OPM 2103 – Operation Management

OPM 2103 – Operation Management

Starbucks

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OPM 2103 – Operation Management

Table of contents:

Introduction................................................................................................................................3

Competitiveness And Strategy...................................................................................................3

Productivity................................................................................................................................4

Forecasting.................................................................................................................................5

Product And Service Design......................................................................................................6

Capacity Planning......................................................................................................................7

Process Selection And Facility Layout......................................................................................8

Location....................................................................................................................................10

Work Design And Measurement..............................................................................................11

Quality Management................................................................................................................13

Production Planning And Inventory Managmenet...................................................................16

Conclusions And Recommendations.......................................................................................17

References................................................................................................................................18

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OPM 2103 – Operation Management

Introduction

Starbucks was founded in 1971 by three local businessmen "Gordon Bowker, Jerry Baldwin,

Zev Siegl" to sell high-quality coffee and whole grains. Starbucks Air will provide high-

quality coffee to its consumers and aim to achieve product innovation, retail expansion, and

long-term service quality. Starbucks opens its first coffee shop in Seattle, Washington. In

1990, Starbucks expanded its headquarters in Seattle, as well as built a new roasting plant. In

the 1990s, Starbucks opened 60 retail stores in the UK. At the end of 2000, Starbucks had a

total of 3,500 branches and now working with 30,000 retails stores. Starbucks sells coffee

and tea products through many other channels such as distribution targeting restaurants,

hotels, colleges, universities, and other workplaces. (The History And Introduction To

Starbucks Coffee Marketing Essay, 2016)

Competitiveness And Strategy

The management is using differentiate strategy; the main reason behind it is Starbucks is

offering a variety of premium tea, coffee, and pastries that satisfy taste buds of customers

(Starbucks, 2019a). The competitors of Starbucks are Costa Coffee, Dunkin Donuts, and

McDonald's. The companies are competitive enough because they have significant existence

in the market as well as they are offering coffee as per customer demand. The management is

achieving a competitive advantage through premium flavor and offering rewards and gift

cards to its customers (Starbucks, 2019b). The coffee service will be discussed further in the

report. The management input beans and transform it into powder form, also add it into the

coffee machine, and as output, customers receive coffee as per their requirement.

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Productivity

Starbucks measures productivity by this equation: Productivity = Output/Inputs. To

enhance the productivity of each individual, employee management is promoting leadership

culture (Peiper, 2019). However, each leader does measure the performance of employees by

using 360 measurement tools. Productivity is difficult because Starbucks provides services.

Starbucks provides free Wi-Fi, provides delivery and it also has Starbucks applications for its

customers. Starbuck’s delivery is available in select cities, almost all cities. It delivers the full

menu of items available at the local Starbucks store. But, paying for delivery with a

Starbucks Card or app isn’t supported at this time. Starbucks application means you will

always have time for that Starbucks run, take an order and pay ahead on the Starbucks® app

for iPhone® or Android™. That means you can walk in and without waiting in line, then ask

for your order at the pick-up area. Also, you can order on the way with the Google Assistant.

Starbucks provides to their customers to create a Starbucks Rewards account and link it to

your Google Assistant, Starbucks Rewards members can use their Google Assistant to place

custom orders and reorder their favorites. So, it makes productivity difficult because services

involve a high degree of customer contact, when there is a high degree of contact, the

interaction between server and customer becomes a “moment of truth” that will be judged by

the customer every time the service occurs. Also, services have a higher degree of labor

content than manufacturing jobs do, although automated services are an exception. Moreover,

quality assurance is usually more challenging for services due to the higher variation in input,

and because delivery and consumption occur at the same time. Unlike manufacturing, which

typically occurs away from the customer and allows mistakes that are identified to be

corrected, services have less opportunity to avoid exposing the customer to mistakes.

Starbucks has around 500,000 partners who are working together for the development of

society as well as employees (Community Service | One Neighborhood at a Time, n.d.). It is

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recommended to management that they must satisfy their employees and motivate personnel

to enhance productivity.

Forecasting

The forecasting is an important factor for the success of the organization because it helps

management in setting goals for the future and enhances overall productivity.

Different forecasting approaches start with qualitative and quantitative methods the

qualitative are subjective means based on customer judgment and their opinions of the

product or service. As for quantitative used for forecast future data based on the old data.

Naïve approach forecasting it’s used for time series data, and provide standards and compare

the more sophistical models, and the most cost-effective forecasting model.

Causal\econometric forecasting method using to know and identify the factors that may

affect the forecasting variable. Judgment method used if there was a lack of historical data or

if there are new and unique market conditions. To enhance forecasting, management of

Starbucks can evaluate the sales and revenue of the past year, and as per that, can set goals

for the future. Starbucks uses Predictive Analytics and Artificial Intelligence (AI). Baskin

Robbins, Adore me, BAP they all examples of companies using forecasting techniques.

Forecasting time horizons when know or note the frame of time needed when considering the

forecast there is a short-range and it’s less than 3 months, Medium range from 3 months to 3

years, Quantitative methods of forecasting tend to be used very frequently in this time frame.

These prognoses tend to focus on sales planning, production planning, and most ordinary

budgeting. Carrefour for example. Long-range when it’s more than 3 years Have low

accuracy, and excellent for planning R&D projects or giant construction projects that may

adapt to changes over time. Chunnel is an example.

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Figure 1: Sales of Starbucks

Source: (Statista, 2018)

To enhance forecasting, management of Starbucks can evaluate the sales and revenue of the

past year, and as per that, can set goals for the future.

Product and Service Design

The management offer coffees in different sizes and glasses to fulfill the needs of

employees. Starbucks is considering its packaging and working to make it environmentally

friendly. The management is designing coffee with the help of proper R&D. Starbucks has a

well-defined global creative process way to describe its design process. There are two basic

routes through the process way, the mainline for standard projects and the express for simpler

projects with no new creative requirements such as reprints of existing material. The mainline

process begins in concept heights where concepts are developed, presented and approved.

Agreed concepts continue to the downtown phase of the process way, where the detailed

implementation of the design is carried out, final approvals are obtained and prepress work

commences. Express projects may enter the process here, or join it in the next phase, the

production district. In this final phase, the completed work is signed off by the project's

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owners and liaison with printers, packaging makers or other production resources is managed.

The packaging of the product is in plastic cups because management needs to serve around

600 billion customers. The management should redesign the product as plastic is impacting

negatively on society. The management should design compostable cups that are

environment-friendly. Also, design cups that can reduce future challenges. Since 1985,

Starbucks has rewarded customers with a 10 percent discount when they bring in a personal

cup. If you’re looking for a new favorite reusable cup, Starbucks has a new assortment of

reusable drinkware as part of the holiday collection available in stores now (Conradson,

2018). Moreover, In July 2018 Starbucks announced it would phase out plastic straws from

more than 30,000 stores worldwide by 2020. The new lightweight, strawless cold drink lid

will begin rolling out to stores (Warnick, 2019).

Capacity Planning

Capacity planning can be performed within a fixed period. Starbucks management

maintains capacity by proper planning of inventory and supply chain. The management keeps

minimum beans and makes sure that they get beans and coffee on time without any barrier.

The automation is part of capacity management as it creates a flexible schedule and develops

a seamless process. For example, the Starbucks process provides the flexibility to adjust

personnel to increase demand unexpectedly at peak times such as weekends or college hours.

As the company at Starbucks has acquired an astonishing supply chain spanning more than

50 countries, this is a good ability for their organization, which will further increase their

financial income. It allows management to avoid the problem of excess capacity. Starbucks

has excess capacity due to its excellent quality control. For example, the company is focusing

on farmers' coffee beans sources that meet the quality standards of the coffee and make

products always available. Build a good relationship with good stakeholders. Furthermore, if

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they have more capabilities, it will be better for the company as it will improve revenue

performance or expand and increase employee production and ethics. Also, they can expand

operations of the store so they can crater more customers.

Design Capacity = 300cup, Effective Capacity = 250cup, Actual output = 321cup

EFFICIENCY UTILIZATION
Actual Output Actual Output
x 100% x 100%
EffectiveCapacity Design Capacity

321 321
x 100% = 97% x 100% = 86%
250 300

Process Selection and Facility Layout

The process of working is dependent on core values which are work with

transparency, respect, and dignity (Starbucks, 2019f). The process and store layout are mainly

designed by considering the needs of customers. The management uses the process which is

sustainable and inspires the individual. The management has a goal to make Starbucks

synonym of the coffee empire (Starbucks Coffee Shop, 2019). The following are the layouts

that are being followed by management to facilitate customers. Starbucks company has

always believed in serving the best coffee possible. It's their goal for all of our coffee to be

grown under the highest standards of quality, using ethical sourcing practices. Processes and

Equipment, Sorting, Roasting, Blending. There are three critical steps in processing the

beans: sifting and sorting, roasting, and blending. The first stage of roasting dries the beans

Roasting. Blending: The beans are then transported to the blending machines using

pneumatic conveyors. Next, blending is done to mix the roasted coffee beans and create

distinct coffee favors. Source: Colombo Page News Desk, Sri Lanka. After blending, the

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beans are then Packaging: pneumatic conveyors. Beans will be which allows the gases to

escape, without the beans being exposed to the damaging air. Finally, the packaged coffee is

placed in boxes that are 4x2x2 ft and palletized into pallets with dimensions. Other Products:

Handcrafted Beverages: Fresh‐brewed coffee, hot and iced espresso beverages, coffee and

non‐coffee blended beverages. • Merchandise: Coffee‐ and tea‐brewing equipment, mugs and

accessories, packaged goods, music, books, and gift item.

First step is receiving of raw material which the coffee and the products then

transform the materials to the staff who works in the factory bean assortment which they

bring the bean then they transport the bean for the roasting, roasting the bean , then the

quality tasting which the taste of the bean should be good to continue the process, if it was

good it will pass if it’s not the process will  Fail, after it passes, cooling then transport to

blending , blending which mix the beans, the final product testing should be as they want so it

could pass, packaging, palletizing which the transportation, transport to finished good

storage, order fulfilment then finally the delivery.

TheLayout of entrance zone plays an important role to represent a coffee house first i

mpression. Both the Coffee Bean &Tea Leaf and Starbucks design their entrance layout in a 

desirable manner and placing their main promotion menus at the end caps. And it thinks that

Starbucks coffee has a perfect layout of the products itself and their shop especially, which

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they provide good designs, for example, they are specialized in writing customer’s names in

their cups and providing them a good service.

Location

Starbucks owns 5 roasting plant companies in Nevada, Pennsylvania, South Carolina,

Washington, and the Netherlands. Moreover, they have 24 co-manufacturers in the United

States, Canada, Europe, Asia, and Latin America. Starbucks sell their products in the UAE

which is considered one of the top coffee retailers in the region. They opened almost 60

branches in Dubai and 50 in Abu Dhabi distributed around all the areas so everyone can have

access to it. Dubai and Abu Dhabi are great choices for such a company because both cities

have many tourists who came from different cultures, countries, and continents. Everyone

needs a coffee shop nearby to grab a coffee whenever they want and don’t have to drive long

distances for it. Starbucks considered customer access as an important factor. If you want any

business to succeed, you should make it easier for customers to find your store or business.

Starbucks stores are usually found near the center of the markets they serve. Most of the

coffeeshops retailers are attracted to malls especially in this region because of the weather as

well as the customers. Additionally, they focused on the industrial areas because they give

these places special attention such as road networks and power supply. I think those two

places are good for Starbucks to establish their business because both cities are crowded

means more likely for customers to visit their branches and try their products. That way the

company’s profits soared high and made a significant change in the market. Abu Dhabi and

Dubai are perfect choices since both cities give easy access to large numbers of people. They

are also a more planned and organized business center in the UAE. Starbucks branch in "la

Mer” in Dubai is a place worth to visit. It is surrounded by breathtaking facilities and views.

Many people visit this place. They can enjoy their coffee with a beautiful view.

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Work Design and Measurement

The company works in a specific manner by sharing similar values as they are committed to

the community and offer high-quality coffee in the world. The management creates a

welcoming culture and provides opportunities for each individual to create a diverse culture

(Starbucks, 2019g). For example, employees of the organization are working together and

sharing the same culture and values to deliver the standard quality services (Starbucks,

2019f).

Starbucks Coffee’s Operations Management, 10 Decision Areas

1 - Design of Goods and Services: Starbucks emphasizes premium design for its goods and

services. The premium character is linked to the company’s broad differentiation generic

strategy, along with its premium pricing strategy. Other firms, such as manufacturers, are also

involved in the design of some goods like Starbucks mugs.

2 - Inventory Management: Inventory management at Starbucks is linked with the firm’s

supply chain and various facilities. At the cafes, inventory management involves office

automation and manual monitoring. In Starbucks supply hubs, automation is more

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comprehensively used. The company aims to minimize stockout and ensure a continuous

supply of coffee beans to its cafes. Starbucks addresses this decision area of operations

management by focusing on supply adequacy and automation.

 3 – Scheduling: Starbucks uses automated and manual scheduling approaches for its various

business activities. The company also applies flexible schedules for management personnel.

This decision area of operations management relates with Starbucks in terms of the firm’s

objective of streamlining processes, while allowing some degree of flexibility among

management positions in the organization.

4 - Layout Design and Strategy: The layout design of Starbucks cafés maximizes workflow

efficiency. It also supports a warm and friendly ambiance to match the company’s

organizational culture. This layout strategy does not maximize space utilization for tables and

seats because Starbucks’ focus is on premium customer experience, which involves higher

prices for more leg space in the cafés. In this decision area of operations management,

Starbucks prioritizes customer experience over space utilization.

Specialization Jobs at Starbucks are specialized especially at the retail level. Example:

some stores operate with a drive-thru window. At any given time there will be four

employees working to operate the drive-thru window: one to take orders, one to handle cash,

one to work the espresso machine, and a “floater” who can fill in where needed, Starbucks is

currently seeking candidates for our Finance & Accounting Rotational Development Program

where you will utilize your knowledge and maximize your learning agility as a contributing

member of a team, challenging the status quo and developing solutions that will enhance

growth and generate value to our customers every single day. Through this two-year

program, you will have the opportunity to complete four distinct rotations, where you will

learn the diverse functions of the finance organization such as US Retail Finance, Corporate

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Finance, Treasury, or Accounting. We are looking for those who are highly motivated and

focused on expanding the breadth of their finance experience. Upon successful completion of

the Rotational Development Program.

Quality Management

The selected product is coffee. The management considers four determine of quality

standards which are the following:

 They go where the best beans are.

 They are very picky at harvest.

 They’re for the good of all coffee.

 They taste-again and again and again.

They’re so picky when it comes to their beans and harvest: Starbucks is so picky

when it comes to their beans. They bring their best beans from higher altitudes. The cold

nights and warm days create denser beans. Also, denser beans have deeper and more complex

flavors. Starbucks Arabica coffee grows in three different regions, Latin America, Africa, and

Asia-Pacific. Their signature coffee blends are mostly from the Asia-Pacific region. Latin

American coffees are balanced and known for their crisp, bright acidity, as well as their

flavors of cocoa and nuts. African coffee offers flavor notes that range from berries to exotic

spices to citrus fruits, and aromas which give hints of lemon, grapefruit, flowers, and

chocolate. While Asian-Pacific coffee ranges from assertive herbal spiciness and depth

typical of semi-washed coffees from Indonesia to the balanced acidity and complexity that

define the washed coffees of the Pacific Islands. As well as the harvest, Starbucks only pick

the coffee cherries when they are at their peak red, ripe and perfect. After that, they sort them

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again and again based on size, color, and density. They have zero tolerance for defects which

makes their coffee the greatest the unique taste appears in every cup of Starbucks drink. 

They’re for the good of all coffee: Starbucks invests in programs designed to strengthen the

economic and social development in local communities, while also caring for the

environment. To extend the reach and impact of their programs, they collaborated with non-

governmental organizations that have experience and expertise in working with farming

communities. They support communities through farmer loans, growing their farmer support

centers where their agronomists who examine soil samples and provide free advice to any

coffee farmer who asks. Furthermore, Starbucks continuously improve and expand its ethical

sourcing programs such as C.A.F.E. Practices. They taste over and over: They taste more

than 1000 cups of coffee a day to verify the superior taste that all the customers expect. A

batch of coffee is tasted at least three times before it’s approved to come up with the best

results. That’s what makes their coffee special. Inspection: Yes, Starbucks makes use of

inspection. Starbucks’s coffee is safe and untouched by the human hand. They pursue the

British Retail Consortium’s (BRC) food safety standard. BRC has certified more than 23,000

suppliers in 123 countries around the globe. Besides, the total number of workers has been

reduced to one-fourth the number at Starbucks co-manufacturing facilities which is much

safer. They controlled rooms and employees do not have direct involvement with the

machinery so they can focus on om their efforts on quality. Starbucks’ roasting systems were

redesigned to improve performance, as well as reduce greenhouse gas emissions. Their

products are packaged while it’s fresh. Once the coffee is in powder form, it’s packaged

within 12 hours of production. The powder is stored temporarily in silos from which piping

pneumatically transfers it to be mixed and blended, and then transports it to the fillers where

the packages are formed, filled and sealed. X-ray units inspect the packages for any foreign

materials, while a check-weigher ensures appropriate weights. The packages are

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automatically laned for accumulation before they are put into cartons and sent via robots to

be palletized and stretch wrapped.

Nevertheless, Starbucks has a problem that is long waiting in lines to make your order. I

strongly recommend them to use technology to solve this problem. For example, the can put

self-ordering machines which will give the buyer options either to use the traditional way or

the self-service machine which will both save customers time. Such as McDonald’s,

McDonald’s invested in technology for its new self-service ordering system to keep their

business efficient, advanced and relevant. If I would benchmark a company, I would

benchmark Costa coffee. Costa coffee is Starbucks ' top competitor. They can follow

Starbucks’s steps to investing in programs. For instance, they can help farmers and provide

free advice to them. They can also be creative and provide a variety of choices for buyers. In

my opinion, if Costa coffee used these two quality tools, they could make more money than

Starbucks

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Production Planning and Inventory Management

The efficiency of operations and capabilities is a contributor to Starbucks' success.

The management does capacity planning in advance and manages inventory through

automation. They are meeting the demands of customers effectively and improves capacity

and utilizes capacity by designing processes to meet fluctuations in demand. For example,

operations in the company's cafes are flexible to adjust employees to a sudden increase in

demand during peak hours. In this field of operations management, Starbucks aims to

maximize cost-effectiveness through efficient workflow and operations so as they are able to

maintain the required inventory in-store. (L. G. 2017, January 31). To manage inventory

management is using JIT and automation as a strategy. In the table mention below EOQ of

Starbucks has been calculated.

Ordering Cost 2500000

Holding Cost 500000
Annual Quantity Demanded 500,000,000
EOQ 35355339.1

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Conclusions and Recommendations

The above report is mainly based on Starbucks. Starbucks sees in the future a higher

and better ambition because they want to be more creative and sophisticated and famous, so

they will not give up and will do many things about their product and service to satisfy all the

customers and to suit their taste so the retail stores will be more than 30000 in the future. And

it has been found that the company is using differentiate strategy and committed to social

development. It has been found management selected location by analyzing the nature of

customers. Starbucks has been focused on creating a diverse culture for further development.

It has been recommended to management that they should train employees to enhance

productivity. Also, the management should work on packaging as plastic has a negative

impact on society, and t can become a challenge in the future. So we have learned if we want

to win and succeed in our company we must follow these points and overcome competitors.

If these methods are followed, Starbucks will be renowned for its good reputation and strong

quality and will become more global in the future so people will buy from them for the long

term.

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References

Community Service | One Neighborhood at a Time. (n.d.). Retrieved from starbucks:

https://www.starbucks.com/responsibility/community/community-service

Conradson, J. (2018, November 15). 5 easy ways to reduce, reuse and recycle. Retrieved

from stories starbucks & news: https://stories.starbucks.com/stories/2018/5-easy-

ways-to-reduce-reuse-and-recycle/

Peiper, H. (2019, September 7). Top 10 moments from Starbucks Leadership Experience in

Chicago. Retrieved from Starbucks stories and news:

https://stories.starbucks.com/stories/2019/top-10-moments-from-starbucks-leadership-

experience-in-chicago/

Warnick, J. (2019, March 20). Say hello to the lid that will replace a billion straws a year.

Retrieved from stories starbucks & news:

https://stories.starbucks.com/stories/2019/say-hello-to-the-lid-that-will-replace-a-

billion-straws-a-year/

BIBLIOGRAPHY A, J. (2010, Quarter 4). From bean to cup: How Starbucks transformed

its supply chain. Retrieved from supply chain quarterly:

https://www.supplychainquarterly.com/topics/Manufacturing/scq201004starbucks/

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Exceptional coffee can only come from exceptional beans. (n.d.). Retrieved from starbucks:

https://www.starbucks.ca/coffee/ethical-sourcing/coffee-quality

Peterson, D. (n.d.). Starbucks ( Fishbone / Ishikawa Diagram). Retrieved from creately:

https://creately.com/diagram/example/hnrqhi5x1/Starbucks

Animal Welfare-Friendly Practices. (2018, November 13). Retrieved from stories starbucks

& news: https://stories.starbucks.com/stories/2018/animal-welfare-friendly-practices/

Starbucks (2019f). Expect more than coffee, Retrieved from < HYPERLINK

"https://www.starbucks.com/careers/working-at-starbucks/culture-and-values"

https://www.starbucks.com/careers/working-at-starbucks/culture-and-values >

Starbucks (2019g). Community: Creating Pathways to Opportunity, Retrieved from <

HYPERLINK "https://www.starbucks.com/responsibility/community"

https://www.starbucks.com/responsibility/community >

BIBLIOGRAPHY (2014, December 14). Retrieved from slideshare:

https://www.slideshare.net/feyzaYksel/production-management-starbucks

L. G. (2017, January 31). Starbucks Coffee's Operations Management: 10 Decisions,

Productivity. Retrieved from http://panmore.com/starbucks-coffee-operations-

management-10-decisions-areas-productivity

Starbucks Coffee Shop (2019). Designing the stores, Retrieved from < HYPERLINK

"https://starbuckstenthings.weebly.com/designing-the-stores.html"

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https://www.ukessays.com/essays/marketing/the-history-and-introduction-to-

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