The Relationship between TQM and Supply Chain Management
Question:
Discuss about the Analysis of Supply Chain of Starbucks Quality.
Total quality management or TQM mainly consists of the various processes and efforts that are installed by the organization to form a climate which can be improved on a continuous basis. The process of total quality management deals with an approach related to long-term success with the help of customer satisfaction. The members of the organization take part in the improvement of the various processes, services and products. The process of total quality management is based on 8 primary factors which are, customer-focused, involvement of the employees, process-centred, integrated system, systematic and strategic approach, continual improvement, decision-making based on facts and communications (Akgün et al. 2014).
Supply chain management is the process of managing the flow of the services and goods which mainly involves the movement and the storage of the raw materials that are related to the manufacture of goods. The supply chain management process consists of interlinked or interconnected networks, node business and channels which combine the provision of the services and products that are required by the end consumers. The marketing channels of an organization play an important role in the supply chain management related processes. The major function of the supply chain management of an organization are designing, planning, executing, controlling and monitoring the supply chain activities. The processes of total quality management and supply chain management are linked with each other in the organization. The reason being in a global organization managing the quality is not enough as the supply of the products at the right is also important (Androniceanu 2017).
The essay will be based on the analysis of the total quality management related steps that are taken by Starbucks and the ways by which the organization manages its supply chain activities. The major theme that will be discussed in the essay and its applications in Starbucks is “the commitment of management to quality”. The initiatives related to total quality management implemented by Starbucks to fulfil the commitment of the organization to provide quality will be analysed in the essay.
Starbucks is a coffeehouse chain and coffee company of American origin. The organization was established in the year 1971 in Seattle. The organization has more than 27,000 stores all over the world. Starbucks has acquired the position as a major representative of the concept of “second wave coffee”. The company distinguishes itself from the other venues in the US which serve coffee based on the quality, taste and the customer experience that is provided by them (Starbucks Coffee Company. 2018).
The supply chain process of Starbucks is managed closely by the management of the organization and this has been the key behind the success of this global coffeehouse chain. The supply chain practices that are employed by Starbucks are highly acclaimed in the industry and help them in providing superior services to the customers. The supply chain that has been formed by the organization is vertical in nature which involves the management of Starbucks in all the steps of the supply chain starting production of coffee beans to the coffee that is sold to the customers. The implementation of vertical supply chain enables the organization to work with almost 300,000 coffee growers all over the world. The organization believes in the direct interaction with the farmers and tries to ensure that all the coffee that are procured by them have same standards and quality (Augusto, Lisboa and Yasin 2014). The organization collaborates with the coffee growers as they are committed towards selling coffee related products which are sourced in an ethical manner. The quality of the products of the company are also measured by the standards that are established by the company itself. The standards that are developed by Starbucks are Coffee and Farmer Equity (C.A.F.E) standards and the Coffee Sourcing Guidelines (CSG). These standards mainly require the suppliers of the company to meet the sustainability, ethical and quality related standards. The standards of production that are set Starbucks provide benefits for the suppliers and the organization as well (Beske and Seuring 2014). The organization interacts directly with the coffee growers and the suppliers and provide them with special training related to the growth process. The frequent communication and close relationship with the suppliers makes them feel like an integral part of the organization. The suppliers of Starbucks along with the management make the supply chain of the organization least susceptible to the disruptions that can occur due to the external factors like shortage of workers. The various processes which are part of the supply chain management of organizations are, forecasting, transport, inventory, distribution, customer services, strategic planning and procurement (Campos et al. 2014).
Supply Chain Management at Starbucks
The inventory management process of Starbucks is mainly linked with the supply chain related activities of the organization. The inventory management process in the cafes of Starbucks involves activities like manual monitoring and office automation. The automation process is used in a more comprehensive manner in the supply hubs of Starbucks. The organization addresses the decision areas related to management operations by focussing on the supply of adequacy and the automation (Chaudary, Zafar and Salman 2015). Inventory management is one of the most important method of the entire operations management process. This requires high amounts of capital and it further affects the delivery of various goods to the customers. The process of inventory management affects all the operations of an organization including marketing, accounting, finance and the information systems. The inventory management related decisions that can be improved with the usage of tools like, bar coding and radio-frequency identification. The radio-frequency identification method refers to the usage of electromagnetic fields to identify and then track the tags that are attached to the objects in an automatic way. The process of radio-frequency identification can help an organization like Starbucks to address the issues that occur in its operations. This new process of delivery has further assisted Starbucks to improve its supply chain related activities and speed up the process of delivery of raw materials. The inventory related information of Starbucks are stored in the financial statements of the organization. Starbucks is an organization which sells products and not services and hence the organization possesses a large inventory.
According to, Dubey et al. (2017), the customer services process of Starbucks is related to the consistency of the experience that is provided by the organization. The Starbucks coffee company is dedicated towards providing quality service to the customers from the time of their establishment. The organization has gained a fame for itself with the help of their customer services related strategies. The coffeehouse chains aim at establishing successful connections with the customers and this strategy has played an important role in the success of the organization. The employees of Starbucks are trained in such a way so that they can recognise the needs and the desires of the customers. The employees try to address the issues that are faced by the customers and provide them with a positive experience in their stores. The employees of the organization try to build relationships with the customers rather than just addressing their complaints and issues. The personalized experience that is provided to the customers helps in ensuring loyalty towards the organization. The organization has also introduced rewards program for the purpose getting much more personal with the customers (C?t?lin, Bogdan and Dimitrie 2014). The different customers of the organization will receive unique offers via emails and messages. This strategy has been implemented by the organization for the purpose of increasing their customer base and increasing their sales further. Starbucks has recently implemented artificial intelligence for the purpose of providing personalized experience to the customers. This process provides suggestions to the employees regarding the type of coffee they wish to order based on their previous orders or existing database with the company. The customer strategy is based on the ways by which the organization can convince them to spend more in the stores of the coffeehouse chain. The unique customer service strategy employed by Starbucks has helped the organization in gaining the topmost position in the market (Chaudary, Zafar and Salman 2015).
Starbucks and Ethical Sourcing
As discussed by, Izvercian et al. (2014), the strategic planning related process of the Starbucks Coffee Company is based on the emphasis on the specialty coffee based products. The combination of strategies related to intensive growth influences the method that is used by Starbucks to ensure expansion and growth. The intensive growth related strategies of the organization need to be aligned with the generic strategies so that the performance of the firm is maximised and it can achieve success in the industry. Starbucks has taken initiatives to align the generic strategies with the growth related strategies by penetrating into the new markets with the unique products. The management of the coffeehouse chain mainly emphasizes on providing a warm and welcoming environment to the customers. The Starbucks Coffee uses the strategy of broad differentiation which helps in making the organization different from the others in the industry. The emphasis of the organization on specialty coffee helps in differentiating Starbucks. The implementation of the broad differentiation strategy is related to the other business areas of Starbucks. The organization has been using the responsible and sustainable policy of sourcing to differentiate its products from those of its competitors (Jackson et al. 2016). The major implication of the generic strategy of broad differentiation states that Starbucks needs to continue its innovation activities so that it can ensure innovation in the long-term. The organization brings continuous changes in the ingredients used for manufacturing and the products that are offered by them so that they always stand out from the competition in the market. The organization also aims at innovating its supply chain so that the generic strategy implemented by the company is satisfied. Therefore, based on the generic strategy, the major aim of Starbucks Coffee is to innovate the products and the supply chain (Jacobs, Chase and Lummus 2014).
Demand forecasting is related to the estimation of future demand for the products of an organization. The estimation of sales or the demand of the products in future can be termed as demand forecasting. Starbucks uses the survey method for the purpose of forecasting demands for their products in the future. The consumers of the company are surveyed based on their choice and preferences. The organization then designs its products based on the results of these surveys. The opinions of the customers are taken in the form of feedback that can be provided by them in the feedback area of their outlets (Jiménez-Jiménez et al. 2015).
Starbucks has implemented the intensive growth strategies along with their generic strategy to ensure continuous growth of the organization. The various intensive growth strategies of the organization are as follows,
Market penetration – The major growth strategy of Starbucks is the penetration of markets for the purpose of maximising the revenues from the existing markets. The organization has its presence in more than 60 countries of the world. The company aims at increasing the revenues and growth in the current markets and it involves the strategy of opening company-owned stores.
Inventory Management at Starbucks
Market development – This strategy is used by Starbucks Coffee to ensure the development of market. This strategy helps the growth of the revenues of the organization in the new market areas or the market segments (Jiménez-Jiménez et al. 2015).
Product development – This strategy is used by the coffeehouse chain for the purpose of product development. This involves the creation of new products so that revenues can be increased.
According to, Leavengood, Anderson and Daim (2014) the distribution network of Starbucks consists of multiple channels for the purpose of global trading of the coffee market. The distribution channel consists of various processes which start from the coffee farmers to the to the importers or the brokers. The brokers then sell the coffee to the mass-market of coffee producers and roasters. The organization aims at maintaining the quality of coffee by improving the supply chain and creating relationships with the coffee growers. This has helped the organization in attaining the supplies from the coffee growers and further effectively bypassing the middle market which leads in saving the funds. Multiple distribution channels are used by Starbucks for the manufacture of their products. The organization therefore has more than one design related to distribution (Kasemsap 2014). The organization sells the products with the help of direct retail chain in the stores owned by the company. Starbucks imports and further processes coffee and sells this under their brand name. The organization also sells the products in the shopping centres and supermarkets. The company has agreements related to distribution with the coffee suppliers in the hotels, airlines and coffee suppliers. The usage of multiple channels of distribution allows the organization to reach the wider market. The organization however needs to be careful about the approach of using multiple channels so that conflict related situations can be avoided (Mahmood, Qadeer and Ahmed 2015).
As discussed by, Mangan, Lalwani and Lalwani (2016) the procurement policy of Starbucks is related to the ethical purchasing of the sustainable raw materials for the purpose of production. The success of the organization is related to the success of the suppliers and the farmers who grow the coffee beans. The company helps these farmers to thrive and ensure long-term sustainability of premium products that are provided by Starbucks. The aim of the organization is to make coffee the first sustainable product of the world and improve the lives of around 1 million people. The approach of the organization related to ethical sourcing of high quality coffee helps in fostering the better future of the farmers and the communities. The purchasing practices of the organization are responsible and sustainable in nature. The company supports fair trade in the purchase of coffee and helps in empowering the small-scale farmers which will help in protecting the environment. The company grows organic coffee by using the materials and methods that have low impact on the environment (Meixell and Luoma 2015). The organic farming process helps in the replenishment and maintenance of soil health and reduction of the usage of toxic and pesticides for the purpose of building agriculture that is biologically diverse in nature.
Customer Service at Starbucks
According to, Mežinska, Lapi?a and Mazais (2015), the transportation related activities of Starbucks are a major part of the effective supply chain management. The system related to the management of supply chain is designed in a centralized manner and this helps in the control of transportation of the raw materials and the products. The management of the operations of the organization are sustainable in nature and it has the least effect on the external environment.
Comparison between the Dunkin Donuts Group and Starbucks Corporation will enable in understanding the major differences between the two largest eatery and coffee producing organizations. The menus of the two organizations and the major style of business of the two organizations are similar, however they have different business models. The Starbucks Corporation has been established around twenty years after the inception of Dunkin Donuts. However, Starbucks has shown huge growth after they have started their operations in USA. The generic strategies described by Porter have been implemented by Starbucks along with their growth related strategies (Mohammad Mosadeghrad 2014). The major implications of the generic strategies are related to cost leadership, focus strategy and differentiation strategy. The organizations need to choose a specific strategy for the formation of their overall business related strategy. Dunkin Donuts which is a U.S. based snacks and coffee shop which has selected the strategy related to cost leadership. Dunkin Donuts charges quite low prices for their products as compared to its competitors. There are three major reasons due to which the organization is able to charged lower prices for their coffee from the customers. The first reason is that they are able to produce more results and high turnovers. The production of the organization is high and this enables them to spread their fixed costs within a large number of units. Dunkin Donuts offers huge variety of products which further limits the customization which of the services and products (Monczka et al. 2015). The organization is able to bid in a competitive manner over the contracts that are made with the suppliers as they purchase the raw materials in bulk. Dunkin Donuts is able to keep tight control over the supply chain as they have strong relationships with the suppliers. The strong supply chain relationship helps the organization in keeping the costs related to production low. Dunkin Donuts has a strong presence in some parts of the United States of America, however their presence is quite less in the other parts of the country. The organization has more than 3100 stores in more than 30 countries and they serve their international customers in an effective manner. The growth of the organization has been successful due to the consistency that they have maintained between the stores (Palm, Lilja and Wiklund 2016).
The strategy that has been implemented by Starbucks is different from that of Dunkin Donuts. Starbucks has implemented the product differentiation strategy as compared to the cost leadership strategy applied by Dunkin Donuts. The organization has given utmost importance to the quality of the products rather than cost related factor. Customer service and experience has been given huge importance by Starbucks and they pride themselves for providing the best coffeehouse atmosphere to them. The customers can stay in their outlets and enjoy the coffee and the ambience of the place. The coffeehouse of Starbucks is designed in an environment friendly way and by using materials that are environment friendly in nature. The company has taken other major steps towards reducing their environmental footprints by using cups which are also environment friendly. Starbucks has always taken an ethical approach when they acquire raw materials for the production of coffee (Rushton, Croucher and Baker 2014). The ethical methods of Starbucks include the purchasing of raw materials in a responsible manner and further supporting the farmers and promoting the conservation of forests. This strategy of the organization has been able to attract the consumers who are conscious about the environment. Starbucks has implemented the strategy related to growth in a successful manner in addition to the product differentiation related strategy. The international expansion of the organization has given them the topmost position in the coffee industry. The success of Starbucks in the international arena is related to their partners in the different countries and the strong relationship that they have created with the suppliers. Starbucks gives their best in finding the partners who match their ideals, ethical considerations and strategic practices (Sabella, Kashou and Omran 2014). The organization also respects the cultures of the countries where they plan to expand their operations.
Conclusion
The comparison of the two organizations depicts that the generic strategies implemented by Starbucks and Dunkin Donuts are different from each other. Dunkin Donuts has implemented the strategy cost leadership and tried to increase their revenue in the market. On the other hand, Starbucks has implemented the strategy of product differentiation and implemented ethical business practices to create a different position in the market. The strategies implemented by Starbucks have been much more successful as compared to that of Dunkin Donuts. This has been proved by the aggressive expansion of the operations of Starbucks in 50 countries as compared to the presence of Dunkin Donuts in 30 countries (Saljoughian et al. 2014).
The comparison of Starbucks and Costa Coffee is related to the difference in strategies that are implemented in both the organizations. Costa Coffee is a multinational coffeehouse of the British origin. Costa Coffee is considered to be second largest coffee chain in the entire world after Starbucks. The organization was founded in the year 1971 and has its operations in around 31 countries of the world. Costa Coffee and Starbucks give tough competition to each other in the industry. Costa Coffee has implemented the strategy which deals with high volume of production and low margin on the sales. The organization has been expanding its sales by selling the products for prices much lower as compared to their competitors (Siva et al. 2016). On the other hand, Starbucks has always aimed at differentiating themselves based on the quality of their products. The organization has been extending their line of products with the help of the upward stretch strategy where expensive and high quality products were introduced. The organization has introduced coffee which are made using coffee beans which are rare in the industry. As compared to Costa Coffee the strategy of Starbucks is related to low volume and high margin related approach. The strategies implemented by both the organizations have some advantages and disadvantages as well. Costa Coffee uses a strategy which involves low risk in the development of the market (Stadtler 2015). The organization targets the same level of customers and the changes in their preferences with respect to the location are also taken into consideration. Costa Coffee has employed the multi brand strategy which is related to the production of other products like sandwiches and cakes along with coffee. The cafes also contain self-service machines along with the service provided by the staff of the coffeehouse chains. On the other hand, Starbucks aims at delivering the best possible service and high quality coffee to the customers who visit their outlets. The customers can enjoy the ambience in the cafes along with the best quality coffee with premium prices (Topalovi? 2015). Starbucks has been creating a lot of hype around the exclusive products that they supply to the customers. This has helped them in developing a profitable position in the market and increased their presence in various other countries of the world. The aim of Costa Coffee was to maximise their profits and on the other hand, Starbucks has the aim to develop the quality of their brand.
The total quality management theme which will be discussed based on the operations of Starbucks is the commitment of the management to quality. Quality management has been the most important factor related to the fast growth and expansion of Starbucks in the market. Starbucks has acquired the position of the leading retailer of coffee in the world. Despite the several threats from competitors in the market Starbucks has been able to maintain its topmost position in the market. The quality strategies of the organization are the major reason behind the leadership of Starbucks in the market. The earnings of the organization have seen a huge rise in the past few years due to their distinguished taste of coffee and quality standards that are maintained by them (Touboulic and Walker 2015). The innovative ideas of the Starbucks have helped the organization in remaining in maintaining competitive advantage. The founder of the organization has always implemented innovative ideas to expand the range of products and increase the market area. The organization has always maintained its market with the unique quality and flavour of their products. The coffee beans are placed in high altitudes which have increased their flavour and density. The implementation of product differentiation strategy has assisted Starbucks in expanding its market in the other countries of the world (Vrellas and Tsiotras 2015).
The quality standards that are followed by Starbucks in providing adequate quality to the customers is another reason behind their success. The company ensures the best quality service is provided to the customers who visit their outlets. The officials use the technique of random check-ins for the purpose of acquiring feedback from the customers regarding the service quality that is provided to them. The officials also check the drinks to ensure the quality. The management uses the method of EcoSure to make random checks of the qualifications that are required in the outlets. This process takes place in the Starbucks outtlets after every six months and it helps in ensuring that the quality standards are maintained by the staff in the outlets. The empowerment of employees’ method that is undertaken by Starbucks is another way of improving their quality (Wisner, Tan and Leong 2014). This is a major part of the quality system of Starbucks which is undertaken by mobilizing them so that they can become the major advertisers of the brand. The organization focusses on the improvement of the employees by providing them with benefits. Starbucks has received many prestigious awards for the various quality standards that are maintained related to their products, employees and environment in the outlets. The quality of the stores and the high levels of innovation are visible in the outlets of the organization from the first time visit. The organization has consistently developing their strategies related to quality so that they are able to provide genuine services, comfortable atmosphere and high quality coffee to the customers (Zhang, Linderman and Schroeder 2014). This is the why Starbucks has been maintained the leading position in the coffee retail industry. The management has therefore depicted high levels of commitment towards the maintenance of quality in the processes of Starbucks. The top level management is involved in the various quality management and supply chain management related steps that are taken by Starbucks. The quality maintenance in the organization starts from the coffee growers in the farms up to the cup of coffee provided to the customers in the stores (Wisner, Tan and Leong 2014).
The organization has however faced some major challenges in the market. The first challenge was related to the mobile order and pay system which was introduced by the organization. This led to long lines in the outlets and further discouraged the consumers from visiting Starbucks. The second challenge was related to the variety of food items that were provided to the consumers which somewhat decreased the effect of coffee in the outlets. These challenges have affected the revenues of the organization and Starbucks has taken many steps to ensure that their standards in the industry are maintained (Vrellas and Tsiotras 2015).
Conclusion
The essay can be concluded by stating that Starbucks has created its position in the market with the unique strategies and products that they have offered to the customers. The quality maintenance related steps taken by the company have helped in maintaining the revenues in the industry in spite of the increasing competition. The competitors of the organization have not been able to affect the sales and loyal customer base of Starbucks. The involvement of the management of Starbucks in the processes related to supply chain and quality management have ensured the best services provided to the customers. The founder of the organization with his vison of quality production has been the major driver behind the growth of Starbucks in the coffee retail industry.
References
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