How did Starbucks Reduce its Supply Chain Cost? 3 Tips on Cutting Down Supply Chain Costs Without Losing on Profits.

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Building a sustainable supply chain strategy is no easy business if you want to expand your business to a global scale. In the article, we will understand how Starbucks managed to reorganize and reinvent its supply and distribution strategy and become one of the largest coffee chains internationally.

Starbucks Distributive Strategy: A Transformative Move

With 25,000+ stores operating worldwide, Starbucks has managed to cut its costs by half a million and generate over 22 million dollars.

Let's break down Starbucks' distributive strategy:

1. Streamline Supply Chain Process

The first step to reducing supply chain costs was to streamline distribution procedures. The company facilitated its supply chain by implementing specific roles divided into four functional groups: plan, source, make, and deliver.

2. Monitor and Improve Processes

Each functional group was assigned a task to look for improvement. For example, the sourcing group identified the factors driving price increases. Besides this, service quality improved by introducing weekly scorecards with productivity, cost, savings, and safety metrics to improve employees' motivation.

3. Forecasting Future

With systems established to ensure supply chain execution in the present and near future, the company began taking particular care to hire only the best talent available to replenish its supply chain leadership team. The company also committed itself to onboarding training for existing staff. It also continues to adopt technology to improve customer experience, such as through online ordering and supporting other digital innovations at its new megastores.

Tips for Reducing Supply Chain Costs Without Losing Profits

Well, now that we have learnt the secret behind Starbucks' distribution strategy, let's understand a few more ways to decrease our costs without affecting the revenues.

Identify Workflow Inefficiencies

Transportation costs shouldn't be the only focus when determining concealed expenses in the supply chain management process.

It is essential to be as efficient as possible in manufacturing or providing on-point services to customers. Look for bottlenecks or situations that hinder the staff from accomplishing a task. Find out what areas need improvement by polling your team, and consider engaging an outside consultant to provide an unbiased assessment of your business processes. Indeed, this is one of the essential pointers to reducing supply chain costs.

Adapt to Modern Technology

Automation might seem a bit difficult, but using it helps you reduce your supply chain costs drastically.
Many workers perceive it as a means of replacing them, but when used properly, it may assist you in building a more cost-effective supply chain.

Consider how much time your staff spend on jobs that a machine might handle. It takes time to check inventories, prepare orders, and analyze data. Your staff may use that time to work on other projects for your company. If some operations are automated, employees will have more time to focus on their primary responsibilities.

You don't need to scale back your business; instead, you can save money by automating some tasks so that you can put more effort into maintaining the talent you already have.

Manage Inventory & Transportation

Inventory levels can potentially account for up to 75% of your overall expenditures for manufactured goods. It applies to everything, including subassemblies, raw materials, and components. By switching to a just-in-time (JIT) inventory management system, inventory expenses can be decreased.

The next major component of supply chain expenses is transportation costs. It will cost extra to process things through internal departments. Instead, think about reducing the frequency and combining shipments into larger purchases. It could make sense to outsource to specialized transportation firms if that isn't possible. It will also cut down on your operating expenses.

Bringing It All Together

We can indeed conclude that the innovative strategy used by Starbucks has transformed its brand's success. Overall, one can say that Starbucks' improved journey from bean to cup can be a significant example of a successful business strategy.

Undoubtedly, learning about Starbucks' Supply Chain journey must have been intriguing. Supply chain has been one of the top career options among young graduates. If you want to be a part of such a transformative team and bring in your visionary business ideas, an Industry Integrated MBA in Supply Chain Management from BIBS Kolkata can help you achieve that. Learn from the Industry experts themselves and start your Apprenticeships with the best companies after 8 months of classroom studies.

Pursue your Industry Integrated MBA dream with BIBS now!

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