Starbucks chairman and CEO pays tribute to supply chain management in CSCMP first-day remarks

Schultz says supply chain needs to be at the top of the corporate checklist.

By Mark B. Solomon

Howard Schultz wants to let it be known that he gets supply chain management.

During a one-on-one interview today at the Council of Supply Chain Management Professionals' annual global meeting in San Diego, the chairman and CEO of Starbucks Corp. was told by his interviewer, veteran practitioner Kevin Smith, that the company makes 20,000 deliveries each day to support more than 22,600 stores in 65 countries and territories.

"I don't think you know that," Smith told Schultz.

Schultz replied, "I know that!" Smiling, he glanced at the crowd with a look implying that it would be ridiculous to think otherwise.

Schultz can laugh about it now, but in early 2008, when he returned to the Starbucks helm after an eight-year hiatus, he confronted a supply chain that was dangerously inadequate for a company of its size and scope. Fifteen years of extraordinary growth had resulted in an oversaturation of stores, a situation that was painfully corrected upon Schultz's return by the closure of 900 U.S. stores in 2008 and 2009. Perhaps more structurally alarming was that Starbucks' supply chain management discipline had been sacrificed at the altar of multiyear growth, meaning that there were few processes in place to effectively manage the supply lines of a company that still wanted to expand, albeit more prudently. There were no metrics to measure service performance, and when measurement criteria were implemented in 2008, it was found that less than half of all store orders in the United States and Canada were delivered on time.

"Growth and success covers up mistakes," Schultz said, adding that supply chain management and human resources are two functions that are often left behind in such situations. Even as he walked back into the worst crisis of Starbucks' life, one that almost put the company under, Schultz acknowledged that "I don't think we spent five minutes on supply chain issues" during that time.

Nearly eight years later, supply chain management has been elevated to a loftier place in the Starbucks hierarchy, and the business functions in a way befitting an elite brand. Schultz, for his part, appears to have gotten religion. Referring to supply chain management as the "primary co-author of our business," Schultz said "you cannot scale a company of any kind without the skills and base of a supply chain."

He told a packed house not to "look at the function of HR and supply chain as the last thing. Think about them as the first thing."