Starbucks Corporation’s operations management (OM) represents business decisions encompassing coffeehouse operations and corporate office activities. These decisions also influence the productivity and operational efficiency of franchisees and licensees. Strategic decisions in operations management direct business development toward the realization of Starbucks’ mission statement and vision statement. However, the diversity of coffee markets worldwide requires the company to apply different approaches to ensure the suitability of operations management to different business environments. Licensed and franchised Starbucks locations flexibly adjust to their local market conditions.
The 10 strategic decisions of operations management facilitate the alignment of all business areas in Starbucks’ organization. The business objectives in these decision areas implement strategies for industry leadership, such as the Coffee and Farmer Equity (C.A.F.E.) program in supply chain management. Effective operations management fortifies the strong brand image and other business strengths discussed in the SWOT analysis of Starbucks.
Starbucks’ Operations Management – 10 Critical Decisions
1. Goods and Services require decisions on the characteristics of business processes to meet the target features and quality of Starbucks products. This decision area of operations management affects other areas of the coffeehouse business. For example, the specifications of Starbucks’ roasted coffee beans establish the cost and quality limits and requirements in corresponding production operations. The coffee company’s emphasis on premium value and premium design means that production operations and productivity measures involve small margins of error to support high quality and value.
This decision area of operations management demonstrates the influence of the coffee industry environment on the company and its target consumers. Food product specifications are made to match social and economic trends, as well as the other external trends discussed in the PESTLE/PESTEL analysis of Starbucks. In addition, distribution channels affect food, beverage, and service design decisions in this area of operations management. For example, the packaging features of Starbucks instant coffees consider the logistics and inventory processes of distribution channels and retailers.
2. Quality Management ensures that business outputs satisfy Starbucks’ quality standards and the quality expectations of customers. Decisions in this area of the coffee company’s operations management aim for policies and processes that meet these standards and expectations. For example, Starbucks sources its coffee beans from farmers who comply with the company’s quality standards. The firm also prefers to buy from farmers certified under the Coffee and Farmer Equity program. Starbucks’ generic competitive strategy and intensive growth strategies are applied to use quality specifications as a selling point.
This critical decision area of operations management also accounts for customer experience in the company’s cafés and online operations. Starbucks’ strategic objective is to maintain consistent quality of service for consistent customer experience in brick-and-mortar and e-commerce environments. Premium service quality is ensured through a warm and friendly organizational culture at Starbucks coffeehouses. This service quality contributes to competitiveness against other coffeehouse firms, like Costa Coffee and Tim Hortons, as well as food-service companies that serve coffee, such as Dunkin’, McDonald’s, Wendy’s, Burger King, and Subway. Thus, Starbucks’ competitive advantage partly depends on this decision area of operations management.
3. Process and Capacity Design contributes to Starbucks’ success. The company’s operations management standardizes processes for efficiency, as observable in its cafés. Also, Starbucks optimizes capacity utilization to meet fluctuations in demand for coffee and food products. For example, processes at the company’s stores are flexible to adjust personnel to spikes in demand during peak hours. In this decision area of operations management, strategic planning at Starbucks aims to maximize productivity and cost-effectiveness through efficiency of workflows and processes.
4. Location Strategy in Starbucks’ operations management for its coffeehouses focuses on urban centers. Most of the company’s locations are in densely populated areas where demand for coffee products is typically high. In some markets, Starbucks uses strategic clustering of cafés in the same area to gain market share and drive competitors away. Strategic effectiveness in this decision area of operations management comes with a suitable marketing strategy to ensure the profitability of these cafés. Starbucks’ marketing mix or 4P helps bring customers to the company’s restaurant locations. Also, the organization of operations in these locations is supported through a suitable corporate structure. Thus, Starbucks’ organizational structure (corporate structure) reflects this location strategy.
5. Layout Design and Strategy for Starbucks cafés address workflow efficiency. The strategic decision in this area of operations management focuses on high productivity and efficiency in the movement of information and resources, including human resources, such as baristas. This layout strategy maximizes Starbucks coffeehouse space utilization with emphasis on premium customer experience, which involves higher prices for a more spacious dining (or drinking) environment. In this decision area of operations management, the company uses customer experience and premium branding to guide layout design and strategy.
6. Human Resources and Job Design have the objective of maintaining stable human resources to support Starbucks’ operational needs. At coffeehouses, the company has teams of baristas. In other parts of the organization, Starbucks has functional positions, like inventory management positions and marketing positions. This decision area of operations management considers human resource management challenges in international business, such as workforce development despite competition with other large food-service firms in the labor market. This area of operations management also integrates Starbucks’ organizational culture (corporate culture) to enhance job satisfaction, combat employee burnout, and support high productivity and operational efficiency.
7. Supply Chain Management focuses on maintaining adequate supply that matches Starbucks’ needs, while accounting for trends in the market. With this strategic objective, operations managers apply diversification in the supply chain for coffee and other ingredients and materials. Starbucks’ diverse set of suppliers ensures a stable supply of coffee beans from farmers in different countries. The company also uses its Coffee and Farmer Equity (C.A.F.E.) program to select and prioritize suppliers based on ethical practices, sustainability, and community impact. Thus, this decision area of operations management integrates ethics and Starbucks’ corporate social responsibility (CSR), ESG, and corporate citizenship into the supply chain. The Five Forces analysis of Starbucks indicates that suppliers have moderate bargaining power in the industry. Decisions in this area of operations management create a balance between the coffee company and its suppliers’ bargaining power, in order to benefit all parties involved.
8. Inventory Management is linked to Starbucks’ supply chain management. The critical decision in this area of operations management focuses on maintaining the adequate availability and movement of inventory to support the coffee company’s production requirements. At restaurants, inventory management involves manual monitoring combined with information technology to support managers and baristas. In supply and distribution hub operations, Starbucks uses automation comprehensively. Such an approach to this decision area of operations management minimizes stockout rates and guarantees adequate supply of food and beverage products and ingredients.
9. Scheduling has the objective of implementing and maintaining schedules that match market demand and Starbucks’ resources, processes, operating capacity, and productivity. In this decision area of operations management, the company applies a combination of fixed and flexible schedules for personnel at corporate offices, coffeehouses, and other facilities. Also, automation is widely used to make scheduling processes efficient and comprehensive, accounting for different market conditions affecting Starbucks locations.
10. Maintenance concerns the availability of resources and operating capacities to support the coffeehouse chain. The strategic objective in this decision area of operations management is to achieve and maintain the high reliability of Starbucks’ resources and capacities, such as for ingredient production processes. The company uses teams of employees and third-party service providers for maintaining facilities and equipment, like machines used for roasting coffee beans. Also, in this area of operations management, Starbucks maintains its human resource capacity through training programs and retention strategies. This approach satisfies the company’s workforce requirements for corporate offices and facilities and supports franchisees and licensees.
Productivity at Starbucks Coffee Company
Operations management at Starbucks uses various productivity criteria, depending on the area of operations under consideration. Some productivity metrics that are applicable to the company’s operations are as follows:
- Average order fulfillment duration (Starbucks coffeehouse productivity)
- Weight of coffee beans processed per time (roasting productivity)
- Average repair duration per equipment type (maintenance productivity)
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