Starbucks

Part 1-Background of the operations a) Starbucks is a well known coffee shop through out the world. There are Starbucks in many countries and because of its popularity it has grown in size to become the biggest coffeehouse company in the world. The company mainly sells brewed coffee, tea and also cold drinks, snacks, cups and coffee beans. Starbucks also operates an Entertainment division which is involved in books, music and film. It was established in Seattle, USA in 1971. The company was started by three partners, English teacher Jerry Baldwin, history teacher Zev Siegel, and writer Gordon Bowker. Howard Schultz is the current Chairman. The company has a total of 176,000 employees and has more than 9,217 stores in than 40 countries. It had total assets of $5,343,900. Operating revenue of $10,383,000 and a gross operating profit of $2,048,000. The company’s aim is to be the most recognised and respected brand in the world by having plans to expand its retail outlets, grow its specialty operations and by introducing new products and develop new routes of distribution. To provide the highest standard of service of their products and services to its customers. Starbucks plans to increase its market share by opening additional stores in existing markets. The company has over the years pursued policies to enhance its image such as recycling its food packaging and gives 10% discount when customers bring their own reusable cup. The company also has a fair trade policy for the benefit of developing countries. There are a lot of competition which Starbucks face which include other international, national, regional, and local coffee retail outlets. Its main rivals are coffee shops such as Costa and Café Uno and restaurants like McDonalds and KFC. b) I go to Starbucks at least once a month or several times in the year. It’s one of my favorite coffee shops as I like quality and taste of the beverages they sale. Also the environment and furniture that most stores have is modern and relaxing. Some stores also have wifi hotspots so you can use your laptop to access the internet free of charge and there are magazines and newspapers to read. I have been to Starbucks in many towns and cities and other countries. Although the cost of its beverages cost more than some local cafes and fast food restaurants, the cost is reflected in the quality and taste. The staff is friendly and offer good service to its customers. I have a store card which gives me discounts if I spend enough on Starbucks products. My other group members has also go to Starbucks at least a once a month, one of them has bought a Starbucks coffee machine and another member has bought coffee beans from them. Part 2-Transformation Process and Classification of the Operations a) First of all, we have to define the Transformation Process which is according to Slack(2007, p.8) “a model which describes operations in terms of their input resources, transforming processes and output of goods and services”. In the first phase, we have the Inputs which consists of the Transforming Resources ( facilities, staff) such as shops, coffee machines, staff, managers, furniture and Transformed Resources (Material, Information, Customers) such as delivery of goods & stock, market research, food, drinks and raw products in general like coffee beans. These inputs, basically, will go through the Transformation Process which transforms the material, information and customer resources in order to produce goods and services. This, basically, means that beverage and food will be made ready for sale, products will be placed in store room and on shelves and coffee shops will be cleaned and tidied up by staff. The final output resource for Starbucks will be that food and drinks will be prepared, customer will be served, their expectations will be fulfilled and market research/sales analysis will be done. In the end, the outcome for Starbucks is to have satisfied customers, more revenue/ profit than before which leads to more future opportunities. Besides, the Starbucks company will be more organized. Therefore, the main target which is customer satisfaction will be achieved. Nevertheless, we do have to bear in mind when considering macro the transformation process, the random external influences which can be political, economical, social, technological, environmental and legal factors. Political factors can be if the government, for instance, would campaign against coffee drinking or their policies would affect Starbucks corporation tax, national insurance, etc. Economical reasons can have a great impact as well such as shop closures due to recession, the rise of coffee beans price, no protection against new coffee chains, etc. Social influences would be change in customers’ change which will require Starbucks to follow the current trend. Technological factors would be to create faster machines and ways to deliver customer with coffee at different locations. Starbucks has, for instance, already produced their own branded self-service coffee machines on different locations such as colleges or restaurants. Environmental factors could be to follow a more environmental friendly policy such as using recycled plastic cups and give customers discount when they use their own reusable cups. Legal points would to follow, for example, certain health & safety laws which need to be done. The next step is to have a look at the control and feedback mechanism which is according to “the process of ensuring that operations proceed according to plan.” Ideally, the operation is designed to be flawless and run smoothly; however, as mentioned before, we have the random external factors which can cause certain issues and a different, negative result than expected. The whole process works for Starbucks in the following way: First, we have the report (sensor) which checks and records the output from the transformation process, output product & services and customers in form of sales receipts, for instance, or customer loyalty cards. Afterwards, the comparator which can be operation manager compares these reports and results and tells Starbucks how well the business is doing and if there are any gaps which need to be filled. In the end, it is the job of the actuator to give instructions to the rest of the employees if there is something specific which needs to be improved regarding input resources and transformation process. For instance, there will be a report recorded that too much money was spent on packaging which was not necessary. So the comparator forwards this report to the actuator who gives instructions to buy less material for packaging in the input resources and to do the packaging more efficiently in the transformation process. Finally, we will talk about the operation performance objectives which are according to measure its operation objectives and achieve strategic goals. These objectives are called quality, speed, dependability, flexibility and cost. Quality means for Starbucks to high quality coffee, beverage and food, provide excellent service and clean & tidy shops. Speed, on the other side, means that Starbucks want to serve each and every customer on time and avoid long queues. The next objective is dependability which to treat customers valuable by keeping to opening hours, for example, or keep most of the products available at all time. Flexibility is the next point which means for Starbucks to introduce new products on a seasonal basis and offer, in general, a broad range of products. The last factor is cost, which, obviously, tries to be kept low. But by improving the first 4 objectives as mentioned, a lower cost will be achieved. Part 3-Design of the Operations Starbucks Operational Design Operational Design introduction and importance Starbucks‘s CEO Howard Schultz, has firmly believed that the company’s success mainly relies on customers having a positive experience when visiting a store. The coffeehouse chain is famous about selling the Starbucks experience whilst having a cup of coffee which is friendly, warm and relaxing. For the past three decades this business model has worked and helped the organization to expand both in terms of an international expansion strategy and as well as identify new opportunities to streamline their business processes and have merchandise sold in stores ,coffee beans in various grocery items and later on ‘’Hear ‘’music. The types of service that the company operates identified as a process type- Service shop. Definition: Service processes that are positioned between professional services and mass services usually with medium levels of volume and customization. (Nigel Slack, Stuart Chambers, Robert Johnston.) How Starbucks delivers the service: The major part of this type of an operation is that there is a Front room which means everything that is visible to the customer and Back room operations which include all supporting activities which is required in preparation to deliver the product and service to customers. There is a clear transparency at this business model and standardized products of which the customer order but can add or take away ingredients as per request .For an example a cappuccino with a shot of caramel or vanilla flavour. Based on customer feedback majority of the customers valued the following attributes from Starbucks when delivering their service: ✓ Friendly baristas and feel as valued customer ✓ Clean store and highest quality coffee ✓ Fast service and pleasant atmosphere ✓ Reasonable prices and a wide variety of products Key design area at Starbucks: There is a high emphasis on store design and the core offering is coffee that the store sells. However innovation and a response to various globalization factors such as being environmentally friendly, use renewable energy and minimize waste by recycle cups has been adapted. The key evolution was when Starbucks has changed from foam based to paper cups for its takeaway drinks and the growth in non coffee retail items. The store design of the company has been revamped and along with added facilities such as WI-FI connection there is a high emphasis of decorate the stores that reflect the neighbourhood it’s based and encourage community feel and emphasis. Another added feature in certain local areas baristas to learn 100 names and drink orders of 100 regular customers. Theme selection: -Strategic planning of key concepts, themes and palettes. -Taking input from a focus group in terms of getting more customer insight. -Internal communications and feedback from employees and baristas that contributes to the overall Objective of creating a better customer experience. -Front line staff and customer feedback is the key part of process design at Starbucks coffee shops. -They ensured to employ local craftsmen and use recycled and reused materials whenever is possible. Local focus –Ealing Broadway The shop we have chosen for our focus is the one located at St Mary’s Road, just 100 m off the mall. The reason for that is given is close to university, when time allows our group and many other students like to go and have a drink and a chat. We had a consistent great service and high quality drinks served at all times. Analyzing the store I would like to introduce and apply the Service Blueprint process for Starbucks Ealing. Service blueprinting – definition: As Greasly (2009) defines: ‘’Charting device for processes which documents the interaction between the customer and the service provider.’’ The purpose of the service blueprint to identify areas that not efficient, cause wastage and make a correction analysis based on that which will result in overcoming problem areas. There is a set of activities which will start defining by customer actions by walk into the store and look at the menu and place and order .From the barista point of view is taking the order accurately and the payment as well as prepare the drinks to the standard quick. Because of the store layout and the equipment and some raw materials such as sugar and milk, syrups and cups are conveniently located at an all in one service counter, employee’s waste minimal time when serving customers therefore having a positive impact on reducing queues. Lean operations for Starbucks: Lean operations deals with maximizing output with minimum wastage and fully utilize resources. The major task they trying to achieve is to speed up the customer order and serving process, resulting being reduced queues and more revenue. However there is a recent backlash through customer feedback that they feel they are rushed to make an order and the loss of positive experience which is rather now emphasised on the speed of service. Conclusion for question 3: Starbucks has so much inputs and effort into its operations strategy ,and for that reason they have to work out a way around of when it comes to adapting lean operations .Their major challenge is to speed up their service and stay efficient but avoid becoming like a fast food outlet ,and continue on building a positive experience. Part 4 Proposed Operational Change/Improvement Proposed operational change/ improvement Overview current market & strategies for next fiscal period Throughout fiscal 2008 and 2009, Starbucks experienced a consistent weakening in its business. Management recognizes that it faces a more challenging environment from an economic operational and competitive standpoint entering fiscal 2010. In response to those challenges, management intends to focus in the following key areas: • Better operational excellence at the store level; • More meaningful innovation to continue to differentiate the store experience; • Increase efficiencies and effectiveness in the general and administrative infrastructure • To become more capable of navigating through the fluctuation in the external environment Operations Strategy supports the corporate strategy and requires continuous cross-functional interaction. Starbucks operations strategy is a customer driven strategy. Understanding queues Most organisations realise the importance of queues, and provide additional staff and resources where necessary. The till layout and subsequent queue formation is of utmost importance to Starbucks. Customers arrive in unpredictable intervals – moreover, the length of time it takes to “process” each customer varies: dependant on number of purchases made, choice of payment method (e.g.. Cash or Credit card), speed of Customer services assistant, selling difficulties (e.g. Running out of till receipt, change, carrier bags) – using bell for assistance and subsequent response time of staff member. Length of queue is critical: there is the risk of alienating existing customers, and discouraging new customers to shop at the store. Important issue as queues affects design of the store, the capacity planning, layout planning, inventory management and scheduling. Why understand queues are important' Que problems lead to: • Lost Revenue • Customer dissatisfaction • Brand damage • Staff stress Our Proposal • Reduce queue times at peaks • Increase revenue How can Operations improve or change' • Operational changes to staffing levels, allocation of tasks and customer interaction. • Employ extra part time staff to cover peaks and utilise staff at peak times to prioritise till & service not tables. • Customer capture, take the order fast, less drop out. Operations can input and help overcame theses pqp (peak queue period) at the same time increasing turnover. Extra staff need not be highly skilled as they can work floor area, at peak times pull most experienced staff behind the service area. Customer capture = once a customer has placed his order he is less likely to “drop out” so, engaging customers initially at peak times needs to be fast. Proposed Changes and Improvements – continued • Standing instructions change • Table service and store maintenance reduced priority • Greeters on desk, takes orders ensuring that “other” non coffee purchases are handled separately from coffee production, reduce drop out • Both coffee dispensing outlets used at same time • Customers dealt with in fast but friendly manner Conclusion Success and ongoing roll-out development will be apparent in the bellow: • Increase revenue • Increase service speed at peak times • Improve customer satisfaction • Better utilisation of staff • Improve staff morale References and Bibliography Slack N, Chambers S, Johnston R: Operations Management, (2006)5th ed, Pearson Education (p98) Greasley A: Operations Management (2009), 2nd ed, Chichester, England, Wiley and Sons Ltd (pp202-230) On slide Service blueprint map , based on Fig 8.7 at p212. Design Council: Design at Starbucks, (December 2007), Date accessed 15/10/2009, Accessible at: http://www.designcouncil.org.uk/About-Design/managingdesign/Design-at-Starbucks/ Mark Graban on March 30, 2009: Starbucks tests ‘’Lean ‘’ operations in some stores. Date accessed: 15/10/2009, Accessible at: http://www.mbtmag.com/blog/Get_Lean_and_Prosper/12058-Starbucks_Tests_Lean_Operations_In_Some_Stores.php Raissa Carey, 08/09/2009, Starbuck’s Lean Ruins the experience, Quality Digest's. Date accessed: 10/10/2009, Accessible at: http://www.qualitydigest.com/inside/quality-insider-article/starbucks-lean-ruins-experience.html Restaurants and Institutions, 6/25/2009, Starbuck’s Plans New Global Store Design Date accessed: 10/10/2009, Accessible at: http://www.rimag.com/article/CA6667520.html The Starbucks Corporation Fiscal 2008 Annual Report Starbucks Coffee Company website at http://www.starbucks.com/ The company profile for Starbucks Corp (SBUX) at http://zenobank.com/index.php'symbol=SBUX&page=quotesearch (accessed on the 8/10/09) The financial data for Starbucks Corp (SBUX) at http://zenobank.com/index.php'symbol=SBUX&page=quotesearch (accessed on the 8/10/09) Starbucks Structure at http://company.monster.com/starbucks/about/structure.htm (accessed on the 8/10/09) Starbucks Culture at http://company.monster.com/starbucks/about/culture.htm (accessed on the 8/10/09) Starbucks Company Fact Sheet at http://www.starbucks.com/aboutus/Company_Factsheet.pdf (accessed on the 8/10/09) Starbucks Company Profile at http://www.starbucks.com/aboutus/Company_Profile.pdf (accessed on the 8/10/09) Appendix The copies of the presentation slides are attached at the back of this assignment.