Starbucks Malaysia Logistics

Current Logistics Operations

Logistics is the procedure of controlling, implementing and planning the effective, effective flow and storage of products or services and other related items from the procurement process to the point when the certain product or services is consumed for the purpose of customer fulfilment (britannica, 2017).  Operation is defined as work or task consisting of one or more subtask, performed normally at any given location (businessdictionary, 2017). Starbucks buys their beans and roast it on their own and serves high-quality coffee along with fresh pastries, cakes, confections, Italian style espresso, coffee related accessories and other equipment through its company-oriented stores (pahl, 2008, p,7). Starbucks maintains a collaborative and strategic relationship with its partners where all companies involved aim for a sustainable future and achieve long-term goals and objectives (Coyle, et al, 2012).  As Starbucks operates approximately 22,000 stores globally, the focus would be on the logistics operations in Malaysia.

Demand Forecasting of Total Beans Needed

Demand Forecasting is when the company predicts the future demand of its product (businessjargons, 2017). This model may be used for businesses to asses future requirement in the total amount of materials needed for produce the final product as well as to asses on whether to enter a new market.  In Starbucks’ scenario, it translates to the amount of beans they need to place early orders of supplies in order to fulfil the requirements of future expected orders. Therefore, extra orders will always be done to ensure the constant supply of material is always available. The strength in this is that Starbucks will always be able to serve its customer their “wants”. Another benefit of having excess inventory is that Starbucks is able to quickly replenish depleted stock, have a quicker response period and also it decreases the risk of shortages. But there are also risks in having excessive supplies such as having the materials not used up and ending up expired and also if Starbucks needs a bigger storage space at a certain location, they will have to pay more for a bigger space.

Procurement of Beans Needed

Procurement management is defined as the practice of directing and planning the actions of purchasing agents who does the purchases of materials needed in the production of end products of a company (bureauoflaborstatistics, 2017). If the procurement process is well negotiated, a company could meet its target goals or fulfil the demands of its shareholders.  According to business dictionary, there are ten steps in the procurement cycle. First step is to know when to place an order to replenish their stocks. Second step is knowing their specific needs. Since Starbucks uses the same type of coffee all over the world, there is little differentiation in the ordering of products. The only difference would be the regions of a specific store as different region have different promotions. Third step is to source option. Starbucks source their coffee from environmentally sustainable sellers and there are three sources which are: Conservation Coffee, Certified Organic Coffee and Fair Trade Certified Coffee. Step four is to agree on a price and the terms. As these farmers are working with Starbucks, generally, they will already have the best price for the coffee and get incentives in return. The fifth step is to purchase order. This occurs when Starbucks places the order for beans when they are in shortage of supply. The sixth step is to deliver. Starbucks is a worldwide company therefore, they use various different method of transportation and different methods of packaging as well. The main mode of transportation in Malaysia is by shipments. As the main port is in Hong Kong, all initial shipments will be transported to Hong Kong and then to Singapore and later the products will be sent to Johor Baharu where the products will be sent to their respective states and finally distributed to the different stores. The whole process is time consuming. Step seven is expediting, then is when the different store throughout the nation count the days the order is placed up till the time they receive the products. Step eight is to inspect the purchases and the receipt. In this step, also known as (IDS) by the internal operations is when the store manager inspects all the products that were received. Step nine in the procurement process is invoice approval and payment. In this step, the store manager confirms that all orders are available during the receiving of products. Only then can they proceed with the payment which is usually directly deducted from the company’s account into the sellers account. The last step in this process is to record maintenance. This is a vital process as in the case of any internal or external audit, or any verification on tax, the company will be able to give the important documents (businessdictionary, 2017).