Subject SBP2MB961

Supply Chain Management

Submitted to: Dr. Anshu Gupta
By: (Group 6)
Rishabh Dhawan
Srikant Sharma
Varun Balhotra

Case: Starbucks Corporation Building a Sustainable Supply Chain

Q1. What do you understand by a sustainable supply chain?

Ans. A sustainable supply chain is the management of material, information and capital flows and
cooperation between the various members along the supply chain while achieving the stakeholders driven
goals related to all the three dimensions of sustainable development i.e. people, profit and planet. A
sustainable supply chain adds value and leads to reduced cost, improved performance and enhanced
reputation.
In the Starbucks case, the company wanted to ensure sustainable supply of high quality coffee beans
which was possible, only if, the members working along the supply chain such as farm owners,
processors and suppliers are stable.
Despite being a major player, Starbucks did not use its purchasing power to squeeze its suppliers and
reduce margins. It used its domination power to bring a social change and add value to the producer,
customer and society in large. It tried to build a transparent process to promote fairness in the supply
chain.
Starbucks to develop its sustainable supply process, tied up with an NPO to come up with some defined
guidelines (C.A.F.E. practices) for achieving regular supply of high quality coffee. These practices
include the criteria for the suppliers to be preferred suppliers, order qualifiers and order winners. Along
with that Starbucks incentivized these practices, by not only giving orders, but also giving premium price
and ensuring other non-monetary benefits such as healthy working environment, living conditions and
many other.
The Starbucks company thus by maintaining strategic relationship with its suppliers was able to get the
close to real time information of the supplier. It helped the company in predicting the uncertainties and
fluctuations, leading to better planning of the future supply by faster procurement and also enhanced the
companys image.
The new practices adopted by the Starbucks helped to increase the visibility of its supply chain as it
demanded documentation of verification and cash flows of the suppliers in the chain. Increase visibility
helped to gain better understanding the needs and conditions of the supplier and improved relationship

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with the growers, who were previously isolated in the chain. The company supported the farmers by not
only providing high prices for the quality products but also with the financial support and farmer support
centres to provide technical assistance. These helped to build strategic long term relationship with the
members who will be committed to the sustainable production of high quality coffee.
These steps taken by Starbucks not only benefitted and eased the members in the supply chain and society
but also ensured favourable impact to the company in the form of constant supply of high quality coffee,
enhanced image, Information system to forecast the supply shortages, if any, so as to manage disruptions
even before they arouse.

Figure: Supply Chain of Starbucks

Q2. How a company can align supply chain sustainability/corporate social responsibility with its business
strategy?
Ans. A growing body of evidence asserts that corporations can do well by doing good. Well-known
companies have already proven that they can differentiate their brands and reputations as well as their
products and services if they take responsibility for the well-being of the societies and environments in
which they operate. These companies are practicing Corporate Social Responsibility (CSR) in a manner
that generates significant returns to their businesses.

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As in Starbucks, they aligned their corporate social responsibility and supply chain management together
i.e. their work of CSR helped them in getting sustainable supply of their product and helped them in
creating impact in the society simultaneously.

Q3. Managers see sustainability as a constraint. What is your view on it? How can a firm turn it in
opportunity?
Ans. By following the C.A.F.E. Practices, Starbucks was able to develop visibility and transparency and
thus made its supply chain sustainable. Simultaneously, with making the supply chain sustainable,
Starbucks also performed Corporate Social Responsibility by improving the living standards of its
suppliers and farmers of the coffee beans by purchasing coffee from them at a premium price. The
company opened a farmer support centre and helped out in many projects that led to fulfilment of basic
needs of many of the farmers. But it was one side of the coin where company made its supply chain
sustainable.
On the other side, there arose some of the problems also with the sustainability in the supply chain which
were faced by the managers and other supervisors of the corporation. Some of the members of the
Starbucks supply chain had very poor information systems due to which it was difficult to attain
economic transparency. Also, as C.A.F.E. Practices were continuously updating and refining, it became a
daunting job to effectively communicate the revised requirements and practices to farmers, suppliers and
other members of the industry. If this issue of communication of information had been resolved,
Starbucks supply chain could have become more responsive and would reap more benefits from the
opportunities waiting in the coming future.
Q4. Which stage of supply chain is best suited to start developing sustainable base and how could this
stage be engaged to progress on sustainable vision?

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Ans. A supplier plays a critical stage in supply chain. Forming the right partnership with right terms and
polices helps develop a good relationship with the suppliers that will prove beneficial to all the parties
involved and it is the most suited stage to start sustainable base. As in Starbucks, the suppliers were the
farmers who were the source of high quality coffee beans which was the main ingredient for Starbucks.
Hence maintaining a good relationship with the supplier helps in maintaining a sustainable base for the
business.
Thats why Starbucks started C.A.F.E. Practices for the welfare of farmers so that they get continuous
supply of high quality beans and have a sustainable supply chain of coffee.
The supplier stage can help in building sustainable vision as if a company gets its supplies correct and at
the right time from the supplier, it can grow its operations faster and more efficiently and can serve its
customers easily.

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