Resolving Complex Supply Chain Issues

I. Major Facts

The company was founded in 1985 in Los Angeles by three sisters who loved fine tea. Unfortunately, one of the sisters passed causing the remaining two to sell the company. Their then CPA Jack Reynolds along with two partners bought the company with the vision of successful and popular products. Due to its rapid expansion Tea and More (TAM) is facing major growing pains. The company’s revenue grew from under $1 million to over $25 million within 10 years. During his time with the company, he has a reputation of being a “time bomb” that micro-manages every aspect of the company. In order for TAM to achieve success, Jack outsourced his tea business to Japan, Sri Lanka, China, India, and Taiwan. However, with the expansion to multiple countries, he still had to deal with several issues such as shipment size and reliability. To solve this problem Jack decided to make a contract with Earl Morgan Limited (EML), receiving shipments twice a year, cheaper, and more reliable labor and the productions facility were in Cleveland.

II. Major Problem

TAM has many issues, to include but not limited to, management of its supply chain, strategic development, marketing, hostile work environment, administrative methods, customer service, and lower the price of tea. Jack Reynolds is overbearing, controlling, and micro-managing. When he micromanages the operation from start to finish he fails to utilize the full potential of his employee’s which creates a hostile environment which results in his controlling and overbearing attitude. The lack of supply chain management is a major logistical problem. Based in Los Angeles, distribution hub in Cleveland, and supplier in England who needs a 3-month lead time to get the product to Ohio. None of the companies utilize any software that provides them with a current product inventory, slowing down the process of getting the product to the customer. TAM has lost sales due to poor customer service. Sales representatives do not keep up with the smaller accounts, making only the bigger accounts the priority. The firm increased the price of its product by 20 percent, forcing the customers to seek cheaper products.

III. Possible Solutions

A. TAM has a couple of options to reestablish themselves and get back to being a successful company again. First would be to hire a CEO and allow that person to make all the major decision all while utilizing the senior staff. Mr. Reynolds tight grip on the company has created a hostile environment, putting a strain on the employee/boss relationship. By hiring a CEO, it would lessen the stress between himself and his employees, allowing the employees to develop their own ideas give a sense of ownership in the product and company, in turn, improving morale. Allowing his production chief to decide what tea and what blends would eliminate the obstacle course it takes for the product to get to the customer.

B. Solution A and “Implement a web-based billing, invoicing and ordering system and a web-based inventory system. The web-based billing system would eliminate postal costs, invoicing material, and manpower. Customers could control their accounts themselves as well as the company can eliminate any late fee by only accepting credit cards or debit cards for payment purposes. It would cut down the number of employees and sales reps which in turn would save the company money. Implementing a web-based inventory system which would provide a more accurate inventory of the Cleveland facility as well as provide the customer an up to date inventory eliminating customer wait times and increasing customer satisfaction”.

C. Solution A, and B “The limited shipments from EML is pushing customers to go elsewhere for their products. TAM might be able to negotiate better terms with EML or possible look for another supplier. EML’s three-month lead time does not allow for quick decisions to be made by TAM. If TAM found a new supplier, they might be able to react to changes in the market and keep their inventory up. By getting a new supplier, TAM would have timely shipments and better customer service”.

D. Solution A, B, and C “TAM needs to employ a market research company to do a deep study of the current market. The study should incorporate market brands, customer preferences, price and supply and demand of certain blend. If this research is done correctly it will produce an accurate prediction of the future market trend.

E. Disadvantages to these solutions would employees would be out of a job and the upfront cost to implement all these changes. The advantages would be that the company is rejuvenated. It would help TAM, its employees, and suppliers.

IV. Choice and Rationale

I would choose solution D; it is the most logical of all the solutions as in incorporates all four which would help TAM’s bottom line. Utilizing his CEO and senior staff the way he should create a less hostile environment creating an efficient, creative work culture.  It would let Jack focus doing his job and delegating down the chain. Implementing the web-based inventory, billing, and ordering system it reduces costs, i.e. shipping, material, and employee salary. TAM would become more profitable due to the instant billing and ability to charge interest on late accounts. By conducting market research TAM can predict what products are in high demand and be able to do a bulk order with EML that will last past the next run. If the employee is not happy the customer is not happy. These solutions will help to rectify the hostile and negative work environment.

V. Implementation

First, Jack needs to hire the CEO, the most practical person would be one of his partners, they already know the product, company and its employees which would make the training and transition flow smother. Next set up all of his web-based systems ultimately saving TAM time, man-hours and money. Jack will need to meet with EML and other suppliers to see if EML is currently the best choice of suppliers for his business needs. Conduct the market research to make sure he is not wasting money and to ensure he is spending money and man hours on marketing the right product for the customer. The market research will be conducted over a period of time, consisting of multiple countries and in rural and urban areas. This will provide more accurate feedback to what can make the company profit.

Appendix

1. What can we do about lost sales due to poor customer service by outside “contract” sales staff?

Implement the web-based billing and ordering systems. The systems would eliminate the sales personnel and allow the customers to handle their own orders. Incorporating the ordering system would streamline reorders reducing the number of customer service representatives.

2. How can we restore the attractiveness and power of the TAM brand for major customers so they aren’t lured away by low-cost, low-quality competitors?

Conduct the market research to determine preferences and marketing of products. TAM can send out surveys to its larger customers getting their feedback and adjusting the variety of teas. Customers like to know their voice is heard by tailoring the teas to the customers it shows they have a buy-in into the company.

3. How can we minimize “stock outages” and other inventory problems caused by unpredictable customer ordering patterns and the continuing difficulty of getting faster production and delivery from EML in London?

Utilizing the web-based inventory system would allow for L.A, Cleveland, and England to have “real-time” view of current stock levels. This would give TAM the ability to be proactive in it reorders.

4. How can we reduce collection time from 54 days to less than 40 days without alienating the very customer base TAM is trying to attract and retain?

By implementing the web-based ordering, invoicing and billing system only allowing for credit and debit card purchases it eliminates delinquencies by collecting pay instantly.

5. What decisions should we make regarding experimentation with new tea varieties, such as the “Christmas Mint” tea that fell flat last season? Can we afford to continue? such experiments? Can TAM afford to stick only to its basic teas and not compete in the “new and improved” tea market so heavily advertised by competitors?

Due to the lack of funds and effort put into marketing sales have deteriorated. Investing in the advertisement and marketing will pull in more customers. TAM should continue to produce the seasonal items just at less quantity to eliminate waste of product and funds. TAM could incorporate coupons for seasonal items and tea of the month clubs to entice new customers. TAM cannot afford to lose loyal customers not continuing with their current strategies could potentially hurt the companies’ profits.

6. What haven’t we thought of? Where else can financial advantages and process efficiencies be achieved?

Build the management team will better achievements. Bring in motivational speaks to a company team building summit. Utilizing various marketing avenues such as social media and media.

Reference

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