Starbucks Inventory Management

Inventory management is among the most important operations management responsibilities because inventory requires a great deal of capital and affects the delivery of goods to customers. Inventory management affects all business functions, including operations, marketing, accounting, information systems, and finance. Decisions related to managing inventory can be improved through the use of basic tools, such as bar coding, Ratio-frequency identification(RFID).

In retail, good service is paramount for customer loyalty. But when a supplier is knocking at the back door with a delivery during business hours, sometimes a retail clerk has to momentarily neglect a customer to receive it.

For the omnipresent coffeehouse chain Starbucks Corp., radio-frequency identification technology could help address those types of dilemmas. Sean Dettloff, manager for partner and asset protection at Starbucks, told attendees at the national Cargo Security Council Radio Frequency Identification conference Monday in Long Beach, Calif., that the company is considering using Radio-frequency identification technology RFID to help with deliveries.

But there are challenges with this new delivery process, including managing physical security and inventory control, so that delivery people "don't walk out with as much stuff as they dropped off," Dettloff says. "So we envision an RFID license-plate signature," he says, that a supplier would use to deliver goods. Using a card, the supplier would gain access to an RFID-enabled system that records the time, disables the alarm, and confirms a supplier's identity before it unlocks the door and lets the person in. Ideally, the system also would record the inventory that's being delivered. "That's not going to happen tomorrow," Dettloff says. "But you can't get the projects going until you develop these ideas."

Besides, it is also important to realize how Starbucks records their inventory on their consolidated financial statements. Since they sell products, not services, they have a large inventory, which they record at the lower of cost or market. It is also crucial how a firm records and depreciates its inventory, and can give investors wrong information if not done correctly.