PROCESS SELECTION

PRODUCT FLOW
Starbucks coffee uses an assembly line type of product flow they use.  Assembly line flow is characterized by a linear sequence of operations. The product moves from one step to the next in a sequential manner from beginning to end.   When a customer orders coffee, this product is made from one step to the next from beginning to end.  A customer will specify the type of coffee he wants and it is made adding the ingredients in a systematic way.

CUSTOMER ORDER PROCESS
Starbucks uses an Assemble to Order (ATO) process when helping customers. ATO is a hybrid or combination of Make to Order (MTO) and Make to Stock (MTS). Starbucks has the inventory in every branch to reach customer needs, but customers also have the option of personalizing it to their liking. For Instance, a person can order a non-fat latte or a frapuccino without whip cream. 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.

PROCESS CHARACTERISTICS MATRIX
The process characteristics matrix has six possible combinations that a company can adopt. Starbucks' position on the matrix is Assembly line - Assemble to order. Even though every drink is customized to each customer, they follow the same process. This is done because all materials are made assembly line in bulk for Starbucks. Because of this the baristas are able to follow simple recipies to quickly push the product to the customers. This configuration is common in fast food.

FACTORS INFLUENCING PROCESS SELECTION
Some of the factors influencing the way that Starbucks does their process selection include market conditions; including what do customers want and in what quantities. Starbucks also takes into consideration what is offered by competitors like Dunkin Donuts. Customers might like some of our choices and some of theirs so it is up to Starbucks to make decisions with the given information. Capital requirements are another factor that influences Starbucks process selection; the actual monetary requirements to set up production. This is why it is important to know the amount of capital we have in Starbucks before making decisions like expanding or introducing a new product line. Availability and cost of labor is another factor influencing process selection. Since Starbucks employs different hourly employees at any of its stores, it is important that there are enough employees to run the place smoothly. Not only is the labor easily available but also is their employment cost efficient. Lastly state of technology is another factor influencing the process selection. Inventory is managed electronically and would not be possible if the right technology where not in place. Inventory management is one the keys to success of Starbucks because they can do it easily and also reducing their overhead costs.


ADOPTION OF MASS CUSTOMIZATION
Starbucks currently utilize two types of mass customization in the production of their beverages. One form is modular production - assemble to order process as the baristas assembles standardized components at the moment of sale for its customers. For example each customer’s coffee is customized specifically for them due to the fact that they choose the specific ingredients which are the standardized components such as milk, fat free milk, non dairy creamer, sugar, sweetener etc.
The second type of mass customization is Postponement which is the deferring of a portion of the production until the point of livery. For example standardized beverages such as frapuccinos is brewed and awaits the differing aspects such as whip cream, which is held back to be added at the point of sale.

INVENTORY MANAGEMENT

Inventory is described as “ a stock of materials used to facilitate products or satisfy customer demands.” Typical inventories include raw materials, works in progress and finished goods. (pg 363 of the text) Inventory Management is described as specifying the size and placement of stocked goods.

With the nature of the business the finished goods tend to be perishable inventory, Starbucks uses a P-system and a EOQ system for inventory management on a store level. This system helps the company reduce unnecessary waste and shrinkage within their inventory. The inventory is tracked by computer programming that is attached to the point of sale registers and through the closed network online ordering with Bartlett Deliveries, the delivery company for stores. This program is called Inventory Management Systems (IMS).


Starbucks does its shipping and ordering in two ways. The first is for the retail of the store using the P-system. This order is placed every seven days with a three day lead time. Various pars are set for the different SKUs throughout the store. Over stock for the entire inventory is set at 15% to ensure enough retail for customers. The second order is done on a daily basis using EOQ. This order has a two day lead time. This order is placed for all the materials, for example milk, espresso, and cups, that are needed to make drinks as well as the short life pastries. Sales for Starbucks generally have constant demand patterned with the days of the week. Only on rare occasions does the demand vary. This coincides with the changing of the seasons and school breaks.

On a corporate level, the Starbucks roasting plants/warehouses use a Q-system and a P-system as well. Starbucks uses the Q-system for roasting their coffee. They have set reroasting point for their whole bean inventory. Because it takes on average 3 hours to roast a batch of Starbucks Coffee, they are able to keep up with the demand of the many varieties that they sell. This ensures that they can meet the demand of the stores. The plants use P-system for all other product, for example bottled beverages. These products are bottled for Starbucks by the Pepsi Bottling Corporation and are shipped only on a monthly basis to the plants.

INTRODUCTION

Starbucks coffee company as it is now known was first started as a single store in Seattle’s historic Pike Place market in 1971, where it still stands today (pictured right). It was created by three entrepreneurs; english teacher - Jerry Baldwin, history teacher - Zev Siegl and writer - Gordon Bowker. Starbucks orginally started as a coffee bean store but has grown to now offer approximately 14 varieties of coffee in addition to other products.

In 1981 Howard Schultz joined the company in Seattle as the Director of Marketing. In 1983 Schultz visited Italy and was amazed by the coffee varieties and industry there. Upon returning he proposed that Starbucks offer traditional expresso beverages and beans. The idea was rejected so Schultz left Starbucks and opened his own coffee company called II Giornale in 1985. In 1987 the owners of Starbucks sold the company to Schultz for 3.8 million dollars, who then rebranded II Giornale as a Starbucks and the chain of coffee companies was born. Presently Schultz still serves as the chairman, president and cheif executive officer (CEO) of Starbucks. Schultz is also a significant stakeholder in Jamba Juice which can best be described as a "better-for-you" beverage company.

Under Schultz’s guidance Starbucks grew from a single coffee bean company in seattle to probably the most famous coffee company worldwide. Starbucks has 15,000 stores in 50 different countries. In America alone there are 7950 Starbucks outlets. Starbucks is also very philanthropic; they do community service, a recent example was helping in the effort to rebuild New Orleans after hurricane Katrina. They are environmentally responsible as they practice recycling and water conservation to name a few. Also the operations department really emphasize 'ethical sourcing' by purchasing their ingredients and other inputs such as coffee, tea and cocoa from ethical sources as opposed to immoral or illegal suppliers such as those who use child labor.