Operations Analysis: Starbucks

Starbucks main focus has been on its employees. Starbucks understands that their employees are the driving factor and most important resource of the company. Starbucks provides each employee with a starting wage above minimum wage standards as well as a quality health care and benefits packages. They firmly believe that the welfare of their people, environment and community are linked to their success as a company. These principles provide an established and proven work environment for every staff member throughout every retail store owned or operated by Starbucks.

PERFORMANCE OBJECTIVES

Speed

Starbucks is all about customer experience and the key aspect to that is not keep a customer waiting. Speed is an essential aspect, for the business, because the speed of their processes affects them in many ways. The profitability is affected when the staff keeps the customers waiting and this could cost them dearly, besides, with regard to the product, by being slow the quality of the food and beverage also suffers. One way of reducing time is to have efficient and smooth internal communications, and by keeping an adequate quantity of inventory, especially a well organized kitchen or working space.

Quality

Quality is probably the main performance objective as it is usually the one factor that differentiates it from its competitors. As mentioned above, as part of the customer experience, quality plays a main role. Quality encompasses a lot factors and a large portion of that depends on the customer perception of it. Quality is primarily affected by the quality of the resources, the time management etc. Starbucks could adopt a TQM approach and even have quality checks. They could take back feedback from customers from time to time to review their performance.

Dependability

Starbucks needs to be consistent in its performance, and the quality of service or product provided. One way to measure dependability of products is for example a business may look into the records of the amount of warranty claims made against a particular product.

Flexibility

Speed and Flexibility are related, the faster the processing time the better the chances of processes being adjusted quickly. Flexibility also involves a degree of being up to date and to accommodate the customer needs from time to time. Starbucks’ R&D department would have to identify flavors and new mechanisms that could attract new customers and benefit the company. It also involves understanding the economy they work in, like creating a customized menu for the countries they serve in.

Cost

Cost affects a large chunk of how the company works, because no matter which company it is they all have a profit maximization objective. Major costs for Starbucks include the acquiring of coffee beans and Starbucks is very specific about the Arabica beans they procure, an example of minimizing cost would be how they have started growing their own coffee beans, which has given them better control over their costs by reducing supplier costs. Another method to do so is to update technology that better uses input and reduces waste.

Of the 4 strategic perspectives, Resources applies best to Starbucks

Financial resources affect Cost and Quality performance objectives. If quality is high, costs are usually high. However, Starbucks finds the balance between cost & quality and provides a good quality product & service at minimum cost.

Physical resources refer usually to the area where business is carried out and affects the Speed element of the performance objectives. Starbucks all around the world have similar outlet design where to get to the counter; customers have to first pass through the seating area. It would be faster and probably more convenient to customers to have the counter closer to the entrance.

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Human resources include the knowledge and experience of employees/owner and affect the Dependability variable of the performance objectives. There is a requirement for all Starbucks employees to learn how to make the various drinks and also how to interact with customers. The way Starbucks employees interact with customers is very different from other of their outlets. Also, a drink made in one outlet sometimes doesn’t differ at all from the same drink made in others. There lies a very high degree of consistency in the product and service of Starbucks.

Technological resources affect the Quality, Speed and Cost variables of performance objectives. With better technology, costs can be reduced, speed may be increased and quality can be consistent.

SUPPLY NETWORK

The major aspect of Starbuck’s supply chain is the supply and distribution of the coffee beans. This is a complex process as the coffee and other related products need to be obtained from around the world to be delivered at their retail outlets. Starbucks follow the rule of “Plan, Source, Make and Deliver” for their supply chain. Their operations begin right from the planting of the coffee to brewing the perfect cup of coffee for their customers. Starbucks’ supply chain includes everything from planning the raw materials, to the manufacturing of the coffee and last but not the least distribution of this coffee to their retail outlets, and they successfully do this by “positioning its own people inside of distribution centers, to keep watch over operations and forge stronger relationships with service providers.” (Refer to Appendix 1)

CUSTOMER ORDER PROCESS

Store Entrance

Cashier I

Cashier II

Payment

Specialty Drink

NO

YES

Pickup Counter

Cashier Calls Order to the Barista

Barista Repeats the order and prepares

Products Eg. Coffee Bean

Select and purchase supplies, hire and training

———————————————————————————————————————————————————————–

Seen by Customer

Not Seen by Customer

Fig: Paryani, K. (2013) Product quality, service reliability and management of operations at Starbucks.International Journal of Engineering, Science and Technology, 3 (7), p.3-14. Available at: http://www.ijest-ng.com/vol3_no7/ijest-ng-vol3-no7-pp1-14.pdf [Accessed: 13 Mar 2013].

(Refer to Appendix 3 & 4)

ORDER PROCESS MAPPING

This order process mapping has been divided into three main portions, the customer’s viewpoint, the cashier’s viewpoint and finally the barista’s view point. From the customer’s viewpoint, the order process begins when the customer enters the store and begins to make an order. At this point depending on the speed of the order process, the customer could either wait at the queue or leave it he/she feels like it is time consuming. On reaching the cashier, the customer reads and chooses from the menu available and places an order to the cashier. The cashier then informs the customer about the specialties offered, like a caramel or chocolate topping etc. This is the decision point for both the cashier as well as the customer and the customer could alter the order further. After this point, the customer pays for the drink and proceeds to either in store or maybe wait at the special stools near the checkout counter to the collect the drink and proceed to leave. Next from the cashiers’ perspective, the process begins with the opening of the store, and it is the responsibility of the cashier to ensure that they have necessary cash to make transactions, by ensuring that they have coins and other cash/notes. The actual order happens, when the customer chooses the drink or food places the order. The cashier then mentions the various options available like choosing a topping or cream etc. The cashier after confirming the order with the customer, then immediately calls out the order to the barista. After this, the cashier tells the customer the amount to be paid and collects the amount, along with a receipt for the order, and tells the customer the approximate time that will be taken for the drink to be prepared. The final approach is that of the barista. When the order is placed by the customer, the cashier calls out the order to the barista. The Barista then follows this up by calling out the order loudly once more. This is the poke-a-yoke approach, as a method of double checking and ensuring that the right order is placed. After this, the barista proceeds to make the actual drink. At this point it can take two deviations, there could be a fail point and the barista may not make the drink properly, in which case the drink will be made again and the barista completes the drink and places it on the checkout counter or gives in to the customer in his/her seating area. The red arrows signify an interaction between the customer and the staff and how the viewpoint is different in both their terms. The green arrow is the cashier calling out the order to the barista.

Fig: Perkins Will. (2012). Research journal. The Impact of an Operational Process on Space. VOL 04.02 (1), p43-44.

TRANSFORMATION PROCESS MODEL

Inputs

Outputs

Transformation

Process

Coffee beans

Baristas and other staff

Coffee Machine, condiment counter, food freezers and other equipment

Coffee

Customer Satisfaction & Experience

Preparation of Coffee

Warming of Food

Fig : Simple Transformation Model adapted from Shaw, N, 2010, Operating Systems, Performance Objectives and Operations Strategy, Operations Management 1, Heriot Watt University, Edinburgh

(Refer Appendix 2. )

The transformation process model shown below gives us an insight to the detailed version of the order process of Starbucks. It starts with the environment, which includes the customers of the coffee shop. The transformation process model is constructed keeping in mind the Starbucks customer experience that ensures when a customer leaves the coffee shop they have a smile on their face. Like the traditional transformational process this model also depicts the inputs, the transformation system and the outputs. This model creates a linkage between monitoring and control and the transformation system, which helps in enhancing customer experience and the environment in the shop.

Environment

Customers

Inputs

Customer Order

Coffee Beans

Staff

Equipment including coffee machines and so on.

Transformation System

Preparation of coffee

Food warming

Output

Prepared Coffee

Starbucks Experience

Monitoring and Control

Fig: Detailed Tranformation process of the order process adapted from Operations management: The input/output transformation model. 2013. Operations management: The input/output transformation model. [ONLINE] Available at: http://cnx.org/content/m35439/latest/. [Accessed 13 March 2013].

PROBLEMS FACED

Some of the primary problems faced by the company in terms of its operations and performance are as follows.

Inadequate seating capacity and power sources.

The cleanliness at the condiment counter is another issue.

No new beverages options or menu and that not all beverages are available at different stores across the globe.

Inconsistency in customer service and inventory.

The Wi-Fi ports aren’t available at all stores.

RECOMMENDATIONS

A) Increase seating capacity:

Starbucks can increase their seating capacity by having a outdoor seating area. They could also use comfortable, space friendly couches and bean bags that can be moved around easily to suit the customers comfort. By increasing the seating capacity of the store, more customers will prefer to dine in-store and this would mean that the order process will be serving a larger number of people at the given time. Staff would have to be on hand at all times.

B) Cleanliness of the counters and the coffee desks:

Starbucks’ has a separate condiment counter which hold additional sugar sachets, stirrers, mug holders, tissue napkins etc. Though the staff provides these along with the coffee order, customers can access this if they need any additional. A recommendation that we would suggest is to develop a good roster system that will ensure that staff take turns in keeping an eye on the coffee desks. This is essential to the order process, affecting the level of customer service and satisfaction. This could contribute effectively to improving both the speed and customer satisfaction of the order process, because this is a vital part of the process.

C) Customized orders:

Though Starbucks boasts of customizing their beverages on the request of the customers, like providing variety in their milk full cream, low fat, skimmed milk, soya milk etc. It was identified that most of the time, the store is out of inventory for the required order and this is a major weakness. This affects the order process, because it confuses the customer and the barista. This will have a direct impact on the order process such that, the staff taking the order will have to be specific in terms of mentioning their specialties available. The customer must be made aware of the choices available, and they should have the respective ingredients available for these options.

D) Stores have Wi-Fi ports.

Starbucks, like its competitors, provided the policy of free Wi-Fi ports in the store. However, not all stores are consistent in this aspect and many stores don’t offer this facility. This will affect the order process, as customer like youngster and business people might actually leave the store due to this reason.

E) Switch menu.

Customers often feel like the Starbucks menu doesn’t switch around much and also that they don’t have all their options available in all store. We would advice Starbucks to incorporate the feedbacks from their customers into their menu and this again would directly affect the order process.

CONCLUSION

This report has effectively analyzed the operations of the Starbucks chain of coffee shops. The study looked into understanding the performance objectives by aligning them to the strategic objectives of the company. Furthermore, we have identified the suitable transformational model of the company and then explained in detail the order process. We chose the order process as the main focus of this paper, because we felt this was one the main operations of the company. We have identified how the order process functions and have also mapped out the entire process from the view point of the customer and the company. Finally, we have identified some functional problems and weaknesses of their operations. One the basis of site study as well as adequate research through company profiles and journals, they study has looked into amending some of these issues. The report has explained our recommendations towards addressing these issues and henceforth makes the operations of the store more beneficial and profitable to both the company and customers.

APPENDIX

1. “They set a direction based on three broad action areas: service, cost, and talent. We make 80,000 deliveries per week globally and the store managers and baristas rely on us doing this well for them to be successful. Replenishment to our stores was not setting our stores up for success. We talked to store managers and they were clear that they could not be successful if the reliability and quality of supply was not good enough.”

2. The basic model of transformation process indicates the inputs and outputs required by the firm. One of the main procedures of Starbucks is the order process that includes different inputs that are essential for the coffee shop. The inputs being, coffee beans, barista and other staff, the coffee machine, condiment, food freezer and other equipment’s. The outputs result in the hot and warm coffee and the customer satisfaction and experience. The process that led to the outputs includes the production of coffee and warming the food.

3. Starbucks utilizes an Assemble to Order process (ATO) when dealing with customers. ATO is a mixture of make to order and make to stock. Since customers like to personalize their order, Starbucks has an inventory in every branch to reach customers needs. The product is made when a customer puts in their order yet all the materials are kept at hand for workers to make each order accordingly. Also, they keep certain things made at all times on hand like caffeinated and decaffeinated coffee because it’s a common order that’s expected to sell and can be customized for the specific customer such as adding sugar or milk if they’d like to. (Team 1 Starbucks, 2010)

4. A typical service blueprint of the order process at Starbucks is shown Below. To start the order process, the barista behind the cash register gives friendly service by looking the customer in the eye and then greeting the customer. The customer gives the order. If the order is for an espresso drink, the barista repeats the order, out loud, and states the ingredients in a predefined order (size, type of milk, type of coffee, etc.). The barista behind the espresso bar repeats the drink ingredients in the same order. This simple poka-yoke technique helps to guarantee that the drink will be made correctly the first time. This process is generally observed at in most Starbucks’ stores, where the barista asks for the customer’s name and repeats it with the drink order. In the early days, the baristas were trained to ask the customer’s name. Howard Schultz has brought this step back as another way to differentiate Starbucks from the other coffee shops; this act, in turn, has had a positive impact on improving market share. (Paryani, 2011)

Names of team

Members

Team work (management/co ntribution

/attendance of team meetings)

Research (contribution to data collection / group discussions /idea generation /literature review)

Final Report (report construction

/report write up/diagrams/ referencing, etc.)

Total contribution towards assignment

Athina Abigail D’silva

1

2

2

5

Callahan Jason Brown

2

1

2

5

Leni Vincent Joseph

2

1

2

5

Nida Saleem Siddiqui

2

2

1

5

Rudy Rosario

2

2

1

5

Vidhya Subramani

1

2

2

5

Total score

10

10

10

30