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The Effectiveness of The ERP System at Starbucks

The Effectiveness of The ERP System at Starbucks

Enterprise Resource Planning systems

Abstract

Enterprise Resource Planning (ERP) software is used in organizations to integrate data from different departments about stakeholders, activities, processes, products and services, among others. The information is stored in the ERP system, and the system allows organizational stakeholders to view it from different access points. Thus, the ERP system plays a pivotal role in supplying the managers with information they need to make informed decisions. This paper explores the effectiveness of the ERP system at Starbucks. Prior to that, the paper presents a background of Starbucks and a literature review on ERP systems. The primary data on the ERP system of Starbucks was derived through conducting a survey on store managers and technical experts of the company. The results derived from the study indicated that the organization’s ERP is effective and it has been enhancing the company’s performance. The weakness of the system lies only on computer system occasional breakdowns. The company should address the weakness and continue strengthening the system in the future.

Introduction

Enterprise Resource Planning (ERP) is software that enables different technological applications to integrate and share information. The software is used in organizations to facilitate the integration of information from different departments, processes, and functions. For instance, the software allows for the integration of information from the human resources, marketing, inventory management, manufacturing, financial and procurement departments, among others. As such, a manager or a worker from one department can access information from all other departments from one point of output. The software is automated, and thus, it tracks changes and progresses in processes, activities, and functions. However, data must be entered into the ERP system so that it can be shared with other stakeholders. Due to its benefits, most organizations have implemented the ERP. The purpose of this paper is to carry out an empirical study to determine the effectiveness of the ERP system in Starbucks, Inc. A survey was conducted to determine how effective the ERP is in the organization. The paper contains six main sections, namely the background of the organization, literature review on ERP, the data gathering process, data analysis, conclusion and recommendations on how Starbucks can improve its ERP in the future.

Background

Starbucks, just like other international organizations, has implemented ERP system that enables it to track and share information regarding its products, functions, processes and activities. Starbucks is a renowned retailer of specialty coffee in the global market. The company’s headquarters are in Seattle in Washington, US. Since the establishment of Starbucks in 1971, it has been concentrating on selling high-quality coffee its retail stores. Over time, however, the company has added more products to its portfolio (Seaford & Brooks, 2012). Recently, for instance, Starbucks has been selling high-quality tea, milk, sandwich products, soft drinks and film and music discs. Initially, the company had only one store that was located in Seattle. By then, it was owned by its founders, Gordon Bowker, Zev Siegl and Jerry Baldwin. The former manager of Starbucks, Howard Schultz, purchased the company from the original owners in 1987 (Seaford & Brooks, 2012). During the change of ownership, the company had six stores only. Soon after the change of ownership, Starbucks started expanding rapidly. By 1992, the company had more than 140 stores, some of which were outside the US (Simmons, 2012).

As the Starbucks started venturing in the global market, its number of stores increased rapidly. Significant growth of the company has occurred during the 21st century. Between 2002 and 2007, the number of stores for the company increased from around 5,886 to 15,011 (Seaford & Brooks, 2012). Despite this, the rapid growth was offset by the challenges that emerged during the Global Financial Crisis that peaked in 2008. After the end of the crisis, however, Starbucks continued to expand. Currently, the company has more than 24,000 stores located in more than 70 countries, and it has more than 238,000 employees (Starbucks Coffee Company, 2017). Also, Starbucks is a public incorporation firm. The company’s initial shares were sold in the stock market in June 1992. Managers rely on all important information to make informed and effective decisions. In the same vein, the managers of Starbucks in different continents where it operates can only be able to make good decisions if they have access to information about the company, other stores, different departments, customers, products, suppliers, employees, prices, and sales. Starbucks uses ERP software called Oracle OLAP.

Literature Review

There is extensive literature focusing on different aspects of the ERP system. Much of the existing literature has been developed during the last two decades, which is the period that most organizations have implemented ERP systems. Most studies have focused on the impact of the ERP on organizational performance. Poston and Grabski (2001, as cited in Ali, Nasr & Geith, 2017), for instance, sought to determine how the implementation of ERP system affects organizational performance. The results of their study indicated that there was no significant improvement in organizational performance after ERP implementation. Poston and Grabski (2001, as cited in Ali et al., 2017) found that, however, ERP system implementation helps to reduce costs. The results of that study contrast the results that have been derived in other studies. Hayes, Hunton, and Reck (2001, as cited in Ali et al., 2017), for instance, found that ERP implementation helps to improve organizational performance. Chapman and Kihn (2009, as cited in Ali et al., 2017) sought to determine how ERP implementation can help managers improve organizational performance. The results derived from that study indicated that ERP implementation improves the aspects of control system mentioned above except flexibility. Also, the results indicated that ERP implementation enhanced organizational performance.

Some scholars have conducted systematic reviews to determine the benefits of ERP implementation to organizations. In general, the previous studies have found that ERP software implementation improves organization’s competitiveness, efficiency, forecasting, collaboration, scalability, cost savings, streamlined processes, mobility, integrated information, productivity, regulatory compliance, reporting, security and customer service (Ali et al., 2017).  Some scholars have sought to determine how ERP systems that are not integrated into the internet differ from the ERP systems integrated into cloud computing in terms of benefits and challenges. Ali et al. (2017) found that cloud computing have several challenges, but it is more effective than the ERP system that is not integrated into the internet.

Some studies have focused on determining the challenges that organizations face during the process of implementing ERP systems. Ranjan, Pal, and Jha (2016) carried out a review of the previous studies focusing on the challenges faced during that process. They found that firms usually experience challenges in selecting suitable ERP software. Firms also experience challenges related to the resistance by the internal stakeholders to change and other change management issues. The researchers found that firms often experience knowledge management challenges after installing ERP systems. Further, organizations experience challenges related to change in technology since they need to keep up with the changes. Another challenge that has been noted in the previous studies is the inability to raise resources needed to implement an effective ERP system. As Ranjan et al. (2016) explained, the challenge of scarcity of resources is one of the reasons why many small business enterprises fail to implement ERP systems even when they are necessary. Ranjan et al. (2016) noted that inability to overcome the changes mentioned above could lead to failure of the process of implementing the ERP system.

Last, scholars have made efforts to determine the critical success factors of ERP implementation in organizations. As Saade and Nijher (2016) noted, the most important critical success factor during the implementation of ERP systems is developing and following an effective implementation plan. Precisely, all the important steps of a project implementation plan should be followed, from the project startup planning to the monitoring stage. Saade and Nijher (2016)  explained that the other critical factors include organizational change management, a commitment by top management, clear understanding and focus on goals, addressing multisite issues, the involvement of stakeholders, developing effective implementation team and ensuring there is data accuracy.

Data Gathering

Study Design

The aim of this study was to determine the effectiveness of the ERP system for Starbucks and in case of a need, give recommendations for improvement. To gather the desired information, there was a need to adopt an exploratory research design, which allows the researcher to get new insights from the study phenomenon.

Study Population and Sampling

The population of study comprised of the managers and employees of Starbucks. The researcher adopted random sampling method when selecting the stores and the participants to gather data from. The final sample comprised of 10 managers and 50 employees of Starbucks. The table below shows a breakdown of the managers and employees that made up the study sample and their positions in Starbucks.

Table 1.0: Breakdown of the Participants

Participants Roles
10 managersStore management
50 employeesCustomer service
Data Collection

Only primary data was used for the study. The primary data was derived through carrying out questionnaire surveys on the participants included in the sample. The Questionnaire used is attached on the Appendix. Permission was sought from the managers of the stores prior to carrying out the research. All ethical issues, such as confidentiality, were addressed. The questionnaires were sent to the participants through email and also replied through email. The questionnaires were made short to avoid discouraging the participants from participating.

Findings and Data Analysis

Out of the 60 participants to whom the questionnaire survey was administered, only 34 employees and 7 managers filled the questionnaires and sent them back. 7 questionnaires for sent by the employees were rejected because they were not completely filled. All the questionnaires sent by the managers were completely filled. Thus, the data used for the study was based on a sample of 7 managers and 27 employees. The final population is presented using figure 1.0 below:

The Effectiveness of The ERP system at Starbucks

Themes

The questionnaire used contained four questions. Several common themes emerged from the replies for each question.

Question 1. The benefits of ERP system to Starbucks

Six common themes emerged regarding the benefits of the ERP system to Starbucks, namely cost savings, integrated information, corroboration improvement, streamlined processes improvement, productivity improvement and customer service improvement. The figures below show the frequency of the above themes among the managers and the employee:

Figure 2.0: Theme frequency among the employees 

The Effectiveness of The ERP system at Starbucks

Figure 3.0: Theme frequency among the managers

The Effectiveness of The ERP system at Starbucks

Question 2: How the ERP system affects you and your work

Some of the themes in question 1 were repeated in the second question, but more common themes emerged. The main themes that emerged were information access improvement corroboration improvement, forecasting ability improvement, productivity improvement and mobility improvement. Figure 4.0 and 5.0 shows the frequency of the themes among the employees and managers, respectively:

Figure 4.0: Frequency among the employees

The Effectiveness of The ERP system at Starbucks

Figure 5.0: Frequency of the themes among the managers

The Effectiveness of The ERP system at Starbucks

Question 3: Weaknesses/issues of the ERP system

Only two common themes emerged regarding the weaknesses or issues of the ERP system at Starbucks, namely accessional breakdown of the computer system and inability by some employees to operate it. The frequencies of the two themes are presented by the figures below:

Figure 6.0: Frequencies among the employees

The Effectiveness of The ERP system at Starbucks

No manager indicated the lack of ability to operate the system because they already have the training needed to operate it.  5 managers indicated that the weakness of the system relates to the occasional computer system breakdown

Question 4: Suggested improvements on the system

The main common themes that emerged in the forth questions were to address the problem of computer system breakdown and to provide employees with opportunities for training. No manager mentioned about the need to train the employees, but 13 employees mentioned about it. 17 employees and 6 managers suggested that the problem of computer system breakdown be addressed.

Findings

Looking at the data derived from the study, it is clear that the ERP system for Starbucks is effective and thus, it has been contributing to the organization’s positive performance. The respondents pointed out 6 main positive impacts of the ERP system. As noted in figures 2.0 and 3.0, integration of information is the positive aspect of the ERP system that is acknowledged by most employees and all the managers. Corroboration improvement also ranks high. The managers stated that the system enhanced their corroboration with other managers and also with the employees. Among the employees, cost savings ranks very low possibly because they are not directly involved in controlling costs. The employees ranked customer service relatively high probably because they are more directly involved in serving the customers than the managers.

Regarding the impact of the ERP system on their work, the respondents pointed out 5 positive impacts. Enhancing ability to access information is one of the most recognized impacts of the ERP system at Starbucks by both the managers and the employees. The employees and the managers felt that the system enabled them to access information from different sources within the organization and hence, to have adequate knowledge of how the company operates. Considering the responses for the question, it seems that the ERP system has much more impact on the managers than the employees.

The main issue with the system relates to the breakdown of the computer system concessionary since 5 managers and 62 percent of the employees mentioned it.

The occurrence of the failure has negative impacts, and in some cases, it leads to loss of customers, reduction in sales and increase in costs. Although the managers do not mention bout the issue of lack of training of the employees, it is a major issue considering that 10 employees mentioned it. The two issues were mentioned as the main areas that should be improved.

Conclusion and Recommendations

Overall, the ERP system is very essential in organizations since it helps to integrate information from different sources and to make it available at different access points to organizational stakeholders. Importantly, the integration of information enables the managers to make informed decisions. Starbucks has implemented the system, just like other international organizations. As noted in the literature review, the previous studies have found contradictory results regarding whether the ERP system enhances organizational performance. However, most studies have found numerous benefits of the software to organizations. In order to benefit from the ERP system, it is vital to establish ways of overcoming the challenges associated with its implementation and management. Also, it is vital to understand and adhere to the software’s critical success factors. From the study of Starbucks, it is evident that the ERP system is effective given that it has many advantages to the company and to the managers and the employees. The only issues noted during the study are about the occasional failures of the computer systems in which the ERP systems are run and lack of adequate training by among some employees on how to use the system. The main recommendation is that Starbucks should upgrade its computer systems to reduce chances of failure. Starbucks should establish opportunities for training the employees on how to use the system. Starbucks should continue upgrading its ERP system as the technology continues to change.

Also Study:

Starbucks Case Study Solution

Starbucks Company Analysis Research Paper

References;

Ali, M., Nasr , E., S., & Geith, M. (2017). Benefits and Challenges of Cloud ERP Systems – A Systematic Literature Review. Future Computing and Informatics Journal. Retrieved from  http://www.sciencedirect.com/science/article/pii/S2314728816300599

Johan, A. (2014). Information system at Starbucks. Retrieved from http://starbucksinformationsystem.blogspot.co.ke/2014/11/starbucks_10.html

Ranjan, S., Pal, P., & Jha, V. K. (2016). Literature review on ERP implementation challenges. International Journal of Business Information Systems, 21(3), 388-921.

Saade, R, G., & Nijher, H. (2016). Critical success factors in enterprise resource planning implementation: A review of case studies. Journal of Enterprise Information Management, 29(1), 72-96. doi: 10.1108/JEIM-03-2014-0028

Seaford, B. C. & Brooks, B. W. (2012). Starbucks: Maintaining a clear position. Journal of the International Academy for Case Studies, 18(3), 39-57.

Starbucks (2017). Starbucks Company Timeline. Retrieved from https://www.starbucks.com/about-us/company-information/starbucks-company-timeline

Thin, A. (2013). Enterprise Resource Planning (Third ed.). Boston: Thomson Course Technology

Appendix: Questionnaire

The purpose of this questionnaire is to gather information about the effectiveness of Starbuck’s enterprise resource planning system (ERP). The results will be used for academic purpose only. No personal information or identity will be revealed for participating in the study. Please feel free to respond to the questions below.

Questions

  1. Position held by the respondent at Starbucks
  • Store Manager
  • Employee
  1. Length of service at Starbucks in terms of years

0-1     1-5     5-10       15 and above

  1. What benefits do you think the ERP system in Starbucks has?

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..

2. How does the ERP system affect your work, either positively or negatively?

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..

3. What do you think are the weaknesses or limitations of the system?

………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

4. How do you think the ERP system should be improved?

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………….

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