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Starbucks has been able to monetize these strategies not from deliberate attempts but from the benefits of strengthening its suppliers so they could also experience profitability and reinvest in their businesses.
Integrating to the Starbucks Supply Chain Management System
Starbucks moved beyond using their ethics and CSR initiatives to just support their supply chains and integrated them into their main supply chain systems as well (Witkowski, 2005). Starbucks has successfully defined the corporate value of their CSR programs as a result.
The CAFE program, when tracked as part of the broader Starbucks supply chains, showed that despite the higher costs associated with coffee and ancillary products, the company's quality costs were consistent and predictable due to a stable supplier base (Deutsche Bank 2006). The pricing models of Starbucks are specifically created to take into account high levels of commodity fluctuations including diary, sugar and paper. The company has traditionally managed this risk through the use of hedging and futures-based purchases to alleviate wide swings in pricing (Deutsche Bank 2006). The company has learned over time that the greater the level of stability in their supply chains, the more consistent the level of pricing behavior over time. The supply chain for Starbucks is shown in Figure 1, highlighting the tight integration with estates, small farms and cooperatives. These were the pilot areas of the CAFE program which has since expanded throughout the entire Starbucks value chain (Deutsche Bank 2006). Starbucks relies on a global product development process that seeks to introduce new drinks in...
The stability of their supply chains through the reliance on the CAFE program has significantly reduced sourcing, supply chain and quality management costs as a result (Deutsche Bank 2006).
Figure 4: Starbucks Supply Chain
(Deutsche Bank 2006).
Conclusion: Reciprocal Relationships through the Supply Chain Pay
Starbucks has a series of ethicacy guidelines on which the CAFE program is base, with the most critical one being transparency of financial reporting and variance cost analysis reporting (Argenti, 2004). An essential element of this compliance Starbucks requires is audited validation of payments downstream and upstream and downstream and has indexed payment schedules to these values (Deutsche Bank 2006). An analysis of results achieved show that the stabilized supply chain has significantly reduced operating expenses, and also aided in more efficient new product development cycles while also fulfilling the CSR vision, mission and values of the company.
References
Paul a Argenti. (2004). Collaborating with Activists: HOW STARBUCKS WORKS WITH NGOS. California Management Review, 47(1), 91-116
Matthew Berglind & Cheryl Nakata. (2005). Cause-related marketing: More buck than bang? Business Horizons, 48(5), 443-453.
Deutsche Bank (2006) -- Starbucks Overview. Deutsche Bank Securities Research. New York, NY. 10 July 2006.
Lee, H. (2008). Embedding sustainability: lessons from the front line. International Commerce Review: ECR Journal, 8(1), 10-20.
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