Starbucks Sign Displays Their Supply Chain

I stopped in at my local Starbucks on Sunday morning to get some coffee beans and saw an interesting sign. The signed advertised that the Pike Place Roast beans had been roasted on April 13, in Carson Valley, Nevada.

I’m a bit of a coffee snob and I thought, for a place that has been hyping “fresh roasted” coffee, beans that are almost a month old aren’t exactly “fresh.” Most coffee experts say that beans are beyond their peak freshness after about 10 or 14 days.

Would Starbucks so openly display their slow supply chain if more customers knew that April 13 isn’t exactly “fresh roasted?” The bag was proudly labeled as “Freshly Scooped on May 10, by Chad.” Scooping isn’t exactly the “value added” step in that value stream. I guess if “freshly scooped” is all you have, then that’s what you brag about.

I posted a question about this on the “Starbucks Gossip” blog. I got a couple of responses from (I suppose) Starbucks employees.

We’re guaranteed to get the fresh-roasted beans within 14 days of roasting. As my store is 10 miles away from the Kent, WA roasting plant, it takes us 1 or 2. If they have April 13 beans — about a month old — then they haven’t got their order pars sorted out yet.

By “order pars,” the commenter means their inventory re-stocking levels. If the inventory levels were set too high, they’d have inventory sitting in the store longer than the 14 day window. But another employee disagreed:

I too thought that there was a promise of Pike Place being brewed within 14 days of roasting. I sent an email to the coffee department asking about this, because we were receiving coffee that wasn’t going to fall within those guidelines and I wondered what to do with the coffee. His answer was simply “we never promised the 14 day freshness, but it is a goal we are striving to reach.” I thought his answer was interesting. I am still receiving Pike Place that isn’t within the 14 days and I have, in fact, set very accurate pars. It isn’t the stores problem, it falls back to the roasting plant.

I wonder what the root cause of the supply chain problem would be? I wonder if the Starbucks associates are frustrated that corporate isn’t meeting their guidelines?

Coffee roasting is a fairly simple production process (although I’m sure their volumes are a challenge). If it takes a week between roasting and shipping, that means the store needs to use a certain supply of beans within 7 days. It’s not that coffee beans “go bad” or would strictly need to be disposed of after 14 days (it’s not like spoiled milk), but I wonder how their supply chain perform if they had a rule of “must throw out beans after 14 days.” I’m pretty sure my old local coffee chain in Phoenix had a similar policy (and I remember them displaying that their beans, roasted on site, were roasted 3 to 5 days ago pretty consistently). Different supply chain, different performance.

Starbucks has a small number of huge roasting plants (the largest is 700,000 sq ft in York, PA). They’re definitely going for “economies of scale,” don’t you think?


 


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Mark Graban's passion is creating a better, safer, more cost effective healthcare system for patients and better workplaces for all. Mark is a consultant, author, and speaker in the "Lean healthcare" methodology. He is author of the Shingo Award-winning books Lean Hospitals and Healthcare Kaizen, as well as The Executive Guide to Healthcare Kaizen. His most recent project is an eBook titled Practicing Lean that benefits the Louise H. Batz Patient Safety Foundation, where Mark is a board member. Mark is also the VP of Improvement & Innovation Services for the technology company KaiNexus.

11 Comments on "Starbucks Sign Displays Their Supply Chain"

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  1. Anonymous says:

    “If it takes a week between roasting and shipping, that means the store needs to use a certain supply of beans within 7 days.”
    Shouldn’t this be something more like… If the stores use a certain amount each day then that is how much the roasting plant should roast and ship – i.e. pull from the customer through the value stream?

  2. Mark Graban says:

    True – it begs the question of whether Starbucks is roasting to forecasts and “pushing” beans to stores, or are the stores pulling?

    I wonder if the shipping economics would allow for them to ship beans daily? You could have a pull system from the stores back to the roasting plant. Good point.

  3. DTLay says:

    I doubt that the value of daily shipments would outweigh the cost of 15 day old beans on the shelf.

    Maybe one way to start finding the value of the aging beans (and to really hammer home the value of “fresh” beans) is to price the packages on a sliding scale based on age. For instance, up to 14 days old is 100% of price, 15-20 days is 90%, 20-30 is 75%, over 30 is 50%. Not only does that reinforce the idea that fresh beans are more valuable for your high-end buyers, it opens up the market for those that don’t want to spend quite as much and are hoping for a bargain. At the very least, it would get those people in the door on occasion, even just to look for the older packages.

    Also, that would let you quatify the cost of the slow shipping out of the central hubs, as the days of waiting could be translated into lower revenue on the aging packages.

    All this, of course, assumes that aging packages of beans are really an issue for them.

  4. J Thatcher says:

    Although I’d personally welcome a sliding scale (while I depend on coffee, I’m in it for the caffeine more than the taste), I don’t think it’s a viable option.
    If we take Mark’s second quote as truth, that means that individual franchises are receiving beans past their 14 day mark – a sliding scale then would fundamentally alter the profit margins of a local franchise due to inefficiencies of corporate culture. Not something that goes over well, usually.

    I’m curious as to where the hold up in this occurs, and have to believe it’s in shipping.
    If the value adding, if I have this correct, occurs principally at the time of roasting, then a delay in actually roasting the beans doesn’t matter. They can sit for an indefinite (although I’m sure not infinite) amount of time before they are roasted, so long as they are then sold within 14 days after the roasting.
    The issue then, seems to lie in getting the beans from roast to franchise.

    One possible cause: Working on economies of scale, the regional roasting facilities may roast more beans than are actually needed. This might be especially true given varying consumption rates across the region served by a roasting plant (people drink more coffee in Seattle than Boise).

  5. Mike Lopez says:

    I don’t understand why Starbucks can’t put small ovens in the stores to roast an hour, shift, or day’s worth of beans?

  6. Mark Graban says:

    J Thatcher — yes, unroasted coffee beans have quite a shelf life (up to a year I believe).

    I own a small electric coffee roaster for home use. Problem is that it only roasts enough for a few pots of coffee in each batch. I buy “green” beans once in a while and the value added roasting step takes about 10 minutes.

    But, you have to let the beans sit and “degass” for 1 or two days or the coffee is bitter otherwise. Perfect for the shipping time, eh?

    To Mike, I’ll dig up some of my old research (I had briefly flirted with the idea of a custom coffee roasting business). They DO make small roasters for coffee shops (bigger than my home roaster), that would be appropriate for that use. I’d be curious to look at the cost tradeoffs in cost of machine vs. batch size.

  7. Mark Graban says:

    There’s a dedicated post on this topic at the Starbucks Gossip blog including this comment:

    “starbucks is the only coffee manufacturer in the world who thinks when beans are “scooped” matters, and hopes that because they’re such marketing geniuses they can convince the world to pay attention to what they can control (when it’s scooped) and ignore what they cant control (how stale their coffee actually is).”

  8. Anonymous says:

    And this morning, the Starbucks I frequent from time to time was completely out of their “fresh” roast coffee. (I’m also in the Phoenix metro area.)

    Fresh roasting as a business concept is fairly simple – as a home roaster I’ve put more than a normal amount of thought into the business end of this.

    Different coffees do better with different rest periods after their roast, but 3 to 10 days is the max for truly fresh roast, while 2 weeks is still tolerable.

    As for discarding old beans, that shouldn’t be a problem. They have a pretty firm grasp on what their main coffees are, but for the sake of example let’s say that they have 5 main coffees. Those should be the fresh roast, and the 5 or more secondary coffees should be sold as before.

    Concentrating on the 5 or so main coffees, they could reduce their overhead of green beans since at least half or more of their blends are going to share some of the same kinds of beans.

    Point being is that it is a fairly simple process, especially for a huge company that really does know their coffee so I’m assuming that we’re seeing some major growing pains here as they try to implement some new ideas.
    Particularly since they’re not attempting to fresh roast all of their core coffees, but only one specific blend.

  9. Bettieclaire says:

    I wonder if the shipping economics would allow for them to ship beans daily? You could have a pull system from the stores back to the roasting plant. Good point.

    Procurement Staffing

  10. I think Scooping isn’t exactly the “value added” step in that value stream.

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