Starbucks – Advantages of ERP Implementation

The advantages of Starbucks implementation of a new Enterprise Resource

Planning System were very typical of many other ERP implementations with a large

focus on supply chain management. Starbucks discovered that their annual costs for

their supply chain was growing and over the same period annual sales at stores that

were opened for at least one year dropped by 10%. They were able to discover that

the two main issues with their supply chain stemmed from the untimeliness of

deliveries and that 65-70% of the costs for their supply chain was due to

outsourcing. The new system reorganized the supply chain into simplified chain

functions that would put a focus on the procurement aspect. Since Starbucks spends

$600 million annually on coffee and $2.5 billion annually on dairy and paper goods

this was a major area that needed to recognized in the new system. The system is

able to manage the purchasing of goods from the many coffee plants that they are

involved with throughout the world. Starbucks recognized $500 million savings in

the 2 years after the implementation of this new system. The system also eliminated

the need for paper forms and emailing orders. All orders go through the system and

are automatically updated when the purchases were acquired, billed, and paid for.

With the new streamlined processes the effectiveness and timeliness of ordering

and stores receiving the goods needed, stores are no longer waiting for goods to be

delivered and are now able to get the product to the customer without issues.

Since the new system integrates the supply chain with the other aspects of

the company such as the financial system it again cuts down on paperwork, which

leads to less confusion during communication between both parties. This means less
mistakes and with a decrease in mistakes with ordering and finances it greatly

increased the efficiency of the supply chain. With efficiency comes more “goodwill”

to customers who don’t have to wonder if the Starbucks around the corner from

their home will have their favorite coffee or not. With more “goodwill” comes

customer loyalty which will in-turn lead to more return customers which will

increase sales annually.

Another advantage of the system is that it reduces operating and supply

chain costs. Operating costs are decreased due to the fact that less personnel is

needed to operate the entire system effectively. With everything being

computerized and all information being available on the system there is no need for

certain types of employees, thus cutting salary costs. Since all of the information and

documents are computerized there is no need to paperwork in-turn cutting back on

overhead costs and with the amount of paperwork that Starbucks could be using

this is a huge amount of overhead costs that is removed. Even with the personnel

cutbacks the system is still able to run smoothly and efficiently. All aspects of the

company are integrated into one system, streamlining processes that used to take a

long time to go through many people with no sense of the timing that was needed to

effectively order, manufacture, and supply stores with the required goods.

With the accounting system being integrated into the system Starbucks is

able to maintain a watchful eye on all transactions that occur allowing them to see

what is costing them too much and need to make improvements on. The system

combines all of the necessary information into one easy to comprehend document

for managers and employees to read and evaluate. With the information in one place
is it easier for managers to make decisions on what needs to be done now and in the

future.

Another advantage of this system is that it was specifically designed and

implemented for the use of Starbucks. This means that it was developed for the

ease-of-use by employees of the company. Again allowing for timely transactions

within the organization. The system was designed to easily be manipulated in the

future in the event that the system needs more applications or updates are required.

This will cut down on future costs of the system and again cutting back on overhead.