Starbuckscostanalysis

1、Starbucks Advanced Managerial Accounting Starbucks Cost Man ageme nt An alysis 0 Advanced Managerial AccountingStarbucks Cost Management Analysis 3 Index 2. Starbucks Cost Man ageme nt An alysis In troduct ion Positi oning Starbucks s revenue Company-op erated restaura nts CPG, foodservice, and othe

2、rs Lice nsed stores Starbucks reve nu es: Why customers are willi ng to pay a p remium 1. Product mix 2. Geogra phy 3. Rewards p rograms 4.lnno vative measures Starbucks cost structure and op erat ing expen ses Cost of sales Store op erat ing expense G SUO Sa23 017 0.24 03$ 0,4! Pricing Grounds | St

3、arbucks grande latte In China Otherexpensw cwt? _-二一 Tdx 二二；Ger事？幣霜 Labor OjM -Prafit h Store暫 ex甘 Dues 125 Rent Met世dn叭 add up b lOCh eup (9 irowfeng. The Wil SUWt Joufnill Source 5n*hSifwet From bean to cup: How Starbucks transformed its supply chai n It takes a well-r un supply cha in to en sure

4、that a barista pours a good cup of Starbucks coffee. Thats because the journey from bea nto cup is a comp licated one. Coffee and other mercha ndise must be sourced from around the globe and then successfully delivered to the Starbucks Corporations 16,700 retail stores, which serve some 50 millio n

5、customers in 51 coun tries each week. But in 2008, Starbucks was nt sure that its supply cha in was meeti ng that goal. One clue that things were not quite right: the companys op erati onal costs were rising eve n though sales were cooli ng which can be see n from the follow ing tables. The net reve

6、 nue growth rate was decreas ing and the op erat ing in come was also decreas ing sig nifica ntly which means the costs in creased a lot. Betwee n October 2007 and October 2008, for example, supply chain expenses in the Uni ted States rose from US $750 millio n to more than US $825 millio n, yet sal

7、es for U.S. stores that had been open for at least one year dropped by 10 percent duri ng that same p eriod. ORMti矚 liKMW Operating Hd南n HUCEK盹出 1?S Net Pevemjw i-fipwool hMGrowth tP? R良nt協(xié)血 Irwin ioui * 亠 S7.B 3 nt tit TO久 in In part, Starbucks was a victim of its own success. Because the company w

8、as opening stores around the world at a rapid p ace, the supply cha in orga ni zati on had to focus on kee ping up with that expansion. We had bee n grow ing so fast that we had not done a good eno ugh job of gett ing the supply cha in fun dame ntals in p lace, says P eter D. Gibb ons, executive vic

9、e p reside nt of global supply chain operations. As a result, he says, the costs of running the supply cha inthe op erat ing expen ses were ris ing very stee pl y. STORES OPEN AT THE YEAR END 20000 15000 10000 5000 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Com

10、pany-op erated stores Lice nsed stores To hold those expenses in check and achieve a balanee between cost and p erforma nee, Starbucks would have to make sig nifica nt cha nges to its op erati ons. To tran sform its supply cha in, the coffee retailer established three key objectives: reorganize its

11、supply chain organization, reduce its cost to serve stores and improve executi on and lay the foun dati on for future supply cha in cap ability A plan for reorga ni zati on Starbucks supply chain transformation had support from the very top. In 2008, Chairma n, P reside nt, and Chief Executive Offic

12、er Howard Schultz tapped Gibb ons, who was the n senior vice p reside nt of global manu facturi ng op eratio ns, to run the companys supply cha in. This was a familiar role for Gibb ons; p rior to joining Starbucks in 2007, he had bee n executive vice p reside nt of supply cha in for The Glidde n Co

13、., a subsidiary of ICI Americas Inc. The first two things Gibb ons did in his new po siti on were assess how well the supply cha in was serv ing stores, and find out where costs were coming from. He soon learned that less than half of store deliveries were arriving on time. Follow ing that assessme

14、nt, Gibb ons bega n visit ing Starbucks retail stores to see the situati on for himself and get input from empio yees. A cost an alysis revealed excessive outlays for outsourcing; 65 to 70 percent of Starbucks supply chain op erat ing expen ses were tied to outsourc ing agreeme nts for transp ortati

15、o n, third-p arty logistics, and con tract manu facturi ng. Outsourc ing had bee n used to 16 Advanced Managerial AccountingStarbucks Cost Management Analysis allow the supply cha in to expand rap idly to kee p up with store openin gs, but outsourc ing had also led to sig nifica nt cost in flati on.

16、 In response to those findings, Gibbons and his leadership team devised a three-ste p supply cha in tran sformati on plan and p rese nted it to Starbucks board of directors. Un der that plan, the company would first reorga nize its supply cha in orga ni zati on, simp lifyi ng its structure and more

17、clearly defi ning fun cti onal roles. Next, Starbucks would focus on reducing the cost to serve its stores while improving its day-to-day supply chain execution. Once these supply chain fun dame ntals were firmly un der con trol, the company could the n lay the foun dati on for impro ved supply cha

18、in cap ability for the future. Sim plifyi ng the complex The first step of the transformation plan, reorganizing Starbucks supply cha in orga ni zati on, got un der way in late 2008. It invo Ived tak ing a comp lex structure and simp lify ing it so that every job fell into one of the four basic supp

19、ly cha in fun cti ons: plan, source, make, and deliver. For in sta nee, an ybody invo Ived in planning be it production planning, replenishment, or new product launcheswas placed in the planning group. Sourcing activities were grouped into two areas: coffee and non-coffee p rocureme nt. All manu fac

20、turi ng, whether done in-house or by con tract manu facturers, was assig ned to the make functional un it. And fin ally, all personnel work ing in transp ortati on, distributi on, and customer service were assig ned to the deliver group. After the supply cha in functions were reorga ni zed, the vari

21、ous dep artme nts turned their atte nti on to the sec ond objective of the supply cha in tran sformatio n: reducing costs and improving efficiencies. As part of that effort, the sourcing group worked on ide ntify ing the cost drivers that were p ush ing up p rices. They went out to un dersta nd the

22、con tracts we had, the p rices they were paying, and the shipping costs, and they began breaking items down by ingredient rather than just pu rchase p rice. They built more effective should cost models, in clud ing benchmarking ingredients and processes, which showed that they could n egotiate bette

23、r p rices. 仃 Advanced Managerial AccountingStarbucks Cost Management Analysis Mea nwhile, the manu facturi ng group devel oped a more efficie nt model for deliveri ng coffee bea ns to its p rocess ing plan ts, with the goal of manu facturi ng in the region where the product is sold. Starbucks alread

24、y owned three coffee plants in the United States, in Kent, Washington; Minden, Nevada; and York, Penn sylva nia. In 2009, the company added a fourth U.S. plan t, i n Columbia, South Caroli na. The ben efits of that app roach were quickly apparent; regi on aliz ing its coffee p roduct ion allowed Sta

25、rbucks to reduce its transp ortati on costs and lead times, says Gibb ons. Moreover, once the new facility was up and running, all of the U.S. coffee plants were able to switch from seve n-day op erati ons to five days. In additi on to the four coffee facilities it owns in the Un ited States, Starbu

26、cks also op erates a coffee plant in Amsterdam, the Netherla nds, and a p rocess ing plant for its Tazo Tea subsidiary in P ortla nd, Orego n. The company also relies on 24 co-ma nu facturers, most of them in Euro pe, Asia, Lat in America, and Can ada. Even though it spread production across a wide

27、territory, transportation, distributi on, and logistics made up the bulk of Starbucks op erat ing expen ses because the company shi ps so many differe nt p roducts around the world. Gett ing that under control presented a daunting challenge for the supply chain group. Whether coffee from Africa or m

28、erchandise from China, Starbucksto task was in tegrate that together into one global logistics system. One world, one logistics system The creati on of a sin gle, global logistics system was imp orta nt for Starbucks because of its far-flu ng supply cha in. The company gen erally brings coffee bea n

29、s from Latin America, Africa, and Asia to the United States and Europe in ocean contain ers. From the port of en try, the un roasted bea ns are trucked to six storage sites, either at a roasting plant or nearby. After the beans are roasted and p ackaged, the fini shed p roduct is trucked to regi ona

30、l distributi on cen ters, which range from 200,000 to 300,000 square feet in size. Starbucks runs five regi onal distributio n cen ters in the Un ited States; two are company-owned and the other three are op erated by third-party logistics companies which are sim ply called 3P Ls. It also has two di

31、stributi on cen ters in Europe and two in Asia, all of which are man aged by 3P Ls. Coffee, however, is only one of many p roducts held at these warehouses. They also handle other items required by Starbucks retail outlets everythi ng from furniture to capp ucc ino mix. Depending on their location,

32、the stores are supplied by either the large, regional distribution centers or by smaller warehouses called central distribution centers. Starbucks uses 33 such central distribution centers in the United States, seven in the Asia/Pacific region, five in Canada, and three in Euro pe; curre ntly, all b

33、ut one are op erated by third-party logistics companies. The central distribution centers carry dairy products, baked goods, and paper items like cups and napkins. They comb ine the coffee with these other items to make frequent deliveries via dedicated truck fleets to Starbucks own retail stores an

34、d to retail outlets that sell Starbucks-bra nded p roducts. Because delivery costs and executi on are in tertw in ed, Gibb ons and his team set about improving both. One of their first steps was to build a global map of Starbucks transportationexpenditures no easy task, because it invoIved gathering

35、 all supply chain costs by region and by customer, Gibbons says. An analysis of those expenditures allowed Starbucks to winnow its transportation carriers, reta ining on ly those that p rovided the best service. The logistics team also met with its 3PLs and reviewed productivity and con tract rates.

36、 To aid the review p rocess, the team created weekly scorecards for measuri ng those ven dors. The scorecard assessme nts of a 3P Ls p erforma nee were based on a very simple system, using only two numbers: 0 and 1. For exa mp le, if a ven dor op erat ing a warehouse or distributi on cen ter pi cked

37、 a product accurately, it earned a 1 for that activity. If a shipment was missing eve n one p allet, the 3PL received a score of 0. As part of the scorecard in itiative, Starbucks also began making service data by store, delivery lane, and stock-kee ping un it available to its supply cha in partn er

38、s. The scorecard and the weekly rhythm ensured transparency in how we were improving the cost base while maintaining a focus on looking after our people and servicing our customers, Gibb ons says. Although Starbucks has a raft of metrics for evaluating supply chain performanee, it focuses on four hi

39、gh-level categories to create consistency and balanee across the global supply chain team: safety in operations, service measured by on-time delivery and order fill rates, total en d-to-e nd supply cha in costs, and enterprise savings. This last refers to cost savings that come from areas outside lo

40、gistics, such as procurement, marketing, or research and devel opment. In un dertak ing all of those ste ps to reduce op erat ing costs and improve executi on, Starbucks was lay ing the foun dati on for future supply cha in cap abilities. Earning the companys con fide nee Since Starbucks bega n its

41、supply cha in tran sformati on effort, it has curtailed costs worldwide without compromising service delivery. In Gibbons eyes, the tran sformatio n effort has bee n a success. Today theres a lot of con fide nee in our supply cha in to execute every day, to make 70,000 deliveries a week, to get new

42、p roducts to market, and to man age p roduct tran siti ons,new p roduct in troducti ons, and p romoti on s, he says. Theres a lot of con fide nee that we now are focused on service and quality to pro vide what our stores n eed and what our other bus in ess customers n eed. To sustai n that mome ntum

43、 for impro veme nt and to en sure a future flow of tale nt into the orga ni zati on, Starbucks rece ntly bega n an in itiative to recruit top graduates of supply cha in educati on p rograms. Along with its recruit ing p rogram, the company plans to p rovide ongoing trai ning for its existi ng empio

44、yees to help them further develop their supply chain knowledge and skills. They want to make sure they have thought leaders in our supply cha in orga ni zati on. Starbucks con siders this in itiative to be so imp orta nt, i n fact, that Gibb ons now spends 40 to 50 p erce nt of his time on devel opi

45、ng, hiri ng, and reta ining supply cha in tale nt. The infusion of new recruits will allow Starbucks to stay focused on its supply chain mission of delivering products with a high level of service at the lowest p ossible cost to its stores in the Un ited States and around the globe. 27 Starbucks In-

46、Store Op erati on Efficie ncy Imp roveme nt Since 2008, Starbucks has taken many actions in order to improve the efficiency and therefore reducing the in-store operating costs. For example, Starbucks started using automatic esp resso mach ine and flavor locked p ackag ing to simplify the coffee maki

47、ng process. Starbucks also began to use smart app lia nces such as cloud-based Clover brewers and conn ected refrigerators to facilitate empioyee s work. Other strategies such as empioyee training program and lea n p roducti on were also used to improve the efficie ncy. 1. Use of automatic Esp resso

48、 mach ine Before the in troduct ion of automatic esp resso mach ine into Starbucks stores, Starbucks had orig in ally bee n using the traditi onal La Marzocco mach ine which required the op erator to grind and tamp the coffee bea ns sep arately. With the use of the automatic espresso machine, the op

49、erator simply needs to push one butt on to get a cup of esp resso coffee done. The automatic espresso machine allowed Starbucks to simplify its coffee-mak ing p rocess and reduce the comp lex training that was p reviously loss of traditi onal required on its empioyee. This helps Starbucks to improve

50、 its speed of service and reduce costs, but the price of this improvement is the coffee-mak ing exp erie nee. 2. Use of flavor locked p ackag ing Starbucks further locked packaging. Other than using the automatic espresso machine, simplified its coffee-making process with the use of flavor Starbucks

51、 stores its roasted whole bean coffee in a package that allows the roasted coffee bea ns to retain its fresh ness for mon ths after the coffee has bee n roasted. This ability to main tai n fresh ness allows Starbucks to shi p fresh-roasted coffee bea ns to its stores all over the world. The coffee b

52、ea ns come in differe nt flavors such as Van ilia, Cinnamon, Sumatra, French and many others. These bea ns that come in p ackages are used to make differe nt drinks sold in Starbucks stores. Other tha n coffee bea ns, some in gredie nts such as van ilia or caramel syrup used to make coffee are also

53、put in packages and delivered to Starbucks stores to be used. Clearly, the use of flavor locked p ackagi ng can help Starbucks sta ndardize the taste of drinks in differe nt stores and improve its op erati on efficie ncy. However, it also resulted in the loss of aroma which, perhaps, was the most po

54、werful non-verbal sig nal Starbucks had in its stores. 3. Use of smart app lia nces Si nee 2008, Starbucks has ado pted a few smart app lia nces in some of its stores. One example is the adoption of cloutiased Clover brew ers to its op erati on. This mach ine is able to kee p track of customer p ref

55、ere nces and can be remotely accessed for recipe up dat ing or p erforma nee mon itori ng. Ano ther exa mple is the adop ti on of conn ected refrigerators which can kee p track of the fresh ness of their conten ts. For exa mpl e, if a box of milk stored in the conn ected refrigerator is sp oiled, th

56、e mach ine will put warning on its mon itor. The use of smart appliances in Starbucks stores not only help improve the operation efficiency but also improve the quality of service and products pro vided to customers. 4. Em plo yee training p rogram Studies have shown that“ happyempioyee is a product

57、ive empioyee ” Starbucks realized that in order to imp rove the efficie ncy of its op erati on, it needed to make the empioyees happy. To do so, Starbucks came up with many p olicies to reach its goal. One p olicy that Starbucks used was orga nizing a training p rogram devel oped to help empioyees r

58、elief stress from work. When a good empioyee faces difficulties deali ng with agitated customers, Starbucks will not give a warning to the empioyee, but rather help the empioyee reduce stress through training p rograms. Another policy is limiting“ ciopening shifts and post shifts a week in advanee.

59、“ Clopening shift refers to a shift where empioyees would close the store one day and open the next. With limited“ ciopening ” shifts, empioyees not be too tired work ing. Po st ing shifts a week in adva nee allows empio yees to plan their own personal activities outside of work hours in adva nee. A

60、 frien dly regulati on on work ing shift lays a foun dati on on hav ing happy empio yees. Other than that, Starbucks also offers one of the most generous benefit p ackages to make the empio yees happy. The ben efit p ackages in clude healthcare, stock op ti on, on li ne educatio n and eve n tuiti on