STARBUCKS Justin Rentz Courtney Skillicorn Jeremy Smith

Starbucks Corporation was created as an anti-fast-food place. Now, with the economy and the increase in their competitors ratings, they are being forced into becoming more streamlined. They instituted a “lean manufacturing” team that is travelling the country to try to slim down their times and cut cost.

Starbuck’s new crusade for efficiency coincides with many top name brands struggle cut costs in a difficult economic time. In times of growth, opening new stores and adding fancy products is a key to expansion. During recession, this strategy hurts far more than it helps as people focus on saving more and spending less.

Starbucks used the last period of growth to expand their menu and hire more workers. The President of Starbucks is quoted in saying that they continued to add items and workers, but never felt pressured to optimize until the recent recession.

Retail sales overall have dropped for the fourth consecutive month, showing a continuing tendency from consumers to spend less. Starbucks itself faces stiff declines and has contingency plans for closing up to 900 stores nationwide and renegotiating deals with bakers and renters.

The company faces serious competition as other, cheaper fast food corporations like McDonalds or Dunkin Donuts expand their cheap drink line-up to lure customers away from high end establishments. Faster Starbucks stores reported as much as a 10% increase in transactions from having food and drinks ready to go quickly.

The cost cutting seems to be working, as Starbucks managed to reduce third quarter costs by $175 million. Optimization is difficult for companies like Starbucks with over 10,000 unique locations. Each store has to be individually evaluated to find improvements.

At a busy downtown Chicago store, Starbucks moved various items and bins, and improved customer satisfaction by 20% in 2 months as a result. The same store also boasted a 9% increase in transactions over the same time period.

There is still much room for improvement, as exemplified by another store in Chicago. That particular Starbucks ran out of coffee at 7:45 am and the vice president watched baristas walking all over the store looking for beans to grind.

Business Opportunity! We decided that there is a good market at the moment for consulting firms specializing in increasing efficiency of large corporations. Everyone is trying to cut costs and would probably pay a lot of money to help them do so.