Operations Management : Good Operating Practices Of Companies (MARICO , STARBUCKS )

1. 3/3/2017 Operations
Management
Good Operating
Practices Of Companies
Vishakha Choudhary

2. National company : Marico
Marico is one the leading company in FMCG sector incepted in year 1988. The company has created
one of biggest brands in India. Every month ,over 70 million packs from Marico reachapproximately 130
million consumers in about 23 million households through a widespread distribution network of more
than 2.5 Million outlets in India and overseas
FMCG is one of the biggest markets in India and hence the green practices of such big industry highly
contribute to the well-being of the society through saving environment. The major categories of the
FMCG are cosmetics, nondurables, toiletries and food products.
Products
Consumer products business
Marico as consumer products has prominent market share in coconut oil, hair oils, post wash hair care,
anti lice treatment, edible oil, fabric care, and etc.Under this it created brands like Parachute, Safola,
Revive, Starz, Medikar, hair & care etc.
It has also entered food segment through Saffola Diabetes Management Atta mix.
International products
Marico presence in international market became more evident through its major acquisition of
international brands namely camellia, aromatic ,fianc, Hair Code ,Sundari, etc .Acquisition of Hair Code
gave Marico a customer base of 26 million.

3. KAYA
With KAYA Marico entered into skin care segment .Its KAYA Skin clinic offers dermatological &
scientific procedures most of them approved by USFDA. Today there 65 Skin Clinics in 19 Indian cities,
9 in Middle East has a customer base of 350,000.
Internal control systems and adequacy
Marico has a well-established and comprehensive internal control structure across value chain, to ensure
that all assets are. Safeguarded and protected against loss from unauthorized use or disposition,
authorized, recorded and reported correctly and that operations are conducted in an efficient and cost
effective manner. The key constituents the internal control system are:
• Establishment and review of business plans
• Identification of key risks and opportunities
• Policies on operational and strategic risk management
• Clear and well defined organization structure and limits of financial authority
• Continuous identification of areas requiring strengthening of internal controls
• Operating procedures to ensure of business processes
• Systems of monitoring compliance with statutory regulations
• Well-defined principles and procedures for evaluation of new business proposals
• A robust management information system
• A robust internal audit and review system
The work of internal auditor’s recruitment process. Is coordinated by an internal team at Marico. This
combination of Marico's internal team Marico ensures that its work environment and expertise of Aneja
Associates ensures is challenging and motivating, through its independence as well as effective value
addition. Management by Results policy. This includes performance-based compensation, along with
Internal audits are undertaken on an other measures that help enhance performance. Continuous basis,
covering various areas across the value chain like manufacturing, operations, sales and distribution,
marketing and finance.

4. Young brigade:It is a flat organization. So the kind of freedom that is given to managers at a very young
age is very high. Thus, when people work with Marico, it provides a lot of empowerment and a lot of
satisfaction of doing a holistic job rather than executing the directions that somebody sitting in another
country has provided. Here you have to actually do a lot of things including conceptualizing things. That
is a key differentiator.
While talking of people policies, one certainly has to mention ‘Total football, Total management'
approach to job rotations. A policy of such drastic job rotations does not appear to be a common
corporate practice.|Maricowantstohave a win-win kind of arrangementwith all organization members.
If a person has been handling finances for 10 years,he will leave in search of some other challenge, some
other learning. But job rotation is not only shifting. First it is determined what the employee's liking is.
In the organization, there is a lot of debate and dialogue centered on organizational issues and so
awareness of what are the issues in HR is pretty high which helps authorities make informed decisions.
Ultimately it is also a matter of taking some degree of risk For instance; sometimes the decisions have
not worked out. But this systemmight help in extending a manager'sstaywith the company. The manager
also gets experience. If it does not work out, then he would leave, there is nothing wrong with that.
Kaya, is one ofthe very fewexamples where an FMCG player is going into solutions business.
A decade ago, Mariwala was considering entering a new line of business. And at the top of his mind was
a business with high entry barriers. The idea germinated when a friend approached Mariwala to explore
if they could distribute hair-removal laser machines in India. After substantial research and a trip to New
York, Mariwala zeroed in on skin care,and an incubation cell was set up. It is one of the only examples
that I where a product player has gone into solutions. There is a very strong reason for it. It did happen a
little bit by chance also but there was always a desire to go into solutions. If you have a problem of your
skin say pimples you will just go buy a cream. As opposed to this when you go to Kaya you will get
customized treatment by the doctor then you will have services, products and a special recommended
diet. The whole 360 degree approach to the skin is far more effective that just using a product. So the
belief is that if you need to address issue of skin or whatever else you are doing - hair wellness etc.,you
can address it far more effectively through a 360 degree approach that is customized to the customers'
needs.
Another reason was that Marico wanted to enter the skin space and felt that if it went through the product
route it will be difficult for it to become market leaders in this highly competitive market. So Marico took
it on through a service route and created a brand. And then it also have products under Kaya.

5. Supply chain
Marico faced serious challenges in copra procurement because of volatility in prices and uncertain
supplies leading to unpredictable returns. Through creative use of mobile technology, Marico managed
to bypass intermediaries in its supply chain and reach out to a large number of small coconut farmers.
Mobile technology allowed Marico to manage transactions with the farmers in a cost-effective way for
offering quotations and confirming orders. Through direct sourcing facilitated by technology, Marico
today has managed to significantly reduce the variability in its raw material prices and supplies.
Outbound Supply Chain Redesign
My SAP business Intelligence
Big bang approach for SAP implementation
Stage 1: Lower inventory and supply chain costs
Revamp processes eg:Technological support through highly integrated applications systems
ERP e.g.: Big bang rollout in 2001
Stage 2: Resolve forecasting problems, eliminate inventory and stock- out problems
Partner relationship with distributors e.g.: Timely sales and inventory information
VMI e.g.: Manage distributor inventory by replenishing stocks on the basis of distributor’s input of sales
to retailers.
•Reduced planning cycle
• From 30 days to 10 days
•Improved forecasting accuracy
• Improved delivery reliability
Operational improvements
• Both primary and secondary sales figures were availableImproved forecasting
• VMI implemented for C&FA
• SAP heuristics ensured shipments are sent in full truckloads
and that depot inventories simultaneously remain within
prescribed inventory norms
Improved distribution
•Partnership relation with distributors
• Monitor and manage distributor inventory by replenishing
stock on the basis of secondary sales
• C&FA supposed to replenish distributors within specified
period or face penalty
Improved distributor relationship:
reduced bullwhip effect

6. Marico’s inbound supply change
 Prior to 1991, Copra purchase unit was in Mumbai Marico contracted brokers in Mumbai who in
turn contracted brokers in Kerala.
 Brokers in Kerala had their own trail of intermediaries
 Copra buying is approximately 50% of Marico’s purchase portfolio Increased cost of
procurement due to presence of many intermediaries
 Quality of the copra bought from market significantly different from one that reached Marico
factories Quantity discrepancies Price and Payment terms were dictated by brokers Frequent
supply disruptions
Various Actors in the Copra Supply Chain
To reduce dependency on terminal markets, Marico started sourcing from interior traders- small
aggregators who sourced Copra from interior villages. The following chain is followed now:
Supplier
Network
in
Terminal
Market
Terminal
Market
Brokers
in Kerala
Mumbai
based
brokers
Marico
DISINTEGRA
TION AND IT
reducing
intermediaries in
supply channel.
Buying Office set up
in Kozhikodein 1991,
bypassing 2layers of
primary brokers at
Mumbai & Kerala
Factory set upin
Kanjikode,Puduchery
and Goa. Mumbai
factory shut down.
New factories closer
to sourcing locations
and markets
Terminalmarkets
had strong labour
unions

7.  The IT push : Big bang ERP implementation in 2001-02
• Marico’s Copra suppliers connected through web portal- Marico Connect
• Institutionalize e-buying in Copra purchase (dealt later)
 Further Disintermediation: Share of sourcing through Copra Collection Center
• To further eliminate traders, Marico started with own collection centers
• This brought more stability to the supplies: Small farmers could sell directly to Marico’s ccs unlike
large traders who generally would wait for the right quantity and price
Conclusion:-
Marico’s Outbound Supply Chain: Forecasting and distribution errors impacted company’s cash flows
and hindered expansion
By effective implementation of SAP, forecasting and distributor relationship improved, costs and
inventory levels went down
Marico’s Inbound Supply Chain: Marico faced increased costs of procurement and frequent supply
disruptions due to many levels in supply channel
Disintermediation and IT assisted process improvement led to reduced costs, procurement lead time and
efficient operations
FARMERS
COPRA
CONVERTERS
TRADERS IN
TERMINAL
MARLKETS
MARICO
INTERIOR
TRADERS
MARICO

8. Innovating from oil to cream
Marico wasin a fix: its Parachute hair oil wasa hit with Indians in the Gulf, but why were Arabsshunning
it? Well, apparently because they preferred hair creams to oils. Word went back to headquarters in
Mumbai: Send cream,not oil. The result: Parachute Advance Hair Nourishment Cream,launched in the
UAE in 2001. Since then, Marico’s sales in the region have never slowed. Better still, Marico decided to
try the cream back on its home turf and launched it in 2005 as an after-shower cream,and now has 19 per
cent of the hair creams and gels segment The secrets of Marico’ success: localization coupled with
transfer of learnings, as it acquired local firms or set up its own channels and manufacturing bases.
Striking Roots for Marico, the Gulf was a good Launchpad for its global forays. After the hair-creams-
not-oils lesson, Marico was quick to adapt other practices. Now, Parachute cream has become the #1
player with a market share of 23 per cent in the Gulf Cooperation Council (GCC) region. The business
grew out of Dubai into all the GCC countries across West Asia.
From its foundations, Marico has worked outside the box, to bring innovation to its customers through
the careful creation of continuous and sustainable change. (Marico Industries). Marico’s sustainability
effortsare aimed towards the ecology, whilst institutionalizing a ‘green mindset’ among the Mariconians.
Marico has successfully implemented over 50 ideas in the areas of energy, water, and paper usage
reduction in the past 2 years. The ideas varied from process changes in manufacturing to investment in
equipment that would reduce energy consumption to reduced usage of plastic (Marico Industries)
Sustainable supply assurance is at the heart of Marico's Procurement Excellence Framework. As a part
of its business initiatives, Marico hasbeen able to forge strong and long-lasting relationships with farmers
under the "Farmer First" program.
a. Coconut cultivation
1. Package of Practices:Marico has set up a team to understand the best practices for
Coconut farming through learning programs with universities & on-field experiments.
The information collected is converted into a Package of practice manual which is
circulated to farmers. Exclusive training programs are designed for the farmers
accordingly.
 Trained 3000 farmers with total area of 6000 acres
 Distributed around 2,200 hybrid coconut saplings to the coconut farmers (free of
cost) in Karnataka,Tamilnadu, Andhra Pradesh and Kerala so that farmers can
experience the high productivity of hybrids.

9.  Impact: 120 farmersspreadacross368 Acresof land have adopted the suggested
practices with regular monitoring & guidance of Marico personnel. Early
adopters who started in August 15 have shown 20% cumulative productivity
increase in the months Jan-Apr.
2. Partnering with Govt.: Marico is working with the Government of Kerala as part of
their Keragramam Project initiative in Kavannur Panchayat,Malappuram. Marico have
partnered with the agricultural departments in the state for training farmers and setting
up 12 model farms across Kerala. These Model Farms aim to educate and demonstrate
benefits of scientific farming and pest management practices.
3. Collaboration with Coconut board of India: Marico’s Copra collection centre in
Malappuram district partnered actively with the Coconut Development Board for rollout
& execution of the CPS(Coconut Producer’sSociety) program. Asa part of the program,
the collection centre will be leveraging its reach to the farmers to form clusters in order
to avail benefits from the Govt. Of India. This initiative has brought about a
transformation in the lives of coconut farmers in that area. Overall, 110 clusters were
formed from 07-08 to 13-14 and 121 CPS were formed in 14-15 to 15-16. These efforts
influenced the lives of 7,700 farmers covering more than 6,700 acres.
b. Safflower productivity development:
Marico has beeninstrumental in developing Safflower production aswell asproductivity in India.
Multiple initiatives have been undertaken in past 10 years to arrest decline of crop and develop
Safflower as a profitable option for Rabi season. We are making efforts towards bringing in new
technological solutions to farmers and improve productivity of Safflower in farmers’ fields.
Key initiatives –
Optimizing the resource consumption and improving operational efficiency has always been a priority
for all our manufacturing locations. Most of our manufacturing locations are certified as per ISO: 14001
Seed Multiplication
Program
Quality ofseedis themost
important controllable
variable for improving yields
of Safflower crop. Marico
works with private seed
companies by contributing
money and human
resources in production,
grading andsale ofquality
seeds tosafflower farmers.
As a resultofthis
intervention,we havebeen
able to improve seed
replacement rateto 31%
from 0.07%.
Pre-Sowing Training Classes
(PSTC)
Marico teamregularly
conducts PSTC classes
wherein wedisseminate
information onthebest
practices ofgrowing
Safflower, relevantto the
area wherefarmers operate.
Select influentialand
progressivefarmers are
shortlistedfor theclasses to
help popularisethese
practices among other
farmers inthearea.
PPP Programswith
Government of
Maharashtra.
Public-Privatepartnership
programs withstate
agriculturedepartments are
undertakenin order to help
governmentdriveagenda of
welfare andincome
maximisationoffarmers.
Depending on the program,
Marico pledges either free
inputs intheform of
effective seeds or gives a
buying guaranteetothe
participating farmers
Experiment/Demonstration
Plots& Field days
Marico regularly organises
experiment/demonstration
plots to showcase the
effectiveness ofnew
technology to farmers in
adjoining areas. These plots
help us in screening any new
technology on the basis of
their on-field results.
Marico’s agri-extension
team recommends new
practice tofarmers only ifit
works in our experiment
plots.

10. Environment Management System. Our largest manufacturing plant in Baddi has been certified as per
ISO: 50001 Energy Management System.
Some of the achievements in green practice of Marico are:
• Reduction of water consumption at Jalgaon plant by about 36%.
• Use of recycle paper at Kaya Skin Clinic.
• Reduction of plastic consumption by 90% in plastic bottles
Wide reach
Marico Ltd, the maker of Parachute and Saffola oils, has increased its distribution network by 60% in the
top six metros over the past six months alone. In December,the company started testing a new go-to-
market strategy to generate demand in Mumbai, which will be rolled out nationally in the next six
months. Marico is also trying to double the growth in its portfolio of youth brands like Set
Wet, Livon and Zatak which it acquired from Paras Pharmaceuticals Ltd two years ago.
Energy
efficiency: Energy
efficiency
improvements were
carried out across
all units to reduce
overall energy
(thermal as well as
electrical)
consumption.
Electricity
reduction initiatives
saved overall
900000+ units in
FY 15-16
equivalent to 5.8%
improvement over
FY 14-15. Waste
heat recovery is
done to reduce fuel
requirement.
Renewable
energy: marico
have increased the
use of biomass in
boilers at all
facilities. As a
result Green House
Gas emissions are
also reduced to a
great extent.
Marico has started
using wind energy
for its units and
business associates
in southern cluster
which will provide
20 L units of
renewable energy
per annum worth of
reducing Green
House Gas
emissions by 1000
tCO2 (Tons of
Carbon dioxide)
approximately.
Green House Gas
emissions
intensity:Continuo
us efforts are taken
to reduce the Green
House Gas
emissions arising
out of own
operation as well as
helping business
associates by
improving their
operational
efficiencies.
Waste elimination
and yield
improvement: Proc
ess and packaging
design
improvements in
India as well
international
locations have
benefited in
reduction of
packing material.
Overall 08 projects
were completed in
last 2 years for
design optimization
which had helped
in saving packing
material worth of
260 MT (Metric
Ton).
Efficiency
improvement at
business
associates: A
focussed effort in
improving
operational
efficiencies of our
business associates
resulted in material
movement
reduction which is
equivalent of 13
tCO2 annually.
Initiatives like
usage of multi-
cavity moulds, high
speed printing,
combing of
operations were key
contributors.

11.  Asthe company looks at future growth it has identified five areasoftransformation— innovation,
go to market transformation, talent value proposition, IT and analytics and cost management
 In December,the company signed a contractwith a global firm to outsource its book keeping and
supply chain processes. It believes this automation will reduce inventory days with its suppliers,
thereby increasing their return on investment
 In the coming years, Marico is looking to turn itself into an emerging markets MNC. It has
identified emerging markets of Asia and Africa to expand into.
 In markets where it is already present, Marico is looking at increasing its portfolio and getting
into adjacent markets. For instance, in core markets like Bangladesh, the company has just one
strong brand Parachute coconut oil.
 In Vietnam, it’s male grooming. Similarly, there are adjacent markets. In the past year the
company hasexpanded its operations to Myanmar,Cambodia and North Africa.The international
margins have risen to 16% from 10% since April 2013.
 Nearly, a fourth of Marico’s revenue comes from its international operations. For peers, GCPL,
the maker of Cinthol soaps and Hit insecticides, international revenue accounts for nearly 48%
of its consolidated revenues.
 The company has also revised its strategy for the Paras portfolio of brands to focus on hair gels
and conditioners as opposed to deodorants—a highly competitive category.
 The change in strategy will see the Paras portfolio’s growth more than double from current 7%
to 15%, in the coming year.

12. Best practice and innovation
The solution enables Marico to meet its key strategic objective of best in class governance and risk
management framework. It enables a superior risk management framework for foreign exchange
contracts automating the operational and accounting aspect.
Foreign remittance interface
 It streamlined the process of making foreign exchange payments for goods and services
incorporating the work flow required in making these payments.
 Facilitates creation of digital repository of documents together with robust internal control
framework.
 Real-time status and easy access of payment requests to all the details/documents related to the
payment request in one place.
 Email alerts at all stages of the request to ensure statutory compliance.
Foreign exchange derivatives lifecycle management
A holistic approach to track and automate the entire lifecycle of currency contracts and compliances. It
has the following features:
 Real-time database,tracking, reminders of all derivative transactions.
 An escalation matrix built-in, for ensuring statutory compliance such as timely submission of
underlying and deal confirmations to the bank.
 Alerts for rollovers and exposure-wide tracking of derivatives booked.
 Generation of derivative accounting entries, audit documentation, statutory, conforming to
applicable accounting standards and other MIS reports.

13. International company: Starbucks
Coffee is second only to water as the world’s most popular drink, with more than 400 billion cups
consumed every year. Coffee is a giant industry employing 20 million people globally, and ranks as the
second most traded commodity on the planet after petroleum.
Starbucks Corporation is an American coffee company coffeehouse chain. The first Starbucks store
was opened in March 30, 1971 in Seattle, Washington. Their first store was located at 2000 Western
Avenue and it sold roasted whole bean coffee till 1976. Soon they shifted their store to 1912 Pike
Place Market where they began selling espresso coffee in 1986. As of November 2016, it operates
23,768 locations worldwide. From the beginning, Starbucks set out to be a different kind of company.
One that not only celebrated coffee and the rich tradition, but that also brought a feeling of connection.
Store Design and Operations
It is not only how Starbucks operates its stores that determines the environmental impact, but also how
it builds them—and the materials it uses in the interior construction. In 2000, Starbucks joined the U.S.
Green Building Council (USGBC). Currently, it is evaluating specifications for materials used to build
the store interiors against the USGBC’s Leadership in Energy and Environmental Design (LEED)
standards. In the meantime, the footprint analysis targeted two waste reduction tactics: store recycling
and use of commuter mugs in place of paper cups

14. The store recycling metric measures the
percentage of stores with established
recycling programs. Starbucks goal is to
offer recycling in all of the company
operated stores...

15. Working with suppliers
Starbucks seek suppliers who share their values. Environmental Guidelines Key suppliers receive the
Starbucks Supplier Handbook, which encourages them to adhere to Starbucks environmental mission
statement and environmental purchasing policy. Moreover, it asks suppliers to:
• Provideproducts “fitfor use” and avoid over-
engineered products.
• Providethe mostenergy-efficientproducts
within their category.
• Eliminate excessivepackaging.
• Incorporatepaperless administration systems
whenever possible.
• Adopttechniques that maximize the
efficiency of wood use in productdesign or
building construction

16. Starbucks Supply Chain Balances Efficiency with Sustainability
Coffee colossus Starbucks has developed a supply chain that spans 19 countries and funnels everything
from cups to coffee beans into nearly 20,000 retail stores worldwide, all while maintaining the corporate
commitment to green and sustainable practices.
The Starbucks supply chain operates on an integrated make-to-stock supply model, focusing on tracking
demand in real time to meet the requirements of several different distribution channels. Starbucks uses
Oracle’s automated information system for manufacturing, GEMMS, to monitor real-time demand,
allowing production plans and schedules to be developed and modified as needed. To coordinate supply
levels with multiple distribution channels, the company must have access to constantly updated
information detailing demand, inventory, storage capacity, transportation scheduling and more to keep
things running smoothly.
One Logistics System
The company is streamlined logistically across six continents. Materials are housed in regional
distribution centers which range from 200,000 to 300,000 square feet in size.
Starbucks runs five distribution centersin the U.S.Two are company owned while the others are operated
by third party logistics companies (3pls).
Offshore distribution centers,two in Europe and two in Asia, managed by the 3pls.
Starbucks evaluates its supply chain efficiency with a simple scorecardsystemat the warehouse level and
focuses on four high level categories across the global supply chain:
 Safety in operations
 On-time delivery and order fill rates
 Total end-to-end supply chain costs
 Enterprise savings
The company strives to reduce operating costs and improve execution.
Leveraging Digital Technologies
Starbucks makes use of digital technology to ensure its supply chain is efficient and can cope with the
growing demand for high-quality coffee globally. Using an automated information system, the company
is able to monitor this demand in real-time.
By doing so, production and distribution plans & schedules can be developed and modified as and when
needed, giving Starbucks’s supply chain added flexibility and allowing the company to address peaks in
demand with agility.
Through digital technologies, Starbucks also has on-demand access to constantly-updated information on
things like stock inventory, transport scheduling and storage capacity, allowing the company’s supply
chain to operate at maximum efficiency at all times.
One strategy that Starbucks employs to increase productivity is what is known as lean manufacturing or
lean production. The essence of lean production is maximizing customer value while eliminating waste,
which means cutting out any part of the process that does not directly provide value to the customer. In
2009 Starbucks formed a 10-person “lean team”, led by Scott Heydon, to go into stores to help reduce

17. waste. Heydon learned about lean manufacturing directly from Toyota, the company that invented the
process in the first place. Many of the measures Heydon and his team implemented are simple but
effective- commonly used flavors and syrups were moved to be more easily accessible, toppings like
whipped cream and chocolate drizzle. The theory is that by shaving off a little bit of the time it took to
complete each part of the process customers would receive their orders quicker and have a more positive
overall experience.
Happy employee is a more productive employee, and Starbucks has known this for some time. When a
Starbucks executive observed good employees having difficulty with agitated customers, instead of
admonishing the employees a new training program was developed to help alleviate the stress from these
types of situations. This is just one example where Starbucks identified an area of unhappiness and gave
its workers the tools to succeed, contributing to higher overall satisfaction. Another change Starbucks
recently made was how it implements its scheduling, which includes limiting “clopening” shifts, where
employees would close the store one day and open the next, and post shifts a week in advance.

18. Starbucks Coffee’s Operations Management Decision Areas
1. Design of Goods and Services: Starbucks emphasizes premium design for its goods and services. The
premium character is linked to the company’s broad differentiation generic strategy, along with its
premium pricing strategy. Other firms, such as manufacturers,are also involved in the design of some
goods like Starbucks mugs. In this decision area of operations management, Starbucks ensures that its
goods and services reflect the firm’s high-end brand image.
2. Quality Management:Starbucks also uses the premium character in quality management. For instance,
the company carefully sources its coffee beans from coffee farmers who comply with Starbucks quality
standards. The firm also prefers to buy coffee from farmers certified under the Starbucks Coffee and
Farmer Equity (CAFE) program. Premium quality service is ensured through servant leadership and a
warmfriendly culture. In this decision area ofoperations management, Starbucksimplements high quality
to align with the firm’s premium brand image.
3. Process and Capacity Design: Process and capacity efficiency is one of the contributors to Starbucks’
success. The company’s processes are highly efficient, as observable in its cafés. Also, Starbucks
optimizes capacity and capacity utilization by designing processes to meet fluctuations in demand. For
example, processes at the firm’s cafés are flexible to adjust personnel to a sudden increase in demand
during peak hours. In this decision area of operations management, Starbucks aims to maximize cost-
effectiveness though efficiency of workflows and processes.
4. Location Strategy: Starbucks’ location strategy focuses on urban centers, especially those with large
middle and upper class populations. Most of its cafés are in densely populated areas. Also, Starbucks
occasionally uses strategic clustering of cafés in the same geographic area to gain market share and drive
competitors away. This decision area of operations management shows that Starbucks emphasizes areas
with affluent consumers who could afford its premium priced products.
5. Layout Design and Strategy: The layout design of Starbucks cafés maximizes workflow efficiency. It
also supports a warm and friendly ambiance to match the company’s organizational culture. This layout
strategy does not maximize space utilization for tables and seats because Starbucks’ focus is on premium
customer experience, which involves higher prices for more leg space in the cafés. In this decision area
of operations management, Starbucks prioritizes customer experience over space utilization.
6. Job Design and Human Resources:Starbucks’ human resource management integrates organizational
culture in all areas of the business. This organizational culture involves the employees-first attitude that
cares for Starbucks workers. Also, at the cafés,the company uses work teams of baristas. In other parts
of the organization, Starbucks uses functional positions, such as HRM positions and inventory
management positions, with less emphasis on work teams. In this decision area of operations
management, the focus is on ensuring that the Starbucks culture is woven into every job, while satisfying
basics on technical specifics of tasks.
7. Supply Chain Management: Starbucks Coffee’s supply chain is global, although majority of the
company’s coffee beans come from farmers in developing countries. The company’s strategy for its
supply chain involves diversification of suppliers to ensure stability of supply. Starbucks also uses its

19. Coffee and Farmer Equity (CAFE) program to select and prioritize suppliers. This program uses criteria
for ethical practices, including emphasis on sustainability. Thus, in this decision area of operations
management, Starbucks integrates ethics and corporate social responsibility with supply chain efficiency.
8. Inventory Management: Inventory management at Starbucks is linked with the firm’s supply chain and
various facilities. At the cafés,inventory management involves office automation and manual monitoring.
In Starbucks’ supply hubs, automation is more comprehensively used. The company aims to minimize
stock out and ensure continuous supply of coffee beansto its cafés.Starbucksaddressesthis decision area
of operations management by focusing on supply adequacy and automation.
9. Scheduling: Starbucks uses automated and manual scheduling approaches for its various business
activities. The company also applies flexible schedules for management personnel. This decision area of
operations management relates with Starbucks in terms of the firm’s objective of streamlining processes,
while allowing some degree of flexibility among management positions in the organization.
10. Maintenance: Starbucks maintains its physical assets through dedicated teams of employees trained
for maintaining facilities and equipment, as well as third parties that offer maintenance services. These
third parties include local businesses that provide equipment tune-ups for Starbucks cafés. In addition,
the company maintains its human resource capacity through training and retention strategies that include
relatively high compensation. Thus, Starbucks addresses this decision area of operations management
through the involvement of café personnel, dedicated maintenance teams, and third-party service
providers.