How Starbucks Changed Its Take on Supply Chain

Companies used to think of supply chains as a way to save money and not much else. Things have changed. Today, supply chains are part of the core functions of many organizations.

Few organizations better illustrate this shift than Starbucks. Kelly Bengston, senior vice president and chief procurement officer for the company, spoke at Fortune’s Most Powerful Women Summit on Monday about the way Starbucks’s view of supply chains has shifted during her ten years with the company.

In the beginning, there wasn’t much importance placed on thinking supply chains through. Over time, Starbucks started innovating its processes and involving R&D, and that’s when supply chain became a central focus.

That focus on supply chain may seem natural. After all, Starbucks makes deliveries to stores every single day. But the case for prioritizing supply chain was and is a unique one to make. “The thing about supply chain is, if you’re not in it or don’t see it—there’s a lot of complexity [there],” Bengston said, citing issues of compliance or usage of raw materials.

“There are lots of touches the supply chain team needs to remind people,” she added. To demonstrate how many steps products take through the supply chain, Bengston’s team took executives through the process. They went into the kitchens that make the salads and sandwiches and watched how they were made. They went to distribution centers. They went to manufacturing plants.

That new focus on supply chain creates new challenges. E-commerce behemoths including Amazon have refined speedy delivery, posing a challenge for companies like Starbucks: “If you have a long lead-time on a product, and a highly perishable product on top of that… how do you capture the right demand?” The challenge, Bengston said, is in striking a balance between agility and safety.

And no matter how much you’ve planned, social media can quickly upend things. “You don’t know who on Twitter is going to get excited, positively or negatively, [about a product] and bring sales to a stop or drive them through the roof.” Bengston recalled how Ariana Grande raved about Starbucks’s Cloud Macchiato. But the company had planned its inventory of the product without, of course, any expectation that Grande’s fans—the Arianators—would get so excited about the drink. “It creates an amazing opportunity to test how agile your teams are,” said Benston. “How do you get to business? How can you move it from store to store?”

Another challenge created by social media: Instagram. “We talk a lot about developing things that are ‘Instagrammable.’ Everywhere you go, you see people taking pictures of the beverage they’re having. You’ve got to stay on it and ahead of it,” Bengston said, adding that considerations include inventory plans. “On the other side, you don’t want to overbuy.”

These are the double-edged opportunities and challenges raised by advancements in tech. To be sure, digitizing the supply chain is important. However, “you have to have a core business process in order to digitize what that is,” Bengston cautioned. “You need to understand not only mapping of the supply chain but also processes attached to it. Then you put data science on top of it, and analytics, and machine learning.”

She added: “We get caught up in saying digitizing supply chain is the wave of the future without really understanding what that means.”