1. Lean or Agile Stacey Ryder

2.  1.The Company 2.Industry and Competition 3.SWOT 4.Supply Chain Transformation 5.Move to a Leaner SC 6.Cash-to-Cash Cycle 7.Matrix 8.Key Questions Contents

3.   First store opened in 1971 in Seattle.  Now have 17,018 stores worldwide (as of July 3rd 2011) in over 50 countries.  Started by selling freshly roasted coffee beans and brewing & roasting accessories.  Now expanded into:  Over 30 coffee blends,  Hand crafted beverages,  Merchandise,  Fresh food. The Company Starbucks Coffee Company, Company Profile, July 2011 ( www.starbucks.com /assets/aboutuscompanyprofileq3201172811final.pdf)

4.   Coffee is the 2nd most widely traded commodity in the world.  $70 billion in retail sales globally.  Competition: Industry and Competition US Peet’s Coffee Caribou Coffee McDonalds Dunkin Donuts Coffee Bean & Tea Leaf UK Costa Coffee Café Nero Coffee Republic Independent coffee shops TradeCommodities.co.uk, The 10 most traded commodities, 2011, (www.tradecommodities.co.uk/commodities/)

5.  Strengths Established logo, developed brand, copyrights, trademarks. Many outlets in highly visible locations to attract new customers. Loyal customer base, loyal both to the product and the “atmosphere.” Weaknesses Too highly priced products. Lack of internal focus, with too much focus on expansion. Ever increasing number of competitors in a growing market. Unhealthy product. Opportunities Launching new products/product extension. Expansions into retail operations. New distributions channels (delivery?). Capturing emerging international markets and new customer groups. Threats New competition from existing outlets entering the industry i.e. McDonald's. US market saturation. Coffee price volatility in developing countries. Lack of ownership of coffee farms. Negative publicity from poorly treated farmers in supplying countries. SWOT

6.   In 2008 the supply chain was not meeting the needs of supplying over 50 million customers.  Operational costs were rising even though sales were cooling:  October 2007 Supply chain expenses: $750 million  October 2008 Supply chain expenses: $825 million  Sales drop during this period of 10%  WHY? Supply Chain Transformation Cooke, James A. From bean to cup: How Starbucks transformed its supply chain, 2010, (www.supplychainquarterly.com/topics/Procurement/scq201004starbucks/)

7.   3 Step transformation: 1.Recognise and simplify its supply chain organisation. 2.Focus on reducing cost to serve its stores, minimizing waste, and improving its day to day supply chain execution. 3.Lay the foundation for improvements in the future. Simplified structure: Move to a Leaner SC Plan Production Planning Replenishment Source Coffee Non-coffee items Make All manufacturing; in house or contracted Deliver Transport Distribution Customer service Cooke, James A. From bean to cup: How Starbucks transformed its supply chain, 2010, (www.supplychainquarterly.com/topics/Procurement/scq201004starbucks/)

8.  Cash-to-Cash Cycle (CCC) DIO: Days inventory outstanding DSO: Days sales outstanding DPO: Days payable outstanding FY: Fiscal year TTM: Trailing 12 months Jayson, Seth. How Fast is the Cash at Starbucks, Nov 28 2011, (www.fool.com/investing/general/2011/11/28/how-fast-is-the-cash-at- starbucks.aspx)

9.  Matrix Lean Plan & optimize Agile Quick response Kanban Continuous replenishment Hybrid De-couple through postponement Demand characteristics Predictable Unpredictable Supply characteristics Long lead times Short lead times

10.  QPush or Pull? APull, with replenishment driven due to the philosophy of having the highest quality, freshly brewed coffee and the expectation of the customers. QWhich is most common, lean or agile? ALean, due to the commodity nature if the coffee trade, the order winner being price, dominant cost is the physical cost. QOpportunity to become more agile? AIt could become more agile in the distribution of merchandise, but not coffee. QOpportunity to become leaner? ACould train staff to make the running of individual stores leaner. QIs vendor managed inventory common? ANot within Starbucks, sourcing, processing and distribution are all done within the company. Key Q’s Any More Questions? Thank you