Starbucks adds risk management program to help protect its supply chain

As part of its efforts to safeguard its global brand, Seattle, Washington-based Starbucks Coffee Co. has established an enterprise risk management (ERM) program to identify nascent trends that could impact its supply chain. Stephen E. Lovejoy, Starbucks' senior vice president, global supply chain, Asia, channels, and store development, described the initiative in his keynote presentation at the 2014 CSCMP Singapore Conference in January.

The ERM program allows the worldwide beverage company and coffee house chain to identify macro trends that could interrupt its supply chain and impair its ability to service its customers. "We've found that the enterprise risk management program is critical for our company because it provides early involvement and exposure to risk and information before they happen," Lovejoy said. The ERM program complements Starbucks' business continuity program, which provides a tactical roadmap for maintaining day-to-day operations under adverse conditions. Starbucks operates 20,000 outlets in 63 countries and does business with 9,000 suppliers worldwide.

The company's board of directors reviews the ERM program annually. "It's a dynamic discussion about the risks that the company sees as the most important," Lovejoy said during his talk.

The program addresses key risk factors like supply interruptions, financial volatility, and geopolitical events that could hamper its supply chain operations. Because risks change from year to year, Lovejoy said, the ERM helps Starbucks prepare to deal with emerging threats. "You could be blinded by risks in this world if you are static in your assessment of risk and your mitigation actions. The world may move around faster than your plan," he said.

Another aspect of Starbucks' risk mitigation strategy has been the creation of "centers of excellence," which are staffed by experts in areas that are critical to the company's success. Starbucks has had a center of excellence for coffee in place for some time, and recently established centers for other commodities and for advanced analytics. The centers assist regional and local operations by providing industry analytics and consulting. The centers can also provide assistance in the event of a crisis, Lovejoy said.