Did you ever wonder what journey coffee goes through before ending up in your cup? Well, getting the coffee from Latin America or Africa surely can’t be an easy task. But imagine adding on top of this – 22,000 retail stores across 6 continents that must be supplied with various coffee blends at all times to satisfy your coffee needs every morning. Yes, Starbucks can make it all happen.
The scale and efficiency of Starbucks supply chain is impressive. Consider this – they process 70,000 deliveries a week, supplying their 22,000 retail stores across 65 countries (Boyer, 2015). What is even more impressive is that Starbucks controls every function of their upstream logistics starting from coffee plantations, to coffee processing and manufacturing, and finally delivering. They are involved in every single step and process from growing coffee to serving coffee to their clients. This even includes manufacturing of their cups and paper… wow. So how do they achieve these impressive results? No matter the country, at Starbucks you always get the same coffee experience and fast. Let’s break down their supply-chain and the design of their distribution network.
The magic starts right from the source of Starbucks – their coffee beans. Starbucks sources their coffee beans directly from the farmers, without any intermediaries in between. Their premium coffee is sourced from 8 coffee plantations around the world including Brazil, Columbia, Guatemala, Mexico, Hawaii, Tanzania, Kenya and Saudi Arabia. Starbucks tries to be quiet selective of it’s suppliers, and follow Coffee Sourcing Guidelines (CSG) as set of standards to select their suppliers. Only if the suppliers meets these requirements, will Starbucks source coffee beans from these plantations.
Maintaining Supplier Relations
Starbucks continuously works with their suppliers to ensure every coffee bean meets required standards. Since their plantation are located in developing countries, their strategy must be innovative and make local people feel they are making a difference (Prahalad, 2005). In 2004, Starbucks introduces Coffee and Farmer Equity (CAFE) sustainability standards and even provide farmers with special training programs to ensure high-quality coffee beans (Hoban, 2016). Starbucks even went beyond this dedication to coffee bean production. In 2013 Starbucks acquired a coffee plantation in Costa Rica. This move gives them a competitive edge over competitors but also reduces risk of coffee supply shortage. Research anticipates coffee deficit, with 3.5 million coffee bean bags shortage in the coming year. Owing their own supply point of coffee, Starbucks is secured against possible coffee deficit (Hoban, 2016).
Manufacturing and Distribution
When it comes to processing and manufacturing of coffee Starbucks developed a highly centralised system, that enables them to streamline logistic operations across 6 continents. They currently have 6 Central Distribution Centres where their coffee is roasted, prepared and packaged (Boyer, 2013) . Their manufacturing process follows strict procedures to ensure it delivers high-quality coffee blends to their consumers. These are then transported to their large, regional or small warehouses from where they get delivered to the final retail stores.
Starbucks’ delivery process is even more demanding. Coffee beans travel from plantations all way to their DC centres and then to their retail stores worldwide. Starbucks must process 70,000 global deliveries every week ensuring adequate amount of coffee is timely delivered to each of their retail points across 69 countries! Of course, they didn’t achieve such efficiency right from the start. Back in 2008, Starbucks transportation expenses were fast increasing as their supply chain and logistic system was not able to keep up with their global growth (Cooke, 2016). In United States alone transportation related expenses increased almost by 75 million. They went through large scale reorganisation, where every transport carrier was analysed and their performance assessed. This way they cut out many of their logistic carriers, leaving only their best and most efficient partners.
The latest news is that Starbucks is buying coffee beans from Yunnan province in China, to supply their retail stores located across the country. They really try to discover new ways to optimise the logistic processes and shorten distance between plantations and distribution points. It is also a strategy to built coffee trend in China, who is more known for it’s tea traditions and culture.
Hoben, M 2016, ‘What Can We Learn From Starbucks’ Supply Chain Management?’, Blur Group, weblog, retrieve on 15 May 2016, <https://www.blurgroup.com/blogs/supplier-diversity/starbucks-supply-chain-management/>
Prahalad, CK 2005, ‘The Fortune at The Bottom of the Pyramid: Eradicating Poverty Through Profits’, Pearson Education.
Cooke, J 2016, ‘From bean to cup: How Starbucks transformed its supply chain’, CSCMP Supply Chain, retrieve on 14 May 2016, <http://www.supplychainquarterly.com/topics/Procurement/scq201004starbucks/>
Gruley, B & Patton, L 2016, ‘To Stop the Coffee Apocalypse, Starbucks Buys a Farm’, Bloomberg, retrieve on 14 May 2016, < http://www.bloomberg.com/news/articles/2014-02-13/to-stop-the-coffee-apocalypse-starbucks-buys-a-farm>
Boyer, K 2013, ‘Behind the Scenes at Starbucks Supply Chain Operations it’s Plan, Source, Make & Deliver’, Supply Chain 247, retrieve on 14 May 2016, <http://www.supplychain247.com/article/behind_the_scenes_at_starbucks_supply_chain_operations>