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.