Starbucks Coffee Supply Chain

Topics: Coffee, Supply chain management, Supply chain Pages: 8 (3208 words) Published: March 24, 2014
1. Introduction
Globalization is “the integration of economies around the world through the movement of goods, services and capital across borders” and is a dynamic process through which companies, corporations and organizations leverage their strengths, magnify their reach, and decrease costs by outsourcing multiple business processes (IMF Staff, 2008). The globalization of Starbucks’ supply chain played a crucial role in attaining organizational success, having a significant impact on its business operations. This report aims to analyze the challenges that globalization presents in a constantly evolving market, and evaluate the solutions that Starbucks has implemented to manage these challenges.

2. Background
Starbucks started out as a small coffee retailer in Seattle, Washington in 1971, growing exponentially over the next 4 decades. With over 17,000 stores across 55 countries today, Starbucks stands as the leading specialty coffee retailer in the world and is one of the top 5 international coffee buyers (C.A.F.E. Practices, 2012). In 2012, Starbucks sold 4 billion cups, or 428 million pounds of coffee (Munson, 2013). Since then, Starbucks has diversified to offer a variety of food and beverage options, including over 87,000 drink combinations, sandwiches and an array of commercial products (Eco-management for Food, 2012). Starbucks’ incredible growth (See Appendix A) in a short span of time required expansion of its global supply chain in order to cope with the demand. Due to the extensive diversification of Starbucks products, this report will focus solely on the globalization of Starbucks’ coffee bean supply chain. Starbucks’ global supply chain of coffee is divided into 3 main steps: production, packaging, and distribution. These steps were strategically engineered for cost cutting, operational efficiency and profits. Production, or coffee cultivation occurs in countries across the equatorial belt to capitalize on optimal climate condition, while Starbucks has over 40,000 coffee suppliers from various regions and countries such as Columbia, Rwanda, China and Mexico (Starbucks, 2012a). Upon harvesting, the coffee beans are sent for processing and packaging. The numerous processing plants are located strategically around the world to service Starbucks’ regional retailers in Asia, Europe and the U.S. Starbucks adopts a 3-step processing rule: storage and handling, roasting and packaging, and dispatch (Munson, 2013). Coffee beans deposited in the plants are separated by type, before being roasted, cooled, ground and sent for packaging. After which, they are dispatched for distribution (Eco-management for Food, 2012) in regional distribution centers, with some distribution services outsourced to third party logistics to deal with Starbucks’ massive global reach (Ho, 2013) (See Appendix B for Starbucks’ coffee bean supply chain). Starbucks takes globalization and corporate social responsibility (CSR) very seriously, such as adapting its business to local laws, standards, tastes, and culture (Thompson & Arsel, 2004), resulting in multiple implications on the management of the supply chain. For instance, Starbucks is proud to have their coffee beans 100% Fair Trade certified, aligning itself with an organized movement that imposes set of standards and practices on multinational companies. Moreover, Starbucks has also implemented a unique set of practices called the “C.A.F.É. Program” which sets quality control benchmarks for suppliers. These include regular wages which adhere to laws of the respective countries, supporting local schools, preserving natural forests and using pesticides only as a last resort (Newell & Frynas, 2007). These requirements are part of the unique grading system used to evaluate suppliers and provide control over quality and standards of the global supply chain. However, this has led to criticisms, such as Macdonald (2007) who suggested that C.A.F.É. Practices are often considered buying...

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