Starbucks has named Hans Melotte as their new Supply Chain Chief. Melotte previously served as the Chief Logistics Officer for Johnson & Johnson, and all involved hope that he continues to update their supply chain management since their major overhaul in 2008.
Starbucks made waves when they completely revolutionized their supply chain. With revenue cooling and operating costs rising, the coffee giant realized that amid their success, they did not have an effective supply chain. Investigations showed that one main cause of the loss in revenue was that less than half of deliveries arrived on time, driving up costs, and over 50% of their supply chain budget went to outsourcing delivery to third party transportation services, leading to cost inflation. So Starbucks launched a three step plan to completely revolutionize their supply chain.
Supply Chain Overhaul
Peter D. Gibbons worked to revolutionize inventory management within the company. The Executive VP of Global Supply Chain Operations from 2008 to 2012, Gibbons' work to get data collection solutions took the complex supply chain structure and simplified it to fall under four basic supply chain functions: plan, source, make, deliver. All production planning, replenishment and new product launches fell under plan, source was broken into coffee and non-coffee items, make became all manufacturing, and transportation, distribution, and customer service were grouped together as deliver.
Gibbons' goal was to reduce costs and improve efficiency. Through extensive data collection, his team was able to effectively discover what was driving up prices, and led to the opening of a fourth U.S. Plant in Columbia, South Carolina in 2009. This venture drastically reduced transportation costs and the company was able to change operating schedules from seven days a week to five. Starbucks' efforts saved them over $500 million dollars in the first two years of the program.
Since Gibbons departure, Starbucks has continued to work on streamlining their supply chain, with initiatives such as Starbucks: The Next Generation, a program to recruit top graduates of supply chain education programs as well as training existing employees in supply chain optimization. Melotte, now takes up the reins with the goal of managing the supply chain end to end and enabling key strategic initiatives that will allow the brand to continue to grow.
With nearly three decades of experience, Melotte is the ideal candidate to take over the supply chain. Starbucks operates in more than 70 countries worldwide. Having just opened their first store in South Africa, they are now moving forward with plans to open a 20,000-square-foot roastery in New York.