This is Dr. P. Chitramani, Professor in Business
Administration, Avinashilingam Institute for Home Science and Higher
Education for Women, presenting to you a course in Supply Chain Management.
Dear learners, welcome you all to the first
lecture on Supply Chain Management. And this session
focuses on what is supply chain? The learning objective is to
provide a customer view of Supply Chain and to link it to
the organizational perspective. What is Supply Chain? Supply
Chain is a flow of raw materials and processes that fulfills a customer need.
Imagine you get up in the morning and look for a
cup of coffee. You walk to the kitchen shelf, take the coffee
powder, sugar and milk from the refrigerator. You switch on the
stove, set the water to boil and follow the process to make
coffee. With a cup of coffee you wonder what it takes to get
a cup of coffee in the morning? Then comes the Supply Chain.
Let us consider the raw materials for processing a cup of coffee.
Namely the cooking gas, utensil water, milk, sugar and coffee powder.
Moving backward as a customer you can identify the
primary supply chains that is needed to get a cup of coffee.
Cooking gas is got at your door friend from the gas agent,
who in turn gets it from the regional gas depos of oil corporations.
Utensil is got from the supermarkets that
procure from private label utensil makers, who depend on
foundries, steel and plastic suppliers for raw materials.
Water at home flows from the regional water tanks, which
store and supply water got from the city tanks, dams and various
water resources. Milk is got from the local Kirana shop who
replenish daily stock from milk processing units, who get milk
from the societies and dairy farmers. Sugars journey to your
cup starts from the sugarcane farmers to the sugarcane
procurement societies through the sugarcane factories and the
public distribution systems. coffee powder is got from your
local retailer who gets coffee beans from the coffee booths, rose
the beans and powder it. The Coffee Board intern by the
coffee beans from the local coffee plantations of farmers.
In short, Supply Chain is a process that satisfies a
customer need and consists of multiple entities that are
linked through flow of products, information and funds.
Transferring the experience of coffee at home to the world
class Starbucks Coffee, we can understand the supply chain in
business sense. Starbucks Corporation with more than
24,000 stores in 70 countries starts the journey of customer
fulfillment with a cup of coffee across the world with its
hand picked coffee beans, and other merchandises source across the Globe.
The goal of Starbucks supply chain is to reduce costs
and improve efficiency. It follows a plan, source, make
deliver model of supply chain. What is Starbucks plan? In 2008
Starbucks to meet the competition
planned and re engineered its supply chain
with three major objectives that is
reorganize to centralize its fragmented supply chain, cut
costs and improved services, designed supply chains to meet
its future capabilities. As a sustainable sourcing strategy,
Starbucks worked directly with its nearly 300,000 coffee
growers who meet the Starbucks coffee and farmers equity
standards and coffee sourcing guidelineses. Starbucks
interaction with the farmers ensured that coffee beans are of
the same quality and flavor. This empowers the suppliers to
meet quality standards, ethical standards, like protecting
workers rights and human working conditions,
sustainability through social responsibility.
The handpicked coffee beans generally sourced from
Latin America, Africa and Asia are
shipped in ocean containers to its six company owned coffee
roasting plants in USA and Europe, referred to as greenhouses.
The beans are roasted and packed in the coffee roasting plants.
The company also relies on 24 co-manufactures
in United States, Canada, Europe, Asia and Latin
America. One world, one logistics systems of Starbucks reduce the
transportation and logistics cost and increased efficiency.
After the coffee bean is roasted and packed, it is transported to
regional distribution centers. Starbuck has five in USA, of
which three is owned by Starbucks and two are third party
logistics companies. Two third party logistics companies in
Europe and two third party logistics companies in Asia.
The regional distribution centers carry everything that the
Starbucks stores need from furniture to cappuccino cups.
The regional distribution centers supply directly to the
stores if it has a locational advantage. If not, the stores
are supplied from third party central distributional centers.
Starbucks uses 33 third party central distribution centers in
USA, seven in Asia's pacific region and three in Europe and all
are well connected to the regional distribution centers.
Their effective communication and storecard assessment ensure
consistency, on time delivery, reducing end to end supply costs
and enhanced enterprise efficiency. Further, Starbucks is
vertically integrated to provide the customer delight.
Starbucks is integrated backward through purchase agreements with coffee
growers, company owned bean roasting plants, company owned
warehousing and distribution facilities and company owned
coffee bean farms in Costa Rica & China.
Starbucks is integrated for work with its coffee shops selling
food and drinks, coffee beans, appliances and accessories.
The holistic supply chain model of Starbucks depict that the success of
Starbucks infact is its definition and redefinition of
its supply chain to meet global challenges. So, student, friends
with the hope that you all have understood the concept of supply
chain, let me sum up what is supply chain. A supply chain is
a global network of raw material and merchandise
suppliers, manufacturers, logistics partners,
distributors, retailers, and consumers who are linked through
flow of products and services, information and funds to meet
the customer needs or rather a dream. A supply chain is a
collection of suppliers linked to create one specific product
or service for a company. Every product has its own supply chain.
Those certain suppliers are linked for multiple products.
It is a chain or network of nodes or links,
which include multiple suppliers, manufacturers
and subcontractors, warehouses, distribution centers, and stores
where the consumer can purchase the products. Each link in the
supply chain is sequenced in a specific direction and order.
Each link in supply chain adds time cost and customer service.
It involves human interfaces, digital integration and
logistics partnership. Supply chains are complicated and when
managed well lead to competitive advantage. To ensure effective
control over supplies, value chain and customer service,
the supply chain can be integrated either vertically
or horizontally or both. Benchmarking best practices
and following them leads to sustainable supply chains.
So, with a hope that you all have understood the concept of supply
chain and now to trigger your thinking, I asked you these two
questions from your experience as a customer, they picked a
supply chain and name the brand you like and sketch the supply
chain for it. Awaiting for your answer.
This is Dr. P. Chitramani signing off with a cup of coffee
until you moved to the next session on supply chain management.