A supply chain strategy is like a roadmap that helps companies get their products to customers with as

little friction as possible. This plan ensures that every phase of the supply chain is optimized, including
the sourcing of materials, manufacturing, delivery, and logistics.

Four factors usually influence an organization’s supply chain strategy:

Industry

Company value proposition

Internal decision-making processes

Business goals

Benefits of Strategic Supply Chain Management:

Each company has a business strategy that paints a broad picture of how it will compete in the
marketplace. Since business strategy is like military strategy in that it requires the marshaling and
organizing of all its resources, then it becomes clear that the business’s supply chain can be its most
potent strategic resource. Designing and building the right supply chain, one that promotes the business
strategies, may just be the most powerful way to gain an edge on the competition, move faster, deliver
more value, and be more flexible in the face of both steady change and surprises. The supply chain
strategy is a complex and evolving means that organizations use to distinguish themselves in the
competitive contest to create value for their customers and investors.

1. Business Strategy:

A plan for choosing how to compete. Three generic business strategies are:

Least cost.

Differentiation.

Focus.

2. Organizational Strategy:

The strategy of an enterprise identifies how a company will function in its environment. This supply
chain strategy specifies how to satisfy customers, how to grow the business, how to compete in its
environment, how to manage the organization and develop capabilities within the business, and how to
achieve financial objectives.
Prior to discussing organizational and supply chain strategy in more detail, the first topic in the section
addresses business strategy and competitive advantages. Competitive advantages are closely related to
business strategy because they outline the advantages the organization should realize once it has
decided how it will compete. Other concepts related to supply chain strategic planning covered in this
section include:

Organizational and supply chain strategy.

Prioritization options.

Organizational capabilities.

Alignment of capabilities and strategy.

Resolving misalignment or gaps.

Business Strategy:

Typically a business strategy among supply chain strategies will outline how to grow the business, how
to distinguish the business from the competition and outperform them, how to achieve superior levels
of financial and market performance, and how to create or maintain a sustainable competitive edge. As
per the definition provided previously, business strategies include the least cost, differentiation, and
focus. The least cost relates to a lower cost than the competition for an otherwise equivalent product or
service. Differentiation relates to a product or service with more features, options, or models than the
competition. Focus relates to whether the product or service is designed for a broad audience or a well-
defined market segment or segments. There are many ways that these generic strategies can be
combined or made into hybrids. For example, common business strategies that are generic to many
industries and manufacturers include the following variations:

BEST COST:

It creates a hybrid, low-cost approach for providing a differentiated product or service.

LOW COST:

It focuses on delivering low-price and no-frills basics with prices that are hard to match.

BROAD DIFFERENTIATION:

It creates product and service attributes that appeal to many buyers looking for a variety of goods.
FOCUSED DIFFERENTIATION:

It develops unique strategies for target market niches to meet unique buyer needs.

FOCUSED LOW COST:

It is designed to meet well-defined buyer needs at a low cost.

Focus Advantage Strategies:

The following discussion is divided into two ways to create a focused advantage:

Niche marketing (versus mass marketing).

Responsiveness.

NICHE MARKETING (VS MASS MARKETING):

Firms can choose to develop products and services for a mass market or for a relatively small slice of a
larger market – a market niche. Some examples of niche market approaches include

Catering to high-net-worth customers with products such as luxury automobiles, yachts, large homes, or
specialized services such as estate planning, personal training, or expensive cruises.

Designing for a limited age group, such as children or senior citizens with special needs instead of
serving a broader population.

Providing products or services for residents of a particular geographic area, such as growing vegetables
for a neighborhood market rather than for packaging and shipping around the nation or world.

Starbucks' Supply Chain Objectives

To transform its supply chain, the coffee retailer established three key objectives:

Reorganize its supply chain organization

Reduce its cost to serve stores and improve execution

Lay the foundation for future supply chain capability.

When Starbucks' supply chain transformation was first getting under way in 2008, the company brought
in professionals from the outside to support its re-engineering program. But the coffee retailer is taking
a different approach to recruitment these days. "Now, we want to grow our own talent to support the
growth of our business, in North America and globally, and to support normal staff turnover," says Peter
D. Gibbons, executive vice president of global supply chain operations. "Creating a strong pipeline at all
levels is part of our core mission to improve service, lower cost, and develop talent."

The initial phase of the recruitment program will be aimed at building out the U.S. organization,
followed by a similar staffing process for the company's international operations. After that, Starbucks
will focus on creating an internship program with an eye toward recruiting underclassmen interested in
a supply chain career with the company.

Throughout the fall of 2010, executives at Starbucks visited six universities to interview undergraduates
and graduate students with backgrounds in logistics, engineering, and operations research. From this
process will come a select group of young talent who, starting in July 2011 and continuing for an
undetermined number of years, will be hired and groomed to head Starbucks' supply chain for perhaps
as long as the next two decades.

The company will only consider the top 10 percent of the graduating class of the schools it partners
with. The ideal candidates will have exposure to Fortune 500 organizations either through prior work
experience or through internships. In addition, they must demonstrate prior leadership experience and
be willing to rotate between domestic and international positions.

To help improve employees' skills and knowledge, the company has developed programs covering 30
supply chain capabilities, as well as training manuals for new hires, Gibbons says. "The point is to ensure
that development plans cover skill-building and development for each individual," he explains. The
company also is testing a supply chain training system that will "provide the bulk of our technical
training and will add formal coaching and mentoring to round the process out," he adds.

If successful, the strategy will yield multiple benefits, according to Gibbons and his team. It will brand
Starbucks as a bona fide supply chain organization within both academia and industry. It will ensure a
seamless human resources transition over time as Gibbons and his team near retirement. And the
company will reap the intellectual windfall of advanced concepts that graduates take out of school and
into the workplace. Gibbons says Starbucks expects to learn as much from its new hires as they will learn
from the company.
Starbucks uses the centralized system of only six roasting centers, which prepare, manufacture, and
package beans for further delivery (Boyer, 2013). Such amount of factories can seem very small for the
multinational company; however, it allows Starbuck to be in better control of its product’s quality.
Finally, the packaged beans are delivered to the stores and outlets across the world with over 70 000
deliveries daily, which is enough to supply the company’s global network (Boyer, 2013).

the company could face the decline of its profitability. A similar situation emerged in 2008 in the
Starbucks company, when the company’s production expenses were increasing while the profitability
was regressing (Cooke, 2010). One of the core reasons for the customers’ dissatisfaction was the
inability of the current supply chain to provide more than half retail stores with timely deliveries (Cooke,
2010). Also, the customers demanded new products and the extension of services’ range. Therefore, a
sustainable supply chain was needed to fulfill the customers’ desires.

The Industry’s Demand

Concerning the business environment in which Starbucks was operating, it is possible to say that the
industry also had its requirements which should be necessarily followed. It is also evident that the
second critical purpose of any business after fulfilling the customer’s demand is the profitability of a
company. If the company is taking a loss and does not make any profit, then the company cannot
survive long enough.

To meet the demands of the industry standards, Starbucks had to achieve two primary goals: (1) to
simplify the complexity of the current supply chain and (2) to develop a centralized logistics system for
distribution across the world (Cooke, 2010). Therefore, this subsection along with the previous one
established the problematic aspects of Starbucks’ supply chain which were to be changed in order to be
competitive in the industry. The following subsection will summarize the steps which were taken by the
company to implement a successful supply chain strategy.

How the Current Starbucks’ Supply Chain was Designed

It is possible to claim that today Starbucks runs a highly successful supply chain strategy, which was
tailored to the customers’ needs and the business environment. The first step which was taken to
implement such a strategy was simplifying the complexity of the previous supply chain. It was decided to
reduce the diversity of the company’s job hierarchy to four basic supply chain functions, which were the
plan, source, make, and deliver (Cooke, 2010).

implemented in two primary ways:

by providing self-service and volunteering, and

by applying programs of resources reuse (Sigala, 2014).

Such involvement of the customers into the operational processes of the company creates trusting
relationships, which are significantly important for the expansion of the brand and establishment of its
positive public image. Also, customers can influence positively on the sustainability of the supply chain
(Sigala, 2014).

The Development of Supply Chain in the Context of Traditional Business Functions

Furthermore, it is possible to discuss how four traditional business functions, including operations,
sourcing, distribution, and customer service strategy, are influencing the development of the supply
chain. It should be mentioned that Starbucks operates in 65 countries, which imposes significant
pressure on its supply chain. Concerning the sourcing, the company has built its supply chain with the
aim to control the whole process of manufacturing the product, from selecting the finest coffee beans to
packaging (Bajpai, 2015).

One of the core characteristics of Starbucks’ distribution is “very little or no presence of intermediaries,”
which allows meeting the customers’ demand directly (Bajpai, 2015). Finally, speaking of customer
service strategy, it is possible to observe that the company’s main policy is to establish the customer’s
loyalty by providing high-quality service (Bajpai, 2015).

Supply Chain Risk Management at Starbucks

It is evident that any supply chain is a subject for numerous risk factors, and thus the supply chain risk
management is needed. One of the most critical demands that should be met by Starbucks is the
necessity to “fulfill efficiency- and effectiveness-driven objectives” (Heckmann, Comes, & Nickel, 2015, p.
130). Since these requirements are opposing to each other, it is essential to find a balance between
“distribution costs and shipment rates, or overall logistics costs and service level” (Heckmann, Comes, &
Nickel, 2015, p. 130). The application of supply chain risk management is essential due to possible
severe consequences, caused by the exposure to the risk factors.

Conclusion

Finally, it is possible to come to two primary conclusions, based on the conducted analysis of the
Starbucks company. First of all, it is essential to notice that the company’s organizational performance
vastly depends on the successful accomplishment of a well-designed and excellent functioning supply
chain management. It is evident from the analysis that Starbucks implemented its current supply chain
strategy to increase the company’s productivity and to be able to expand successfully across the world.

Secondly, it should be noted that the supply chain strategy design and relationship with suppliers built
upon communication are directly involved in the company’s success. It is also evident from the analysis
that Starbucks was able to build beneficial relationships with its suppliers. Overall, one can assume that
Starbucks’ supply chain is an example of a significantly successful business strategy