University of Chicago
Type of paper: Thesis/Dissertation Chapter
Analysis the operations management of Starbucks
Operations management concentrates on managing process. All operations focus on the process of input, transformation and output. Operations management will concern about the cost of ingredients, labor requirements, and customer satisfaction. (Heizer, J, p, 39). So all the operators need to concentrate on some main objects of operations management such as capacity, quality, variability, and queuing. They should treat the task of balancing the supply with demand as their primary work. This essay will introduce the idea of how the operations are performed in Starbucks and how the relation between supply and demand is influenced. In the first section it will clarify the capacity and demand management. Regarding the second section it will point out the method in Starbucks to balance the supply and demand in quality aspect. Quality is the soul of a company,said Schurz in 2003. And the author can not agreed any more about this. For the final section it will discuss about the strategies which made by Starbucks to eliminate the problems occurred in queuing.
Capacity management used to be called “demand management” (Crandall and Markland, 1996) or “managing capacity and demand” (Fitzsimmons and Fitzsimmons, 2004). Capacity management attempts to ensure the service runs well and satisfy the visitors’ requirements(Klassen and Rohleder, 2002). In terms of MRP, namely the material requirement planning, MRP is a manufacturing project as well as practical technology. It begins with defining products based on forecasting of market demands and customers’ order. Following this, a plan based on the producing progress of products, products’ material form and stock situation is formed. With the help of computer to calculate the needed amount and time, it then can clarify the manufacture progress and order schedule (Ptak, 2011). Starbucks uses an algorithm named thousand dollar consumption algorithm to calculate the safety material consumption for the next week. This model is applicable for them to make a short term forecast of the material consumption. The best consequence they want most is a smooth rising average. Using the usage amount of weekly material given weekly sale then multiple the next weekly forecasting sales and then multiply 1.15 is the result of safe storage amount (Starbucks, 2006).
A service is an intangible and insubstantial product that cannot be touched or tasted. Services are behaviors, actions and activities (Valarie, Mary, and Dwayne, P. 4). Compare to product, there is no need for transport and storage of service.
The world’s largest coffee company, Starbucks, has 18000 stores in over 60 countries and over 200000 employees. To support this global business, the company made a success of how they organized their delivery of their services and goods. The purpose of Starbucks’ is to make a positive impact of one person, one cup and one neighborhood at a time.
Quality used to be the most difficult concept to define. However, the hospitality industry has experienced the increasingly fierce competitions about higher service quality as time goes by (Parayani et al, 2010). In the same way, Starbucks need to pay more attention on what customers want the most from the service delivery. And the customers care more about the things they experienced in current hospitality industry.
Total quality management(TQM) becomes a more and more significant business management method which is related with hospitality service(Feigenbaum, 1986). This method is aimed at satisfying customers, benefiting all the members of the organization as well as making good contributions to the society(Parasuraman, Zeithaml& Berry., 1988). It concentrates its attention on product and service quality together with the degree of devotion of members. The total quality management concerns about one process, four stages and eight sections. The management system of Starbucks can be seen as a proper instance to analyze this total quality management concept. As for the one process of Starbucks, the enterprise is ought to meet the different working tasks during different time periods. Every business behavior of the enterprise has a whole process of emerging, forming, conducting and verifying(Greasley, 2010). One specific example is that the quality of beverage of Starbucks is strictly evaluated in different ways, such as the temperate, the taste, and the look of the beverage.
The evaluation has its specific requirement rather than basing on the personal preference of the staff. During different making time and considering several kinds of beverages, different evaluating rules are applied. It displays the fact that Starbucks follow the “one process” rule in total quality management. In view of the four stages, total quality management points out a cycle system called PDCA cycle. This cycle system performs in the form of planning, doing, checking and acting. In normal situation, the producing process of a beverage needs the effort of planning what material will be adopted, checking the availability of the material and then using it to make the product. Any of these four stages cannot be skipped because any of them has an important impact on final results. There arises the concept of eight sections following the four stages. It begins with analyzing the current performance of the firm to spot the potential quality problems and ends with concluding the experience, strengthening the achievement and standardizing the working results.
Based on the total quality management, a model named SERVQUAL comes in to being. This model is a new method to evaluate the service quality in hospitality industry(Bojanic, 1994). Its central point is the service quality gap model, namely that service quality is depending on the gap between the aspiration service level of guests and the actual service level they experience(Pitt, 1997). The SERVQUAL model can be simply seen as this formula: the result of SERVQUAL is equal with the actual experiencing result minus expectation result. The higher the SERVQUAL result is, the better service quality is. SERVQUAL is divided the service quality into five aspects: tangibles, reliability, responsiveness, assurance and empathy(Zeithaml, 1990).
Tangibles should have modern service facility, wide attraction of service facility, clear uniform of members and the factor of provided service matching with firms’ facility. Considering the Starbucks, it has the outstanding coffee producing facility, cleaning store environment, quality monitoring system that can meet the international standard. More importantly, the staffs in Starbucks are required to wear the cleaning and green aprons. This requirement not only reflects the idea of environmental protection and healthy pursuing, but also meets the demands of tangibles, which asks the firm to have the clear uniform of members(Zeithaml, 1996). In view of reliability, it is the ability to correctly and reliable to conduct the service commitment. It includes the requirement of meeting the deadline of promised the service commitment, showing the care and helping the guests when they face the problem and recording the activities and transactions correctly. Starbucks has set a target that the coffee in Starbucks will be authenticated and monitored by the third independent professional party before 2015. There are two requirements considering the coffee producing of Starbucks.
The one is that the purchasing process should be legal and reasonable and the coffee cropping process should be responsible. In fact, Starbucks manage to follow such rule, as can be seen from the evidence that it has formed the moral purchasing system called C.A.F.E system. Such behavior shows the fact that Starbucks manage to take the social responsibility, which can help to increase the reliability of the firm and help to build more satisfying reputation.
As for the responsiveness, it relates with the wish to improve the service standard when receiving the suggestions from customers. Starbucks has its own unique customer recovery system. To be more precise, if the customers is not satisfied with the product they buy or the service they experience, staff in Starbucks will give them customer recovery coupon as a kind of method to compensate. Besides this, the staffs also follow the listening principle that requires the staff to listen to the feedback from the customers and take relevant actions to solve the issues. In addition, staff should thank for the feedback from customers, no matter it is positive or negative.
This recovery system plays an important role in dealing with the customers’ needs and shows high degree of responsiveness inside the Starbucks. With regard to assurance, it concerns about the workers’ degree of confidence and ability to display their knowledge and courtesy. The members in Starbucks are asked to follow the 5B principle. The 5B principle is to be considerate, welcoming, genuine, involved, and knowledgeable. To be considerate is to try to care for others and the whole environment. To be welcoming is to welcome every guest warmly, making them have the sense of belongings. To be genuine is to sincerely contact with guests and build the positive relationship with guests. To be involved is to devote the heart into work and have the motivation to build a better Starbucks. To be knowledgeable is to be specific about the work and love the work(Starbucks, 2012). It is obvious that having such assurance inside the Starbucks, the operations inside the firm is under a promising pattern, which is able to develop the quality management level. Finally, it is the concept of empathy, which means that the companies are required to care for guests together with providing the personal service.
Applying this ides to Starbucks, workers in Starbucks welcome the guests individually and then kindly ask for the needs of the guests and provide the first-class service for them. Without these operations, operators can not spot in which the service gap exists and then figure out how to eliminate it(Christopher, 2006).
Customer’s satisfaction is a very important demand in a hospitality industry(Robledo, 2001). The design of the hospitality industry is mainly divided into two aspects, the physical environment and the servicescape. Especially nowadays, the servicescape play a very important role in the customer’s perceptions. The hospitality, particularly hotels, should make their design and plan match the marketing and customer’s anticipation (Bitner, 1992). So, the core business value of Starbucks is to create a certain servicescape named “Third Space”(Starbucks, 2012). The third space is defined as shopping and leisure space distinguishing from living space and working space that are marked as the first space and second space individually. In order to improve the life quality, it is a key point to improve the quality of third space. As for Starbucks, it aims to expand the third space for customers. the workers in Starbucks devote themselves to provide more warm atmosphere for customers through sincerely communication and first-class service. Thus, Starbucks is more like a space for relaxing rather than just a coffee store .
Under the nine-to-five working form as for most people, it is a real need for them to have an additional relaxing place and Starbucks well provides this kind of space due to its value of providing third space for customers. This value has won more and more popularity among customers. There are some knowledge of the waiting lines called queuing theory, which is a very important part of the operations management, and it is a very effective tool that every operators need to know. The most common discipline of queue is “FCFS”, which means first come first service; also it is the same as first in first service.
The Structure of a waiting line system has three parts: arrivals, queue discipline and the service facility. So, considering the arrival characteristics, it is mainly divided into three major characteristics: amount of the arrival population, behavior of arrivals and the mode of arrivals. There are two most important characteristics involving in the form of the service system and the allocation of the service time. And the basic queuing system can be divided into several models: single channel queuing system, multiple channel system, single phase system and multiple channel system (Heizer, J., p. 773). A service facility can be seen as a channel, it usually can be one open teller or a check out service. And different customers’ demand makes different phases of the queuing models.
Also the queuing cost is quiet important, the operators must recognize that there are mainly divided into two parts of the queuing cost, the cost of providing good quality services and the cost of the lost of waiting time(Gross, 2008). But if a manager want to ensure the quality of the products, sometimes the queuing cost is necessary(Hayes, 2011). However, it is very important to balance the savings in service cost(Prabhu, 1997). But to minimize the cost of lost time waiting, Starbucks usually will arrange a senior partner to chat with customers, care about their demands, asking about the customized order then mark it to the partners in the bar counter, save time for both customers and the store. Also this senior partner will arrange some activities according to the queuing condition and his own experience. This partner’s job is to distract customers’ attention. By using this time, the partner can introduce the new product to the customers and send some free giveaway drinks and dessert. Usually the free giveaway drinks will be the drinks which are new to the market. Also this partner can seize this opportunity to promote the member card of Starbucks and the items on the cabinets, which are thoughtfully placed exactly beside the queue lines.
Because of the characteristic of service that cannot be storage and service takes time and the time is variable, also the customers often arrives at variable time. Therefore, the limited of the service capacity caused the bottlenecks in the process. In Starbucks, there is a special character called Floater. Floater is like a free man that does not have a fixed work. Floater’s duty is to make sure everything goes fine. There are often two tellers in a Starbucks’ store, and the Floater’s fundamental job is to guide the customers wait in line and make sure the queue goes smooth, then get to know the customers’ demands then marks it down on the beverage cups within their own special marks which made by Starbucks, this work will efficiently relieve the pressure of partners who works inside the bar. Also the floater needs to notice the whole store, make some operational flexibility measures to ensure the positive operation of the store. One of the operations management’s main functions is to concern about the process design.
The process of operation is to transform the input resources into output services and products. Process design can not only improve one’s quality, but also optimize the capacity of the hospitality organisation. Process shortening is also a very important operation about saving customers’ time and improving customers’ satisfaction. So the Starbucks made a model called “Four Classes Beverage Procedure”. This model segment the beverage according to the quantity level of the beverages in waiting queue that is needed to be made during the service time. So the average making time of the first class drink is approximate 45 seconds, while the second, third, and fourth class needs 37, 30, 25 seconds separately. The higher the class, the more time is spent on making the drink. The serving time of the first class demands one staff, which is required to make from zero to five cups of drink alone.
It is allowed to make only two cups one time in this procedure. More importantly, it is a need for the staff to contact with waiting customers during the making time of the drink. This rule makes good contributions to the customers’ satisfaction, because it alleviates the impatience of the waiting customers. Service is unable to be stocked and is needed to be created immediately when customers come. Queues are caused by variable arrival and processing rates(Cochran, 2008). According to this, the likelihood of increasing the customers’ demands is accumulated. In terms of the second, third, fourth class, the difference relays on the number of required staff and beverages to be made. However, these four-class procedures share a common factor that the staff is required to have a contact with waiting customers. It is a core idea associated with culture of Starbucks.
This idea has positive influence to increase customers’ satisfaction of the brand, thus raising the demand of customers. As more customers coming, the supply of the Starbucks should be added in order to balance the relation between supply and demand. Quality is the soul of a company, and the author can not agreed any more about this. This essay clarified the elements which are needed to balance the supply and demand in a hospitality organisation. Starbucks, the world leading coffee retail company, did a great job to balance the supply and demand in service quality aspect by using the 5B principle. The Starbucks applied some operations and services management theories which are already talked about in this essay, such as TQM and the SERVQUAL to balance the supply and demand between company and customers. Also according to author’s experience and observation, quality and capacity management is very important in the operations management indeed.
WHY USING THE FOLLOWING REFERENCE:
By using the model SERVQUAL which proposed by Parasuraman et al. (1985), the author can clearly clarify the characteristics of Starbucks combine with the author’s own experience and observation. It also helped the author to systematic describe how Starbucks manipulate their quality management.
TQM can be seen as a basic measurement of quality,which is widely adopted by the service industry. The author thinks Starbucks also used this to justify their goods and services. Quality is the soul of a company. The author can not agreed any more about this.
The servicescape theory is widely accepted and used by many people, and many operations strategies are emerged based on servicescape.
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