Strategic Fit and Supply Chain DriversImportance of transportation and Information

 

 

Strategic Fit and Supply Chain Drivers

Importance of transportation and Information

 

Hua, Li

Embry Riddle Aeronautical University Student

LGMT683 Supply Chain Management

Padoro, Piyabalo, Ph. D.

May 29, 2022

 

 

 

 

 

 

 

 

All business models’ final goals are focusing on reducing the cost of an order, and maximizing the company’s profit. There is no exception to a franchise restaurants’ business model. For more revenue, a company needs to attract more customers. As customer are integral parts of the system, companies could use either responsiveness or efficiency to fulfill the customers requests, resulting in an increase of customer return rate. 

Starbucks did good work on predicting customer uncertain demand through pre-order systems, improving both responsiveness and efficiency on customers’ order. Pre-ordering before arriving at a store, customers save time and staff workers could fulfill customer orders efficiently. Starbucks invested on information systems and raised their revenue (Starbucks, 2020).  Recently the labor shortage has impacted the logistical drivers which is a transportation logistical driver (Brown, 2021). To this end Starbuck’s recent shift to the deploying stores in densely populated urban areas could potentially be impacted by insufficient inventories. It has integrated closer with its suppliers to identify disruptions to the supply chain earlier than its competitors (Brown, 2021). During this period of supply chain disruption safety inventory can be increased, in case demand exceeds expectation and on hand inventory (Chopra, 2019). Therefore, Starbucks used information and transportation two key metrics to optimized both customer fulfillment and supplier efficiency. 

Krispy kreme also worked on efficiency this past decade. Early in their expansion they focused on factory stores which pre-made donuts, and glazed them freshly as a dual attraction/retail outlet. In the early 2000’s the franchise nearly went bankrupt, as factory store franchisee numbers ballooned, placing great strain on its supply chain (Parsons, 2013). Cross-Functional drivers such as information decisions and its subset demand planning did not account for the fact that Krispy Kreme also sold its donuts in gas stations and other stores, this meant that its costly 4400 square foot factory stores due to their distance apart, and relatively small numbers had become a financial burden on the whole operation (Parsons, 2013). Sourcing was inadequate and inventory was very large. As part of its revival effort the factory store concept was dropped in favor the small distribution stores seen today (Parsons, 2013). 

Fig 1. Krispy Kreme Financial report detailing per share loss (parsons, 2013).

 

Chipotle similar to taco bell uses a farm to table concept, sourcing fresh ingredients from local farms (Thier, 2021). As part of distribution in 2021 Chipotle had included digital ordering and drive through options to their stores. The information gleamed during the pandemic made Chipotle realize that it would need additional investment in its sourcing practices (Thier, 2021). It worked with the local farmers, implementing supplier selection criteria, to develop organic farmland with small farmers. Chipotle is now focusing on high supply quality, and has a goal of purchasing over 37 million pounds of food directly from small farms (Thier, 2021).

In summary, transportation and information played critical role in these three operations. They utilized gathering and sharing good information and where required shortened the travel distances. 

 

 

Reference:

Brown, A. B. (2021). Starbucks says it will help distribution partners struggling with labor shortages. Restaurant Dive. http://ezproxy.libproxy.db.erau.edu/login?url=https://www.proquest.com/trade-journals/starbucks-says-will-help-distribution-partners/docview/2524571096/se-2?accountid=27203.

Chopra, S. (2019). Supply Chain Management: Strategy, Planning, and Operation (7th edition). Pearson.

Parsons, M., & Khan, M., (2013). Stop squeezing the jelly out of my donuts—krispy kreme case study. In SAGE Business Cases. SAGE Publications, Ltd., https://dx.doi.org/10.4135/9781529710496.

Thier, J. (2021). Chipotle focuses on supply chain 'wild card'. Supply Chain Dive, http://ezproxy.libproxy.db.erau.edu/login?url=https://www-proquest-com.ezproxy.libproxy.db.erau.edu/trade-journals/chipotle-focuses-on-supply-chain-wild-card/docview/2521825017/se-2?accountid=27203.

Starbucks. (2020). Starbucks to Transform U.S. Store Portfolio by Building on the Strength of Digital Customer Relationships and the Convenience of the Starbucks App. https://stories.starbucks.com/press/2020/starbucks-to-transform-us-store-portfolio-by-building-on-the-strength-of-digital-customer-relationships/.