Starbucks – Advantages of ERP Implementation
The advantages of Starbucks implementation of a new Enterprise Resource
Planning System were very typical of many other ERP implementations with a large
focus on supply chain management. Starbucks discovered that their annual costs for
their supply chain was growing and over the same period annual sales at stores that
were opened for at least one year dropped by 10%. They were able to discover that
the two main issues with their supply chain stemmed from the untimeliness of
deliveries and that 65-70% of the costs for their supply chain was due to
outsourcing. The new system reorganized the supply chain into simplified chain
functions that would put a focus on the procurement aspect. Since Starbucks spends
$600 million annually on coffee and $2.5 billion annually on dairy and paper goods
this was a major area that needed to recognized in the new system. The system is
able to manage the purchasing of goods from the many coffee plants that they are
involved with throughout the world. Starbucks recognized $500 million savings in
the 2 years after the implementation of this new system. The system also eliminated
the need for paper forms and emailing orders. All orders go through the system and
are automatically updated when the purchases were acquired, billed, and paid for.
With the new streamlined processes the effectiveness and timeliness of ordering
and stores receiving the goods needed, stores are no longer waiting for goods to be
delivered and are now able to get the product to the customer without issues.
Since the new system integrates the supply chain with the other aspects of
the company such as the financial system it again cuts down on paperwork, which
leads to less confusion during communication between both parties. This means less
mistakes and with a decrease in mistakes with ordering and finances it greatly
increased the efficiency of the supply chain. With efficiency comes more “goodwill”
to customers who don’t have to wonder if the Starbucks around the corner from
their home will have their favorite coffee or not. With more “goodwill” comes
customer loyalty which will in-turn lead to more return customers which will
increase sales annually.
Another advantage of the system is that it reduces operating and supply
chain costs. Operating costs are decreased due to the fact that less personnel is
needed to operate the entire system effectively. With everything being
computerized and all information being available on the system there is no need for
certain types of employees, thus cutting salary costs. Since all of the information and
documents are computerized there is no need to paperwork in-turn cutting back on
overhead costs and with the amount of paperwork that Starbucks could be using
this is a huge amount of overhead costs that is removed. Even with the personnel
cutbacks the system is still able to run smoothly and efficiently. All aspects of the
company are integrated into one system, streamlining processes that used to take a
long time to go through many people with no sense of the timing that was needed to
effectively order, manufacture, and supply stores with the required goods.
With the accounting system being integrated into the system Starbucks is
able to maintain a watchful eye on all transactions that occur allowing them to see
what is costing them too much and need to make improvements on. The system
combines all of the necessary information into one easy to comprehend document
for managers and employees to read and evaluate. With the information in one place
is it easier for managers to make decisions on what needs to be done now and in the
future.
Another advantage of this system is that it was specifically designed and
implemented for the use of Starbucks. This means that it was developed for the
ease-of-use by employees of the company. Again allowing for timely transactions
within the organization. The system was designed to easily be manipulated in the
future in the event that the system needs more applications or updates are required.
This will cut down on future costs of the system and again cutting back on overhead.