Supply Chain Network Design
Strengths and weakness
Hua, Li
Embry Riddle Aeronautical University Student
LGMT683 Supply Chain Management
Padaro, Piyabalo, Ph. D.
June 05, 2022
Starbucks with its strong brand reputation and their customers’ loyalty, have kept its lead position in coffee retail industry over decades. Behind that success, they also have strong supply chain network support. Starbucks sources coffee beans from over 30 countries to make a stable supplier network for their business. They also to coordinate with existing coffee brands, like Seattle’s best coffee brand as buffer to keep a seamless supply chain network (Gaille, 2021). Meanwhile, this supply chain network has weakness as well. In its operation area, Starbucks coffee prices are much higher than its competitive brands, so sometimes people just turn around to find another coffee shop around the corner. People who still go to Starbucks are willing to pay for a fine cup of coffee in a unique atmosphere and to enjoy the moment while staying in the store. Another supply chain network strength is, Starbucks gained business through their pre-order system, customers could customize their own cup of coffee beforehand. Either non-fat milk, add espresso shots, or remove whipped cream. Therefore, this e-business system saves customers waiting time, and improves customers’ experiences in some way. Especially during Covid-19 pandemic, it shortened staying time in the store while baristas made beverages.
Krispy Kreme donuts builds their main distribution network as wholesale and convenience chains, but not limited to ecommerce, they opened up their omni channel operation path (Stankiewicz. 2021). This omni channel saw a 23% rise in Australian business while conducting ecommerce channel testing with their payment innovations (Cameron, 2018). This way of Krispy Kreme operations saves big compared to opening physical retail stores. Maintaining wholesale as main operation and deemphasizing retail nodes helps to maximize the company’s profit. If Krispy Kreme targets wholesale stores as its main operation, it has a more explosive opportunity. Consumers going to wholesale stores for all different items in demand, such as living goods or groceries, can be easily tempted to grab a box of donuts for a family snack or to treat office workers. This strategy is similar as retail stores who let Redbox, for free, install kiosks in their stores. This is after retail stores found out Redbox’s kiosk have high customer return rate and can attract people to go inside store, and take a look and eventually lead a purchase in that store (Chopra, 2019). At same time, if they use wholesale as a main sales route, it might reduce customer experience. This because customers need to take longer to access the donuts. Sometimes, customers need to walk to the bakery section in the big wholesale store just to find the doughnuts. This challenge is indicated as below Figure 1.
Chipotle sources its ingredients from local farms to the store, with organic ingredients (Chipotle, 2022). Organic food costs more than other food, but when purchase from local area, it edges out imports from distant places due to the transportation cost. Doing local sourcing, is good for local farmers and the local economy, but when damage to the crops occur in a local area, it becomes a bottleneck in the supply chain network for the local retail store. To prevent this, Chipotle should set local farm ingredients as a first priority sourcing source, but also need maintain a percentage of produce contracted to arrive from beyond the local area. As another business as well, Chipotle also worked in the e-business arena, boosting their sales as high as 70% last year (Their, 2021).
Reference:
Gaille, B. (2021). Starbucks SWOT Analysis. https://brandongaille.com/starbucks-swot-analysis
Chipotle. (April, 2022) Chipotle’s 2021 sustainability report update demonstrates enhanced support for its people. https://ir.chipotle.com/2022-04-22-CHIPOTLES-2021-SUSTAINABILITY-REPORT-UPDATE-DEMONSTRATES-ENHANCED-SUPPORT-FOR-ITS-PEOPLE
Cameron, N. (2018) Krispy Kreme builds on omni-channel retail ambitions with payments innovation. https://www.cmo.com.au/article/650766/krispy-kreme-builds-omni-channel-retail-ambitions-payments-innovation/
Chopra, S. (2019). Supply Chain Management: Strategy, Planning, and Operation (7th edition). Pearson.
Stankiewicz, K. (2021) Krispy Kreme CEO says the doughnut chain is exercising ‘discipline’ in its growth plans. https://www.cnbc.com/2021/08/17/krispy-kreme-ceo-says-the-doughnut-chain-is-exercising-discipline-in-its-growth-plans.html
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.
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