Supply Chain Management

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This is a case that illustrates several facets at once: Globalization & Rapid Expansion, Supply Chain Management, ERP Implementation, and IT Infrastructure. This case takes place in 1997.

You have to admire the enthusiasm of Starbucks employees. Store managers have been known to stuff sacks of coffee beans into their cars and race over to help out other stores running low. Exceptional customer service, but certainly no way to run a business - especially one that's growing as quickly as Starbucks that is trying to make inroads around the globe. "With over 2,000 stores, you can't have 2,000 people running with coffee in their trunks," says Tim Duffy, director of supply chain systems and support for Starbucks. The specialty coffee supplier plans to have 2,000 retail locations up and running by year 2000, up from 1,400 today. To make sure none of these locations is beholden to a distribution system backed by a fleet of employee cars, Starbucks is in the midst of overhauling its supply chain management system. Fortunately, or perhaps unfortunately, Starbucks has chosen a best-of-breed approach over and integrated ERP solution. This approach is where companies hand pick the best software product for each piece of the supply chain process. What was supposed to be a three-year project is now slated to be finished in five, primarily because Starbucks chose a best-of-breed approach over an integrated ERP (enterprise resource planning) solution. With supply chain software vendors such as Manugistics Inc. bragging about full implementations of their applications being completed in less than a year, it's fair to ask what's taking Starbucks so long. The answer to that question provides lessons for any IT executive looking to revamp his or her company's supply chain operations with a best-of-breed system. This approach, where companies hand-pick the best software product for each piece of the supply chain process, comes with its share of headaches. Among them: an extended vendor evaluation period, complex software integration hurdles and version control problems. Relevant Background Although Starbucks was a 26 year-old company in 1997, the coffee powerhouse had been on a caffeine-jolted curve for the 5 years prior. Since it went public in 1992, the store opened 1,235 retail locations. Sales from those stores opened during that 5-year period accounted for 86% of the company's annual revenue. In short: new store growth meant revenue growth. The expansion of the retail operation, however, was just part of the supply chain story. Amazingly, Starbucks was able to handle the growth, from $103M to $700M in annual sales with its original "supply chain system". Duffy says that even though Starbucks lacked formal supply chain processes, he attributes it to the company's "ambitious and impassioned" employees. This isn't hyperbole. The only real technology being used was a merchandise management system called JDA software, running on an AS/400. The rest of the supply chain processes were done manually. Starbucks even had problems with the fundamental BOM (bill of materials). "There were as many BOMs in the company as the people who needed them," Duffy says.

The Choice In early 1995, Starbucks resolved to revamp their technology behind the supply chain. Their stated goal: to create a state-of-the-art, integrated supply chain system that would reduce costs by an undisclosed amount, improve customer service, and maintain consistent quality. Initially, Starbucks figured that an ERP package would be the best solution. With that in mind, the company's supply chain operations and IT groups defined the company's needs. Some six months after the whole process began, however, Starbucks decided that none of these ERP packages could meet its needs. Instead, it opted for a best of breed approach, which mean pulling together nine separate components.

Starbucks' Supply Chain Menu Vendor
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