Starbucks Coffee Company is a gourmet coffee provider with over 17,000 stores in 55 countries worldwide in fiscal year 2011 (Starbucks Company, 2011, p. 3). Its main focus is to provide gourmet coffees, teas and related beverages in its stores worldwide. To ensure that Starbucks continues to provide superior products and services, it must ensure that it has in its stores enough inventory to service its valued customers, without sacrificing quality and with decreasing the possibility of waste.
Starbucks inventory numbers can be derived from its financial statements; however, the numbers given are only a summary as the actual details are proprietary and cannot be retrieved through any other method.
The Starbucks inventory reserves were $25. 5 for 2008, $21. 1 million in 2009; $18. 1 million in 2010, and $21. 1 million in 2011. “Inventory reserves are based on inventory reserves are based on inventory turnover trends, historical experience and application of the specific identification method” (Starbucks, 2012).
In greater detail, Starbucks inventories for 2008, 2009, 2010, and 2011 are as follows: Inventory in Millions (in millions): | 2008| 2009| 2010| 2011| Coffee – Unroasted| $377. 7| $381. 6| $238. 3| $431. 3| Coffee – Roasted| $89. 6| $76. 7| $95. 1| $246. 5| Other Merchandise held for sale| 0.
6| $116. 0| $115. 6| $150. 8| Packaging & other Supplies| $104. 9| $90. 6| $94. 3| $137. 2| Total| $692. 8| $664. 9| $543. 3| $965. 8|
Starbucks’ level of inventory vary depending on seasonality and commodity price variations. Further, since Starbucks contracts with its suppliers, it purchases certain amounts based on fixed contracts (Starbucks, 2012). An interview with a former Starbucks Manager, Anthony Costa, provided information that Starbucks uses the P-system. The P-System or Periodic System is a system wherein the sock is reviewed based on its par which is a certain level of inventory. For example, a box of cups is a par of cups.
Every seven days managers check the inventory and order the appropriate numbers of par they need for the following week. The ordering system typically requires 3 day lead time. The desired inventory is just enough to have a little overage based on customer demands. Too much inventory can be wasted, especially in ordering perishable items such as milk and other dairy products. Lastly, according to Mr. Costa, Starbucks uses its labeled Starbucks cups as an inventory control.
Management measures sales based on Starbucks labeled cups. Every day, management counts the cups and balances them with the sales compared to the actual cups used. At times when cups are missing, it could be due to waste, mistake, customer service or theft. Each missing cup is the responsibility of the cashiers and the management. Reference Starbucks Coffee Company. (December 2011). Starbucks 2011 Annual Report. Retrieved from http://starbucks. com/investorrelations/fy11annual_report
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