A previous OM in the News post discussed how the food supply chain is experiencing shortages. Starbucks has joined the list of companies experiencing supply chain issues.
Shortages have resulted from spikes in demand as customers move towards a new normal, coupled with lingering COVID-19 pandemic issues impacting transportation and production. Almost every industry is affected. As reported in a previous post, computer chips used in almost every electronic product are in short supply. Other shortages include chicken wings, ketchup packets, lumber, and diapers.
Starbucks shortages have included cups, mocha flavoring, hazelnut syrup, toffee nut syrup, peach flavoring, and green iced tea, to name a few. Interestingly, the shortages are both national and regional. Some items are scarce nation-wide, while others are only impacting a handful of locations.
In response to the shortages over the summer, Starbucks temporarily discontinued 25 lower demand items—including one of the relatively new additions to the menu—oat milk.
However, Starbucks doesn’t want any shortages with its fall menu, including its very popular Pumpkin Spice Latte (PSL). Reports are that Starbucks has the ingredients in stock, and that shortages are not expected on popular fall menu items.
This post is based on the Business Insider article, Starbucks’ pumpkin cold brew drink is so popular, some workers say they’re struggling to keep it in stock even though there’s no shortage of base ingredients, by Mary Meisenzahl, Sept 10, 2021; the Business Insider article, Starbucks Is Trying to Ensure There’s Plenty of PSLs As Supply Chain Shortages Continue to Hammer the Chain, by Mary Meisenzahl, August 24, 2021; the QSR Magazine article, Starbucks Facing Supply Chain Shortages, by Ben Coley, June 11, 2021; and the YouTube videos in the Spotlight. Image source: Shutterstock / M. Unal Ozmen.
1. What are the impacts of the shortages at Starbucks?
Guidance: Of course, Starbuck’s regular customers would be upset if they couldn’t get their favorite Starbucks item, or try the latest TikTok inspired drink.
Generally, shortages in retail are negative, and to be avoided. However, in the time of COVID, shortages have become commonplace across many industries. Customers are likely to forgive Starbucks as long as shortages don’t last too long. One benefit is that Starbucks is generating a great deal of buzz on both traditional and social media. It may reinforce how people feel about their favorite Starbucks drink—possibly increasing customer loyalty.
2. What should Starbucks do about shortages?
Guidance: Obviously, the first step is to get items back in stock as quickly as possible. Approaches to eliminate or reduce the impact of the shortages could involve working with their suppliers, finding new suppliers, using different transportation methods, or encouraging customers to select replacement products.
Demand management is complicated by Starbucks encouraging its customers to customize their drink. The company claims there are over 170,000 possible drink combinations. Starbucks has already taken one step, by temporarily removing 25 lower selling and/or problematic items from their menu. This allowed them to concentrate on keeping the remaining items in stock.
Since some shortages are localized, Starbucks should help customers find the locations that have the ingredients they crave, which could be done through their app.
Another possibility: have suggestions available to baristas to offer customers when they are out of their favorite item. These suggestions should use ingredients that are available. Suggesting a replacement that can’t be made would only make the matter worse.
A variation on this approach would be to promote drinks that are readily available at all locations. This would put added pressure on the supply chain to ensure that the ingredients for these drinks are in stock.
3. How do limited time offerings (LTOs), like Starbucks PSL, impact the supply chain?
Guidance: LTOs help bring in customers. Many Starbucks customers anticipate the day when Starbucks opens their fall menu with the PSL.
Unlike items that are served year-round, LTOs are only available for a limited time. Starbucks’ fall menu typically is available from mid-to-late August until mid-December. From a supply chain perspective, this means that the item, and its associated ingredients, will only be available for a short time, and shortages need to be avoided during the promotion period.
Additionally, in the case of the PSL, customers have been waiting since last fall for this item to return.
On the other side, the company won’t want to have leftover ingredients that won’t be used, and might be discarded when the LTO ends. It may also mean that a supply chain adds additional members to provide the ingredients for these LTOs. All of this needs to be planned in advance for the LTO to be successful.