Reinvention Update: Starbucks CEO Notes Importance of Supply Chain Transformation
Starbucks has continued to move forward with its five-phase Reinvention Plan, announced last fall. During a recent call with investors, CEO Laxman Narasimhan gave a glimpse into the latest progress and how Starbucks is navigating this strategic approach amid murky economic waters.
“Our performance is strong, but our health could be stronger,” admitted Narasimhan. But the CEO is confident that the brand’s long-term outlook remains optimistic as long as Starbucks’ evolution continues on its path to meet the changing demands of consumers.
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“For our long-term sustainable growth, we will look to discover ways to, first, further elevate the brand by getting the basics right, operating our stores well and with a beverage-forward food attached focus for renovation; second, build on our leadership position in digital by scaling and introducing new and relevant customer experiences; third, evolve to a more global presence for our business and for our brand; fourth, work to become less wasteful and move with greater speed; and fifth, and critically reinvigorate our culture around what it means to be a partner at Starbucks."
— CEO Laxman Narasimhan
“There is more work to do to tailor our stores on the demand that we see, advance our technology, enhance how we innovate our equipment, and also, more fundamentally, how we get back to focusing on fundamental operations and executing better — a priority that is evident with my deep engagement over the last several months across supply chain, technology, reinvention, store development, store operations, marketing, and product,” said Narasimhan.
Transforming the company’s supply chain seems to be at the top of the priority list, with Narasimhan stating the company has an opportunity to “strengthen the factory in the back.”
[Also read: Target Rolls Out Drive Up Starbucks Option at Select Stores]
“Today, our store deliveries involve a high-touch one-size-fits-all model. We are out of stock in more items than we would like. Through segmentation and a format-specific approach, we will be able to lower costs while creating a better experience for our partners and ultimately for our customers,” said Narasimhan. “We also have abundant opportunities to optimize what we buy across several areas, as well as opportunities in how we buy it. Currently, we have over 1,500 cup-and-lid combinations across our network.”
By streamlining supply chain processes and focusing on a smaller, more targeted portfolio, he said Starbucks can be more sustainable and work across less costly hubs to simplify operations. He believes these changes will deliver top-line growth and margin expansion, create long-term value, drive deeper engagement, and help the company adopt a global mindset.
As part of the reinvention, Starbucks has just released a new mission: “With every cup, with every conversation, with every community, we nurture the limitless possibilities of human connection.”
This article first appeared on the site of sister publication RIS.
