. The latter is accomplished through ethical sourcing,
environmental stewardship, and community involvement. Some of its awards
are as follow: One of the Most Admired Companies in America by Fortune 20032015, Worlds Most Ethical Companies by Ethisphere 2007-2015,
Employer of the Year by U.S. Business Leadership Network Annual
Leadership Awards 2014, 100% Rating on the Corporate Equality Index by
Human Rights Campaign Foundation in 2015, Top 10 Employers of the Year
in China by Zhaopin.coms Annual Best Employer Award in 2014, named
one of the Best Workplaces in Canada by Great Place to Work Institute
2011-2014, Retailer of the Year by Visual Merchandising and Store Design
in 2013, Worlds 50 Most Innovative Companies by Fast Company in 2012,
and Worlds Most Ethical Company, for the 10th year in a row by
Ethisphere.

Purchasing and Supply Chain Management of the Organization


Starbucks takes pride in its effective and efficient supply chain management,
they follow 6 initiatives
1. A Centralized System Starbucks manages its supply chain &
logistics network across 6 continents using this method. (5 in the U.S, 2 in
Europe, 2 in Asia). Starbucks uses a scored system to elevate its supply
chain efficiency; the four high level categories Starbucks uses are Safety in
operations, On-Time delivery and order fill rates, Total end-to-end supply
chain costs, Enterprise savings.
2. Leveraging Digital Technologies- By using and automated
information system Starbucks is able to monitor this demand in real-time. Its
also has an on-demand access to constantly updated information on things
like stock inventory, transport scheduling and storage capacity, allowing the
companys supply chain to operate at maximum efficiency.
3. Supplier Relationship Management-The company established its
Coffee and Farmer Equity (CAFE) sustainability standards for third-party
suppliers in 2004 to substantially support its suppliers. With the majority of
its suppliers in isolated, rural locations, this approach to Supplier Relationship
Management also enables Starbucks to make its suppliers feel like an
integral part of its operations.
4. Strict Supplier Vetting-Starbucks has strict supplier-vetting
guidelines in place to ensure that every supplier is in line with the companys
sustainable, green and efficient approach to business operations.
5. The companys Coffee Sourcing Guidelines (CSG) sets standards for
its coffee-producing suppliers, and only when these strict guidelines are met
will a producer be approved as a supplier. And only when these guidelines
are met will a formal buyer-vendor relationship be formed.
6. Innovation- Faced with a decline in production of its main coffee
blend due to a fungus, Starbucks decided to address the serious threat to its
supply chain by purchasing a farm in Costa Rica.

7. Zero Waste & Inefficiency-Starbucks efficient and sustainable


operations go far beyond its supply chain. CEO Philip Letts highlighted in an
article last year how Starbucks UK arm is the embodiment of a Size Zero
Enterprise.Purchasing Supply Chain Management issues implied in the
organization
A major issue that Starbucks faces is rapid expansion which can be a
good thing if managed properly. Starbucks first issue in rapid expansion was
when the company started moving too fast, too soon and started branching
out to other product lines like, music CDs, DVDs, breakfast sandwiches and
added a variety of fancier drinks. Due to this rapid growth and poor
leadership, poor decisions, inexperience employees, poor store location,
customer service failure and loss of focus on core values. This rapid
expansion caused Starbucks to close 900 unprofitable locations in 2008. In
order to get back in the game new leadership and choices were made to
stick to the proven success of Starbucks they upgraded machinery, retrained
employees and return simplicity to its product.
Another major issue facing Starbucks is increased competition from
other retailers with a similar, if not identical concept and their lack of
experience in doing business in a price sensitive market. Starbucks should be
able to defend its position against these other retailers because of the
extensive initiatives it has undertaken to sustain its brand advantage. In
addition to its direct retailing activities, Starbucks has formed distribution
alliances with Dreyers Grand Ice Cream, Barnes & Noble Booksellers, Capitol
Records, Pepsi-Co, and Nordstrom to expand its product and distribution
portfolios. Starbucks is dealing with competitors every day, there are
numerous coffee shops all over the world and being able to stand out to
generate customers is important. Their main competitors are Dunkin Donuts,
McDonalds, and Nestle. It is important that for Starbucks to know their
competitors and what they are currently doing.

Analysis of Internal and External Elements that Affect the Supply Chain.
External elements are factors that can negatively or positively impact
the business beyond its control. All businesses are vulnerable to both the
internal and external factors. There are several external elements that affect
the business, such as economic, government, sociocultural, and competitors.
Economic trends can impact the company by causing unemployment or by
generating a booming business. The government can change the regulations
and law on how businesses should operate, such as taxes. This impacts the
businesses supply chain structure by how they handle employment taxes,
health and safety, and quality control regulations. Another major impact is
the international supply trade that can cause positive or negative challenges.
The sociocultural factor includes lifestyle trends which varies depending on
the location of the business. This can also include factors such as income,
ages of customers in the surrounding areas, and consumer preference.
Competition with other businesses alike can also have an impact of the
business. There may be other factors, not mentioned, that have an impact of
any business which is why it is important for businesses to be aware of their
SWOT analysis. The SWOT analysis is beneficial to any business, at any point
in time. It also allows the business to identify strengths, weakness,
opportunities, and threats that influence or impact the business, and make
changes that would positively impact the business. Conducting an external
analysis is essential for the operation of a business. It allows the business to
evaluate and analyze the environment to better operate and compete with
competition. One way to overcome negative external forces is to

communicate with employees to eliminate room for rumors or conflicting


stories. To eliminate competitor threats the business must build a loyal
relationship with their customers and ensure that they improve their
customer satisfaction by focusing on the customers needs.
According to a research done by the University of Waikato "internal
supply chain refers to the chain of activities within a company that concludes
with providing a product to the customer. This model can involve numerous
tasks within companies-sales, production, and distribution." Although this
chain of activities is supposed to help the organization grow and be
successful, there is always a risks that a negative effect can occur to the
supply chain and the product will not be delivered to its customers.
Starbucks supply chain includes the following items "material flow,
purchase of coffee beans, roasting plants, distribution centers, and
purchasing systems," in other words plan, source, make, and deliver. Also,
you have your more common elements like IT, machine problems, employee
principles and standards. All this movement effects Starbucks supply chain, if
not one of these items is on point then the whole system approach is backed
up to a certain extent.
If flow of material (the transportation of coffee beans) is jeopardized
the material will never reach its destination, ultimately the customer
purchasing a latte at any of the 23,000 locations Starbucks has to offer. The
company needs to be able to purchase coffee beans in order to make the
product the organization is well known for. Starbucks tries its best to be a
sociably responsible company by developing strong, long-term relationships
with farmers all over the world, to make sure that customers can buy the

high-quality coffee they seek. A disruption for this element will devastate the
supply chain and Starbucks will have to seek other suppliers. Starbucks has
major distribution centers that provide orders for stores all over the world.
Any delay for this internal factor will push back orders for stores and
eventually result in a loss for the organization. Now and days machines play
a more important role in many organizations speeding up the process to
produce and deliver products. At Starbucks the integration of machines, such
as Frankie Evolution machines, may cost up to $11,000 to produce special
coffees; however, this is being used every hour at a staggering pace. The use
of these machines is crucial to the supply chain and plays an important role
for employees as well.
It is said that external elements for the supply chain have a much
greater impact than internal elements due to the statement that internal
elements can be controlled and the organization can adapt faster. All in all,
the elements that may affect the supply chain for Starbucks should be
closely monitored and forecast to mitigate the issues.

Recommendations
Starbucks, being a sociably responsible company, needs to be in a
constant improvement to ensure that all the levels of the supply chain are
being operated as supposed to and make sure they meet the required
procedures. We have analyzed that the journey from bean to a cup is not an
easy one, and especially if the organization wants to deliver the best quality
product in the market. However, one of the mistakes that the company has
experienced in the past, is that while focusing on opening more and more
stores around the globe, the supply chain had to focus on keeping up with
that expansion rather than focus in the proper management of the supply
chain. While at times when operational costs fluctuate and sales are going
through a rough season, Starbucks has decided to follow a three step
method that helps improve the supply chain performance, cuts costs, and
prepares the organization for future. These three key steps are:
1. Reorganize its supply chain organization
2. Reduce its cost to serve stores and improve execution
3. Lay the foundation for future supply chain capability
As of this day, the mentioned method has greatly worked for
Starbucks. The organizations supply chain, in an effort to be more efficient,
has transformed to success. In an effort to sustain the success in a future,
Starbucks recently began an initiative to recruit top graduates of supply
chain education programs. This not only benefits the company by having
better employees; but also helps the overall economy and society.

Sources

Chapa, Sergio, Valley Biz Blog: Starbucks to open [its] 18th RGV Location,
http://valleycentral.com/features/valley-business-blog/valley-biz-blogstarbucks-to-open-18th-rgv-location, May 2014.
http://www.starbucks.com/about-us/company-information/starbuckscompany-profile. Retrieved Sept. 2016.
https://en.wikipedia.org/wiki/Starbucks, Sept. 2016.
http://www.smartceo.com/fast-growth-fails-starbucks-krispy-kreme-pets-com/
http://www.fool.com/investing/general/2014/06/24/3-glaring-problems-withstarbucks-us-strategy.aspx
https://www.americanexpress.com/us/smallbusiness/openforum/articles/business-growing-pains-7-ways-rapid-growthcan-kill-your-business/
http://www.management.ac.nz