Starbuck Improve and Control Phases
Starbucks Coffee Just Got More Expensive
*Spike in Operating Costs
*Starbucks’ Cost of Sales
*Starbucks’ Cost of expenses
*$12 million Starbucks lost after the chain shut down
Coffee prices went up for certain Starbucks lovers last July, when the chain increased its prices for the third year in a row, hiking up certain brewed coffee beverages by 10 to 20 cents and select espresso beverages and tea lattes by 10 to 30 cents. The chain increased prices again on certain cold beverages and baked goods in November. (Ledbetter, 2017)
Identifying necessary and unnecessary steps
Identifying the value
Identifying the problem
Mapping the process
Identifying the flow throughout the process
Input a pull System
We will not need to look for perfected results sense the process is designed to target excessive cost and waste
Excessive Cost and Waste
Starbucks like other business have to keep up with the flow of the market so utilized direct necessary steps. The value is represented by who is affected dud to the problem in the price case it could be both Starbucks and the consumer. By keeping an eye on the waste and production Starbucks pull system will monitor if they products being generated matches the sell volume. Controlling excessive production may allow Starbucks to decrease prices. Since there will be no down time to run trials setting a flow will help keep the operation moving along smoothly with minimum error. Each part in the process will have a flow to match in order for the changes to happen. If a part of the process seems flawed Starbucks can identify where and fix it. Monitoring the improvement will conclude if the process Is working and if steps needed to be added or taken away.
A data display tool for numerical data that breaks down discrete observations into separate categories for the purpose of identifying the “vital few”. The overall trend of the prices for the Grande size is almost the same in all the foods.
Cause and Effect Diagram
This is a visual tool used to brainstorm the probable causes for a particular effect to occur. Effect or the problem is analogously captured as the head of the fish and thus the name. The causes for this effect or problem is generated through team brainstorming and are captured along the bones of the fish. The causes generated in the brainstorming exercises by the team will depend on how closely the team is related to the problem.
Clearly, the prices are within the limits and no much effect is expected by customers
The prices are within the limits and thus no much changes in the customer expenditure. This might only affect the market share if the competitors reduce their prices and offer quality product at a lower price and compared to Starbucks. Otherwise, they are not much to be worried about.
Means of Removing the Effects of Price Increase
Reduce the number of employees to cut the wage costs
Transact in Futures to reduce the foreign exchange losses
Diversify the market to overseas market to curb effects of the local inflations
Increase market share to overseas market to minimize competition locally
Cost of Defects and Process Variation
Lack of focus on customers
Backend cost because of misalignment
Tools and better training
Attachment to the customers
Organization management support
Although most of the variables are out of the management control, other avenues should be employed to increase profits and maximize shareholders returns.
Futures and swaps are a good examples to be employed. You have to be smarter than the competition. Getting back to validation of resources, time, and money will allow Starbucks to build up a stronger core. The innovation process will help Starbucks gain its confidence back and enable customers to feel welcomed. Starbucks is a globally known name, and one of the highest trusted brand as a coffee maker. The reasonability lays on the company to reach out to the hundred thousands of partners who are looking for their backing for the highest quality coffee. Starbucks has had a tough year with different allegations which have brought lousy publicity for the company. (Metro Corp, 2018).Now Starbucks is giving the employee more training tools that will allow the customers feel as if they matter. The company also has to implement new designs so that the customer can feel the Starbucks experience. (Starbucks Corporation, 2016). The attachment to customers will reignite an influx of business and give good light to the Starbucks brand. As the connection continues, management will have to present more support that is streamlining toward the customers. The focus should be on store operations in the IT back-end systems that help guarantee a smoother customer experience. As Starbucks makes better decisions, it helps reflect the initiatives that will bring Starbucks back to the top of the coffee market.
Critical-to- Quality Characteristics
Starbucks is mostly likely going to lose more customers due to their prices increment and thus fail to meet their Critical-to-Quality features of profit maximization
The inflation and foreign exchange will greatly deter the company goals since they are out of the management control
Wage increment is mandatory to catch-up with inflation rate thereby the company has no control. This increase operation cost and thus profit reduction
To keep up with the company goals, the management has to review its actions on price increase and employs others methods to compete favorably in the market.
Profits with be threatened and stock prices might fell a lot.
Maximum Acceptance Range of Key Variables
On maximum acceptance ranges, Starbucks for the best case scenario aims for daily sales to increase over 4%. With the costs increase of the coffee’s higher price Starbucks needs for sales of the same brewed coffee to stay the same and cover any additional expenses with their signature beverages to stay on their current level or increase.
If sales match the coffee’s price increase, then Starbucks might hit a decision point to shift their strategy to bring more revenue to cover all new expenses and generate profit.
In the worst case scenario, if the coffee’s new price affects them too much on how many customers still purchase their product, the company will have to consider lowering prices of their other products to bring more paying customers and cover the expenses of the brewed coffee’s elevated price.
How to Monitor Deviations
Data sheets detailing daily sales
Data sheets detailing daily costs
Data sheets showing beverage sales by type
For this process, the firm has to rely on gathering daily data to monitor how much has the price change affected the volume of customers purchasing regular brewed coffee. Also they have to monitor and compare the sales between the brewed coffee and their other signature beverages as well as the daily costs versus what is being brought in. By gathering this data Starbucks can effectively track what is happening in their stores and adjust anything in their process if necessary.
How to Monitor Improvements
Third Party Consulting Firm
Starbucks’ will need to monitor workplace operations so that they can develop strategies designed to improve procedures and protocols. As a business scales up in sales or in size, the task of monitoring becomes more important. Monitoring operations requires management oversight, employee feedback and customer reviews. Improving the operations will require analyzing collected data to identify the underlying problems and to find resolutions that will solve future problems. (Leonard, K. (2018)
How to Control Improvements
Distribute Written Protocol
New Policies and Procedures
One of the reasons for that lack of success, for Starbucks, is the inability to sustain improvements yielded from Lean Six Sigma projects. Through LSS projects the aim is to make improvements to address a business problem, such as increasing output, reducing cycle time or reducing defects. Using the DMAIC (Define, Measure, Analyze, Improve, Control) methodology, improvements are implemented to address the problem. However, without appropriate control measures, over time improvements are likely to drift back to baseline. (Jones, 2018)
The Modified Process
Quality Customer Service
Compile Internal Factors
Implement Customer Surveys
Decide which product to discard or develop
Offer lower prices
Cut cost by delegating to companies that has an expertise
Tools are practiced to ensure that the key variables remain within the maximum acceptance ranges under the modified process. This modified process can guarantee management the success of Starbucks price rate by focusing on the forecasting models and the time series analysis of the pricing for past and future products and services.
Ledbetter, C. (2017). HuffPost, This Is Why Your Coffee Is About To Get More Expensive. Retrieved from https://www.huffingtonpost.com/entry/this-is-why-your-coffee-is-about-to-get-more-expensive_us_587f8edce4b0c147f0bc17c2
Gajannan, M. (2018). Money, Your Starbucks Coffee Just Got More Expensive. Here’s Why. Retrieved from http://time.com/money/5304415/starbucks-coffee-price-raise/
Alamgir, A. (2016). Odyssey, 22 Reasons Why You’re a Coffee Addict . Picture retrieved from https://www.theodysseyonline.com/22-reasons-why-youre-coffee-addict
Leonard, K. (2018). Chron, How to Monitor & Improve Workplace Operations. Retrieved from http://smallbusiness.chron.com/monitor-improve-workplace-operations-48158.html
JW2 Business Strategies . (2018). Picture retrieved from http://www.jw2strategies.com/how-can-jw2-help.html
Jones, O. (2018). iSixSigma, How Do Organizations Sustain Improvements? Control! Retrieved from https://www.isixsigma.com/methodology/dmaic-methodology/how-do-organizations-sustain-improvements-control/
Metro Corp. (2018). Starbucks Anti-Bias Training â€œMissed the Mark Completely, a€ Say Two Philly Baristas. Retrieved from https://www.phillymag.com/business/2018/05/30/starbucks-racial-bias-training-philadelphia/
Oyedele, A. (2018). Starbucks sinks after announcing a weaker-than-expected sales forecast and plans to close over 100 stores next year. Retrieved from https://finance.yahoo.com/news/starbucks-sinks-announcing-weaker-expected-202400074.html
Starbucks Corporation. (2016). Starbucks Statement on System Error. Retrieved from https://news.starbucks.com/news/starbucks-statement-on-system-error