2. Starbucks 10-k Analysis
Product Supply
Starbucks is committed to selling the finest whole bean coffees and coffee beverages
We control coffee purchasing, roasting and packaging, and the global distribution of coffee used in our
operations. The price of coffee is subject to significant volatility. Although most coffee trades in the
commodity market,
Supply and price can be affected by multiple factors in the producing countries, including weather, natural
disasters, crop disease, general increase in farm inputs and costs of production, inventory levels and
political and economic conditions.
Total green coffee purchase commitments as of September 27, 2015 were $1.1 billion,
We depend upon our relationships with coffee producers, outside trading companies and exporters for our
supply of green coffee.
Starbucks operates seven farmer support centers
4. “Interruption of our supply chain could affect our ability to produce or deliver our products and
could negatively impact our business and profitability. “
Any material interruption in our supply chain, such as:
• material interruption of roasted coffee supply due to the casualty loss of any of our roasting plants
• interruptions in service by our third party logistic service providers or common carriers that ship goods within our
distribution channels
• trade restrictions, such as increased tariffs or quotas, embargoes or customs restrictions
• natural disasters
Food, beverage and other products are sourced from a wide variety of domestic and international business partners in our supply
chain operations, and in certain cases are produced or sourced by our licensees directly.
A vendor's or supplier's failure to meet our standards, provide products in a timely and efficient manner, or comply with
applicable laws is beyond our control. These issues, especially for those products for which we rely on one or few suppliers or
vendors, could negatively impact our business and profitability
5. Inventories (in millions)
Sep 27, 2015 Sep 28, 2014
Coffee:
Unroasted $ 529.4 $ 432.3
Roasted 279.7 238.9
Other merchandise held for sale 318.3 265.7
Packaging and other supplies 179.0 154.0
Total $ 1,306.4 $ 1,090.9
Inventory levels vary due to seasonality, commodity market supply and price
fluctuations.
As of September 27, 2015:
• we had committed to purchasing green coffee totaling $819 million under fixed-
price contracts and an estimated $266 million under price-to-be-fixed contracts.
• approximately $38 million of our price-to-be-fixed contracts were effectively fixed
through the use of futures contracts
6. Item 2.Properties
The significant properties used by Starbucks in connection with its roasting, manufacturing, warehousing,
distribution and corporate administrative operations, serving all segments, are as follows:
Location
Approximate Size
in Square Feet Purpose
Rancho Cucamonga, CA 265,000 Manufacturing
San Francisco, CA 79,000 Warehouse and distribution
Stratford, CT 81,000 Warehouse and distribution
Augusta, GA 131,000 Manufacturing
Minden, NV (Carson Valley) 360,000 Roasting and distribution
York, PA 888,000 Roasting, distribution and warehouse
Gaston, SC (Sandy Run) 117,000 Roasting and distribution
Lebanon, TN 680,000 Distribution center
Auburn, WA 491,000 Warehouse and distribution
Kent, WA 510,000 Roasting and distribution
Seattle, WA 1,004,000 Corporate administrative
Amsterdam, Netherlands 97,000 Roasting and distribution
Samutprakarn, Thailand 81,000 Warehouse and distribution
We own our roasting facilities and lease the majority of our warehousing and distribution locations. As of
September 27, 2015, Starbucks had 12,235 company-operated stores, almost all of which are leased. We also lease
space in various locations worldwide for regional, district and other administrative offices, training facilities and
storage. In addition to the locations listed above, we hold inventory at various locations managed by third-party
warehouses.
7. Demand
• Total Revenue for 2014 was $16.5 Billion
• 75 percent of the total revenue is based on the American segment.
• 75 percent of American Revenue was based on the sales of
beverages.
• Beverage sale in America was about $10 Billion.
• The demand for the coffee cups around 4 billion of the company.
• The demand was tied to the wellness of the operating segment of
America.
8. Risks
• Starbucks faces include late delivery from
supplier
• Slow replenishment lead time
• Damaged/unusable beans and imprecise demand
forecasts
• The transportation risks and cost
9. Supply Side concerns
• Starbucks uses C.A.F.E Practices to ensure viable supply of high
quality coffee beans.
• Practices are guidelines to ensure
– high quality coffee beans,
– promote equitable relationships with farmers, workers, and
communities
– protect the environment Suppliers were chosen meticulously to
smooth the forecasted supply
• Fluctuations and long supply response times
• Costa Rica, Brazil, Vietnam, and Columbia make up the majority of
the global supply
10.
11.
12. Manufacturing
• Processing plants – From beans to coffee
• Starbucks currently owns and operates four coffee plants in the United
States
– Kent, Washington
– Minden, Nevada;
– York, Pennsylvania
– fourth U.S. plant, in Columbia, South Carolina.
• Adding the fourth roasting plant helped the company with its coffee
production
– by reducing its transportation costs
– lead time.
– With the new facility company switched from seven-day operations to five
days.
13. Supply Chain Goal
• Making the supply chain more efficient will have a high impact on its operating cost.
• Operating cost
– Transportation,
– distribution,
– Logistics
• Company ships so many different products around the world
– With 70,000 to 80,000 deliveries per week
– the inbound shipments from around the world,
• The company brings coffee beans from Latin America, Africa, and Asia to the United States and
Europe in ocean containers.
• The unroasted beans are trucked to four storage sites
• The finished product is transported to the regional distribution centers.
– These regional distribution warehouses range from 200,000 to 300,000 square feet in size.
• Starbucks runs five regional distribution centers in the United States
14.
15. Recommendation 1
• We tried to add a location in Houston, Texas
• Warehouse with capacity of 100,000 sq. ft.
• Goal
– to reduce cost for the logistics cost in the
neighboring states
– Help the growth in Mexico
