Dead Body in the Road, and How Starbucks Increased Efficiency

Photo by Tyler Nix on Unsplash

I backed out of my driveway about 6am in early January. As I turned into the street, I noticed a 6-foot dark object in the road.

Is that a dead body?

Turns out that my Christmas Tree, which I had set next to my driveway for pickup, had rolled into the street.

Well, that’s a relief.

If you decorate for Christmas, you may spend hours (or days) getting ready and taking it all down in January. My wife and I have found some ways to work more efficiently, which makes the process easier.

Finding small efficiencies can make a huge difference, if you operate a large business like Starbucks. This post explains some recent changes Starbucks has implemented, and the potential impact on profits.

Just how big is Starbucks?

So, how big are we talking about?

Here are some highlights from fiscal year 2023:

• Consolidated net revenues a record $36.0 billion

• 38,038 stores

• 33 million US users on the Starbucks phone app

It’s a massive operation. If the business doesn’t keep an eye on efficiency, costs will increase quickly. Saving time also presents a great opportunity to increase profits.

How Starbucks increased efficiency

Another quote from Starbucks’ financial report:

“GAAP operating margin of 18.2% increased from 14.2% in the prior year, primarily driven by in-store operational efficiencies...”

Operating margin is defined as (operating income divided by net sales). Investopedia explains that operating margin is the profit generated on each dollar of sales, after subtracting the variable costs of production.

Think about the profit on day-to-day operations: selling coffee and other items.

One way Starbucks squeezed more profit out of each dollar of operating income is through store efficiency.

It’s all about the Baristas.

Better equipment, faster Baristas, less time

How long does it take a Barista to make a Grande Mocha Frappuccino?

According to this report, Starbucks cut the time from 87 seconds and 16 steps down to 36 seconds and 13 steps.

How?

“A new proprietary Siren System that features a custom ice dispenser, milk-dispensing system and new, faster blenders all located within reach of a barista, reducing bending and heavy lifting. It also eliminates the need to move back and forth behind the service bar and eases congestion in a crowded, busy space.”

Better equipment, fewer steps, less effort…and less labor time.

And customers are served faster- particularly those with specialty orders.

“… two in three drinks ordered have requested customizations such as extra espresso shots and flavorings.”

One other great time saver- the digital app.

Technology makes “the customer experience at Starbucks more personalized and effortless, while also freeing up baristas to focus on creating more moments of connection.”

Is best part for Starbucks?

Higher profits- without raising prices

Starbucks increases profits without needing to increase prices.

If you operate in an environment with heavy competition and demanding customers, it’s the best way to improve the bottom line.

The Lesson

Your business is spending money on materials and labor to build a product or deliver a service. Take a hard look at increasing efficiency- before you consider price increases.