This research paper discusses the reversal of the growth momentum achieved by Starbucks Company and the problems facing its internal business process which in turn would decrease the customer base of the company in the long run. The paper suggests some positive steps to stall the decline by introducing redesigning in areas like information system for better interaction and adding value in its whole supply chain process. In order to be more cost effective in the whole of the value chain of Starbucks the paper has introduced certain tools like lean management and IT software to smoothen the process of interaction in a much better way.
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Starbucks Company has attained a unique place in the world for the brewing and retailing of extra rich coffee experience that it gives to its millions of customers. The company has more than 16600 stores in over 40 countries and is still expanding. Starbucks sells different varieties of coffee like drip brewed coffee, espresso hot drinks, coffee beans, salads and other snacks, besides offering mugs and tumblers with its logo over the counter. Starbucks also runs an entertainment division and markets music and films apart from the sale of books and other stationery.
Although Starbucks Company is seen to be the world’s largest producer and retailer of specialty coffee, offering the widest range of regular and decaffeinated coffee and beverages, it is not likely to be so in the future due to stiff competition and price war. This means that most likely the competitors which are both local cafes and large retail giants are gaining ground in this niche area where Starbucks previously had a firm foothold. This is quite likely as the current trends of the world’s largest coffee brewer suggest and necessitated the giant to close down shutters on many of its promising coffee stores around the world. The recession has further taken its toll with many consumers preferring similar coffees at cheaper price. Therefore, there is every reason to suggest that Starbucks carries out a total redesigning of its existing levels of functions right from the stage it procures its materials like raw bean purchase to the stage when the final output passes on to the hands of the customers at its various stores. This is not an insurmountable task as Starbucks own system has so far allowed it to function without much of hindrance. But given the fact that the current market conditions have changed drastically and the stiff competition has brought a price war, Starbucks would have to make some changes in the methods pertaining to this problem. Hence, this paper suggests certain important steps in the right direction which could make Starbucks a formidable challenge to it customers as well as retain its large customer base almost intact. The first and primary step is to make some changes in the way the information system at Starbucks functions and the second is the way the lean management system could be introduced in its value chain starting from the procurement of raw materials to the sale of coffee beverages at its retail counters. In order to bring out the required focus on these two foremost activities it is necessary for Starbucks to introduce a newer and better Information System to solve this problem. This would mean that Starbucks would have to implement new software which helps in allowing the free flow of information through the complete supply chain process. As we move into the information age, the success of the organization depends upon its own experience and that of others and by the right method of collecting this information it attains the greatest competitive advantage (Fairfield, 2001). The second problem is to curtail wastages as well as avoid the fluctuating prices of coffee beans while procuring through a series of checks and pragmatic forecasting. The fluctuation in prices could be seasonal and the procurement could be done by meticulous planning. For instance, coffee procurement could be made by coming into terms with the suppliers on a long term basis where prices of coffee beans could be fixed. In this Starbucks is way ahead of all other competitors and can dictate terms in the market to some extent and thereby reduce its procurement costs. For all this to be made into a seamless operation the rapid flow of information with the help of Internet and intranet is of paramount importance and hence the right software facilitating this flow for stage by stage implementation of lean management and the consequent training of the staff for the fulfillment of the whole process are the prerequisites.
Here, the Information System is quite different from the Information Technology and should not be confused. At Starbucks the information system includes the component known as Information Technology and this is allowed to function in tandem with that of other processes in order to get the maximum effect.
The Information system at Starbucks should achieve alignment of processes, the use of hardware, the installation of the requisite software and the relevant flow of data from one end of the value chain to the other. At Starbucks it is therefore suggested that there should be a different approach for the flow of information and they must add value at every level of the supply chain. For this reason the staff ought to be trained in the right direction for understanding the whole processes at Starbucks in order to give the customers the best experience they can get anywhere else at affordable and competitive pricing. The information system at Starbucks can be made to use for procurement of supplies, the passing of the materials into the inventory, supplying and cooking section and to the counter where the items pass into the hands of the customers.
In order to make this operation smooth and almost effortless the staff must be trained with skills in usage of the intranet and the Internet as well as lean management system. The basic idea is to get everyone right from the procuring stage to the customer service section the knowledge and skills are required of lean management system. Not only this, the staff at each level of function adds something of value by carefully monitoring the items that pass through his or her hands and add value to it. The ultimate product when it reaches the hands of the customers is one of rich and mind-boggling experience which the competitors would fail to do as it is Starbucks competitive strength. This culture once when imbued to all the areas of the Starbucks with the help of the fastest method in the form of unique software could become a marvel to its own employees as well as other stakeholders. The key determinant is how a brand is positioned and successful positioning involves associating the brand to the category which the customers can easily recognize and quickly differentiate (Iacobucci, 2001).
Aligning Corporate Goal with Lean Management
The mission statement of Starbucks is to inspire and nurture the human spirit and in fact means one person, one cup and one neighborhood at a time. The mission statement thus is quite ambitious for Starbucks and had not there been much of competition and every additional store that it established in one neighborhood made money for it then the mission is quite in line with practicality. However, this is not so for Starbucks has to buckle under the pressure of world wide recession and many of its stores had to close down. In order for the mission statement and its objective are made practical Starbucks would have to implement the lean management system at each stage and to put that into affect it must have a smooth information flowing system in place. As lean management would put a check into the wastage apart from adding quality and value to the product at every stage it would allow the mission and the objectives of the company to be achieved without any hindrance. Perhaps the lean management system being quite effective especially during crash crunch, there would be more liquidity infused into the system as well as there would be money available to fulfill the need for one store per neighborhood as per the mission statement. With proper checks in wastage through this system there would be better checks and controls over items that are not cost effective or which are not quite in line with Starbucks brand. Again, apart from quality the product looks and the way it is served should be appealing and this is also achieved by the staff who is involved in adding value to it. Product quality by itself does no make a sale for the customers must understand that the items they receive are of good quality and value (Reddy, 1994).
Cost Benefits of Systems Change
One of the chief factors for introducing lean management techniques at Starbucks is to control wastage and give priority to procurement of supplies and produce coffee beverages, snacks and other food products according to the demand. The software developed for the purpose would ensure the smooth function of the whole system so that neither there is any lag in quality of the product nor any wastage results out of it. In case of such careful alignment the functions of all departments in the supply chain remain uninterrupted and the end product attains a value that is truly an experience for the consumers. Again, by reducing the overall cost effectively the margins achieved are on the higher side and give the Starbucks Company the flexibility to manipulate the price and if need be can reduce it significantly enough which is not at all possible for the competition.
The other advantage is that during peak season there would be enough liquidity for expansion plans, especially in emerging economies where the affect of recession has not been felt so badly. So even if the Starbucks management thinks of expanding further it would not face resource crunch. But the best of all in this system is the performance of staff which would be quite in line with mission statement of the company. The trained staff of Starbucks would be better placed in tackling any difficulties or problems and can be entrusted with even greater responsibilities. The very culture would pave way for work life balance as a whole with total quality management being the focal point in the behavior of staff. Apart from that the employees would work in a more efficient manner as they would be rewarded and promoted based on the system’s efficiency. All these actions finally translate into increase customer service and further improve upon the customer service information by receiving feedbacks such that the system is again made more efficient and productive.
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Implementation of the System
The implementation of the lean management system could be made in a phased manner than in an abrupt manner. The fact is that Starbucks has already got a system in place which is quite good as far as the standards are concerned. But this does not necessitate the system to be perfect as the cost effectiveness of its operation along with total quality control is of primary importance. However, while introducing a system over that of another or scrapping one altogether may not be quite to the liking of the employees and even managers as they would have already made themselves comfortable with the older system. Besides, they would not want another system to be thrust upon them for there is no written guarantee of sorts whether the new system would perform better or worse. Besides, it is quite a well known fact in the industrial circles that redesigning and reengineering have backfired on several well known companies. Many of these companies have had success over time only after several earlier attempts at reengineering had proved to be futile. This naturally brings all sorts of apprehension in the minds of the employees and they might resist these by deliberate acts of underperformance or vociferously. Hence, on its part the management should be aware of these changes and try to implement them in a phased manner. In many instances the employees as rightfully seen are the first target as they may be shifted or transferred or even asked to leave. This may be good for the company, but it surely upsets any employee who has given honest service to the company for many years. With the proper implementation of mechanisms that would address such issues the management may make the move for change in the system and introduce in a phased manner the lean system of management. They should also form an ideal mutually acceptable condition for this change and all employees are to be made aware of the fact that the customers nowadays are more discerning than ever before and if the company does not change or address this problem then it would have to down its shutter permanently. Customers are more discerning than they used to in the past when they purchased simply depending upon their whims and fancies (Griffin, 2002). This sums up that the customer is the most important person at the premise of the stores of Starbucks and that the customer satisfaction should be the objective of the company policies and any change to that end has to be implemented whether it is acceptable to the employees and the management or not.
The new system which would be implemented in a phased manner can be done within a stipulated period of time of one year. In order to implement the lean management system a good project plan is required and the management must ensure that the proper project management software is used for the purpose. There are many types of software and the management as well as the other employees may be taken into confidence for the most suitable software after getting their feedback and response. The resulting software could be chosen in consultation with a software company to suit the business. One of the prerequisite part of the project planning which actually relates to work schedules and the period of time that is required for their completion can be derived from a Gantt chart. These again can be developed with the help of a good software company or if it is to be used for each individual store then the same could be downloaded from various websites. Under the project plan the scope of the project is defined and then steps are taken and drafted for the completion of the same. That is various areas that require changes at Starbucks are stated and written down and these are then grouped in order the specific jobs could be allocated to individual employees. This can be more easily done with the help of a software program and the logical interrelationship between the different tasks like supplies, logistics, inventory, kitchen and counter can be very well defined with the help of a diagram drawn or charted in the computer and then passed on to various stores with the help of the Internet. Here, the management as well as the employees can quickly get an idea of the important parts of the system as well as their most critical areas.
With the help of this project planning Starbucks management can estimate the cost of resources that are necessary under the lean management system and the cost of implementation of each type of activity. This would enable them to get the total project cost and which again would lead to trimming and pruning of the budgetary allowances and the cost of implementation by foregoing some areas while making the necessary changes in the others.
The Starbucks systems change by introducing lean management with the supplementary help from flow of information can be made into an effective tool for the overall growth of the organization, especially in retaining its large customer base and getting new ones. The system which is almost foolproof in nature is a concerted action on part of all level of employees and stakeholders in the supply chain. This redesign mitigates most of the fear that would have arisen had Starbucks lost a good number of its customers to its competitors. The risk of losing business is in fact greatly curtailed and Starbucks can look forward to a complete turnaround in its profitability and share value after the system is made operational.
One of the most important factors in this type of lean management technique is the overall focus which would make the staff and the management even more involved as their benefits would soon be perceived at all stages of the company. There would be no paucity of funds for day to day operation or if Starbucks had wanted to introduce an item on no profit or no loss basis for creating more value and goodwill then the same could be done without much affect on the overall profits of the company. The introduction of kiosks and digital retailing solutions and self service kiosks which could be established anywhere could be implemented as they are all a perfect match to the system of lean management.
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