STARBUCKS: A LOT MORE THAN COFFEE

Startbucks (www.starbucks.com) sells much more than espresso and cappauccino, even though coffee contributes more than 80% of the firm's total revenue. The company is focused on three broad sources of growth: additional items that are now sold on traditional Startbucks coffeehouses, new locations (both within U.S. and outside) and food services (made up of restaurants, offices, schools and hotels that purchase Starbucks products such as whole bean coffee and Frappucino) for resale. This case is limited to the first category.

Startbukcs recently added Tazo tea to its store, a hot breakfast sandwich menu, and a $5.95gouret selection of cheeses that is part of a larger lunch menu. All of these items are part of Starbucks' plan to get a larger share of each customer's food budget. Starbucks' Music CD division also sells products in its retail locations. For example, the CD division received exclusive rights to sell a remake of Alanis Morissette's Jagged Little Pill.

A major problem associated with Starbucks' adding new products to the existing stores is the effect on waiting lines. According to research, 64 percent of Americans say that they choose a restaurant based on how much time they have. Since these new items require preparation, Starbucks becomes more vulnerable to time-pressed consumers. Starbucks' director of store operations engineering acknowledges that, "This is a game of seconds."She and her 10 engineers constantly ask themselves:"How can we shave time off this?"Starbucks has focused on delivery speed since its growth spurt in the 1990s.

At Starbucks, it now takes, on average, about three minutes from the time a customer gets in the line until he/she receives the final order. This compares favorably with the three-and-one-half minute it took five years ao, when Starbucks began to measure this variable.

Let's consider some tactics to deal with the time issue. One solution is to stop requiring customer signature for credit card purchase under $25. In the past, the processing of a credit card was the longest part of the cash register transaction. Eliminating the need for a signature can reduce the service transaction time by 22 seconds. Another time-saver involves the addition of "floaters" personnel who wait on customers, take orders and run to the back rooms for necessary supplies. The chain is considering a floater who will work only on sandwiches at especially busy times. Starbucks' quest for increased speed has had no effect on its order accuracy rate that has remain constant at 99.4%. Starbucks' new sandwich items are warmed in combination convection and microwave oven that meets the chain's need for speed, as well as taste.

Starbucks' organization also has to accommodate the chain's overall growth rate. Howard Schultz, Starbucks' chairman and chief global strategist, recently announced that Starbucks now has a long term-goal of having 30,000 locations on a worldwide basis, as compared with its current 12,500 plus stores. This new goal is for 5,000 more locations than the previous objective.

Questions

1. Identify Starbucks' major issues in selecting and interacting with merchandise sources.

2. How should Starbucks evaluate its merchandise?

3. Discuss supply chain management issues for Starbucks.

4. How else can Starbucks reduce transaction times within its store?