Operations Management Presentation of Starbucks

1. Brian P. Germain & William McDougall
Operations Management
Professor Ken Hung
Suffolk University
Sawyer Business School of
Management

2.  International Coffee House that
started in Pike Place Market,
Seattle Washington in 1977 –
Founder CEO Howard Schultz.
 17,000 stores in 50 Countries
World Wide.
 The average Starbucks customer
visits the store 6 times per
month while a loyal 20% of
customers go to the stores 16
times per month.
 Famous for their enthusiastic
“Baristas,” “specialty coffees,”
and lattes.
Sawyer Business
School of
Management

3.  Customers are the heartbeat
of most businesses, and
have a say in the value of
the company, what they’re
good at, and how to improve
on areas necessary.
 Employees provide the
atmosphere of the company.
Without enthusiastic
employees that love their
job, the company will not
grow financially or culturally.
Sawyer Business
School of
Management

4. Customers Food Orders Beverage Orders
Customer with a finished
beverage and a fresh packaged
food item.
Sawyer Business
School of
Management

5.  The Starbucks we will be
examining is the store
located in Downtown
Crossing in the heart of
Downtown Boston
 Busiest Times include
Monday – Friday
8 am – 10 am
 At most has 6 Baristas on
hand taking the orders,
preparing the drinks/food,
and working the cashiers.
Sawyer Business
School of
Management

6. Enter Exit
Manager
Beverage Bar
Cashier x 3
Condiments
Food Bar
Sawyer Business
School of
Management

7. Two-Server System
Cashier 1
Beverage
Store Bar/Pickup
Entrance
Cashier 2
Sawyer Business
School of
Management

8. 2 Hour Examination
8 AM – 10 AM
Ta = 0.7
Cashier 1
Beverage
Store Bar/Pickup
Entrance
Cashier 2
Inter Arrival Time = 0.7 Min
Service Time = 1 Min
Standard Deviation = 2 Min
CVp = 2 Min
CVa = 2.857
Sawyer Business
School of
Management

9. Min = 5
Ppl = 13.5
Min = 45
Ppl = 131
Min = 65
Cashier 1
Ppl = 187
Beverage
Store Bar/Pickup
Entrance
Cashier 2
Min = 5
 Flow Time Ppl = 13.5
= 120 Min (2 Hr)
 Flow Unit
= 345 Ppl
 Flow Rate
= 2.875 Ppl/Min
Sawyer Business
School of
Management

10.  Utilization
= 1/0.7*2 = 72%
 Time in Queue
= 1 * 0.72 ^ √2*(2+1) – 1 * 2^2 + 2.857^2 = 6.7 Min
2 1 - 0.72 2
 Time in System
= 6.7 + 1 = 7.7 Min
 Inventory in Queue
= 6.7/0.7 = 9.6 Min
 Inventory in Service
= 0.7*2 = 1.4 Min
 Inventory in System
= 9.6 + 1.4 = 11 Min
Sawyer Business
School of
Management

11.  Store size.  Inventory in Queue relates
 Huge push from 8 – 10. to over 50% of the total
 Third register not being time spent in Starbucks.
utilized.  Starbucks bar area
 No intended waiting areas. congestion due to high
 Inflow/Outflow customer volume of customers/drinks
clashing. per customer.
 Human errors in beverage
preparation.
Based on Visual Examination Based on Numbers/Data
Sawyer Business
School of
Management

12.  By reducing the standard
deviation from 2 to 1.5, the
time in queue will be reduced
from 6.7 min/customer to 3.8
min/customer (roughly 57%).
 Utilizing the third register,
thus changing from a 2-server
system to a 3-server system
will reduce the utilization from
72% to 48%, which would
reduce the time in queue to
1.33 min’s.
Sawyer Business
School of
Management

13.  Changes in the system are
difficult for franchises due to
standardization.
 Opening a third register during
peak hours would increase
costs.
 It is unreasonable to hire an
extra employee for 2
hours/day.
 The size of the store inhibits
their ability to challenge the
issue of customer congestion.
Sawyer Business
School of
Management

14. Questions?
Suffolk University
Sawyer Business School of
Management