Tuesday, February 19, 2013

Will Starbucks scrap Lean Manufacturing?



Throughout 2009, Starbucks had been making waves about how much it is changing in response to new consumer spending patterns. First, it was the announcement that it planned to revisit the pricing of its coffee and baked goods and go back to basics with the re-introduction of Pike's Place coffee. Then, it was the announcement that it would consider closing down some superfluous Starbucks stores and pursue other cost-cutting measures. Finally the big announcement: Starbucks was embracing Japanese-style "lean retailing" techniques 

As part of the Starbucks transformation, CEO Howard Schultz outlined the:
  1. Improving the current state of the U.S. business: by giving our store partners better training and tools, launching new products—some of which will have an impact as significant as Frappuccino® products and the Starbucks Card—and introducing new concepts in store design, among other enhancements to the Starbucks Experience.
  2.  Reigniting our emotional attachment with our customers by restoring the connection our customers have with you, our coffee, our brand, and our stores.
  3. Building for the long term, which has two distinct pieces: realigning Starbucks organization and streamlining the management of the organization to better support customer-focused initiatives by ensuring our support and planning functions—from back-end IT systems to store operations—are most effectively dedicated to the customer experience. This will help us to make smarter decisions about new products and initiatives and bring them to market more quickly than ever in our past.
  4. Expanding our presence around the world, by building a profitable business outside the U.S., and capitalizing on the enormous, untapped potential for our brand.

Starbucks has used lean manufacturing to expedite service for several years. However, the coffee giant announced in October 2011 that its baristas would no longer work on more than two drinks at once. This change is intended to address complaints about “average” quality espresso drinks and variable drink quality.


Does Lean Manufacturing reduce product quality?

Whenever a quality issue occurs in a lean shop, observers wonder if lean management is responsible for the defect. Though substandard implementation of lean principles may negatively affect product quality, lean management should not. Instead, lean manufacturing should alter a company’s fundamental definition of quality to focus on those things that are defined by the customer as adding value. If a particular process or feature takes time and does not add value for the customer, it should be eliminated. That goes for not only large items, but also for small movements within the manufacturing process. When the customer receives a product that includes all those features she defines as valuable, that is available when she wants it, and is provided at a value made possible by the reduction of waste, quality is achieved. Only the end user of a product can define the term “quality” as it is applied to that product. What good to the customer is an additional feature if it means that the product is not produced rapidly enough?

Is Starbucks abandoning Lean Manufacturing?

Some observers have rightly wondered if Starbucks intends to abandon lean management techniques and emulate trendy artisan coffee shops. The iconic chain certainly has struggled in recent years. Store expansions have slowed and earnings took a hit in fiscal year 2008. On the other hand, this year’s outlook for the world’s largest coffee maker is distinctly sunnier. A quality push from Starbucks doesn’t mean a step back from lean manufacturing principles. As stated above, the customer’s perception of value is the most important barometer of quality for any lean shop. Changes focused on improving the customer’s experience of value are justified, even if they reduce the speed of service. Furthermore, Starbucks has so far used lean management to speed drink preparation using a model in which baristas produced as many drinks as possible. There’s no reason the same techniques cannot boost speed for baristas serving only one or two drinks at a time. Observations by lean managers will need to be repeated.

A slower Starbucks passes the Toyota Test

When it comes to essential philosophies of lean management, executives throughout numerous industries turn to Toyota’s practices and production systems for guidance.  Specific Toyota initiatives may fall flat, but Toyota is overall deserving of its reputation as a model of product flow. At Toyota, even initially successful manufacturing processes are routinely replaced as better alternatives appear or changes are necessary in response to customer concerns. It is second nature for Toyota executives to make changes immediately upon realizing that a faster, smoother alternative is available. When faced with a problem like the one Starbucks is currently experiencing, what would Toyota do? Probably exactly what Starbucks is doing: Scrap processes that speed production but detract from customer-defined value.


References:
  1. http://online.wsj.com/article/SB124933474023402611.html
  2. http://www.shmula.com/starbucks-why-lean-why-now/5639/
  3. http://bigthink.com/endless-innovation/starbucks-and-lean-retailing-innovation
  4. http://www.petercanthony.com/2011/02/will-starbucks-scrap-lean-manufacturing/

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