Major Facts
Tea and More (TAM) is a company that has been expanding rapidly since its purchase from the three sisters that started the enterprise. The overall revenue grew from under 1 million to circa 25 million dollars a year (Doyle & Bell, 2014). The company used to buy from various suppliers from China and India but has been since forced to work through an intermediary – Earl Morgan Limited (EML), for whom TAM is not a priority customer since the company works with large retail chains in Europe (Doyle & Bell, 2014). The company’s most traded teas have been reduced to 5-6 varieties, and the attempts to diversify the product line have been largely met with failures.
TAM has been experiencing a gradual loss of market share to cheaper and low-quality competitors. They have also experienced trouble obtaining timely payments from existing customers (Doyle & Bell, 2014). Outside traders have been continuously failing the company at all stages of the process. The company is experiencing logistic issues with teas that are not mainstream and easily delivered by EML (Doyle & Bell, 2014). The company is struggling to find a solution to these problems, and the director, Jack Reynolds, believes that him micromanaging everyone will improve the situation.
Major Problems
The company has a myriad of problems both within and without the supply chain component. They are as follows (Doyle & Bell, 2014):
- Inflexible management structure with an authoritarian leader in charge, which negatively impacts morale and makes TAM lose valuable employees;
- Issues with stocking and supplying. EML is treating TAM like a second-hand customer. It can supply popular brands in large quantities but fails to deliver on smaller purchases of rarer brands. Because of these logistical failures, customers are often forced to wait longer times;
- Issues with quality. TAM’s prices have been climbing higher while their quality has been slipping.
- Issues with sales. Outside salesmen are unreliable in selling and handling cash;
- Issues with customers. Customers are not staying loyal and are sloppy with their payment obligations.
Possible Solutions
TAM suffers from a plethora of problems that have to be addressed in a holistic manner, as each has the potential of causing company downfall. An inflexible management structure can be solved by removing some of the power from Reynold’s and offering more freedom to salespersons and other decision-makers (Jacobs et al., 2014). Alternatively, the company can move from a centralized structure it has to that of a franchise, with each franchisee having autonomy and being able to supply the local producers. Both solutions offer the advantage of quicker and more autonomous decision-making (Jacobs et al., 2014). The disadvantage of the first solution would involve Reynold’s likely unwillingness to part with power, while franchising is very cumbersome to perform in the short term.
Issues with stocking and supplying, as well as those of quality largely stem from the fact that EML is an in-bulk supplier specializing in large retail chains rather than dedicated teashop stores. They can provide popular teas in great quantities, but do not have windows for smaller, on-demand supplies. Two potential solutions include either removing the extra flavors to simplify the supply chain or diversifying it to not rely on EML as much. Both would succeed in ensuring the company always has full stock (Jacobs et al., 2014). The latter solution can potentially solve quality issues as well. The disadvantages of each method include the fact that the first solution would completely remove TAM’s identity as a company, whereas the latter will make logistics potentially more complicated.
Issues with payments and sales can largely be attributed to the company not having salespeople of its own and having to rely on outside sales to mitigate the issue. Customer payments are delayed because neither customers nor salespeople are pressured to deliver payments on time. These issues can be solved by dropping the 3rd-party sellers in favor of the company’s own, introducing electronic payments only, and reducing the payment times to 40 days maximum, with an additional fee enforced after that (Jacobs et al., 2014). These measures will ensure that money is delivered to the company on time, at the cost of disenfranchising some of the customers with sketchy paying habits.
Choice and Rationale
The choices among the ones proposed for different issues plaguing TAM include reducing Jack Reynold’s overall authority and giving decision-makers more autonomy, diversifying suppliers, and implementing all three solutions to help solve the sales and payments crisis. Although hard, curtailing Reynold’s attitude is vital to the survival of TAM, as he is stuck with an outdated operating model and is actively harming the company (Doyle & Bell, 2014). It will be possible to remove him from absolute power, as there are other investors and partners owning the company. Diversifying suppliers will allow TAM to produce popular teas in bulk while indulging in holiday-specific flavors, rare brews, and catering to smaller businesses (Jacobs et al., 2014). They can obtain these specialty supplies from their old Chinese and Indian suppliers. Finally, working with company-based salespeople, encouraging the use of electronic payments, and reducing the waiting times for customer transactions will ensure that the company always has enough operational cash.
Implementation
The first part of the proposed changes would involve conversing with partners and investors about how TAM has been gradually losing market share and highlighting Jack Reynold’s behavior and leadership as inappropriate and ineffective. They could put pressure on the man to back down and give up some of the authority. Diversifying supply channels should not be difficult, as the company already has standing relations with EML, and can utilize its old contacts to acquire high-quality rare teas in smaller quantities. Finally, the transition from outside to inside sales would need hiring people and expanding the staff. Fully switching to electronic payments and shortening the waiting time on clients is possible with existing capabilities, not many changes are required.
Appendix
- The first thing to do about the outside contract sales staff is to replace them with company salespeople. With enough numbers and liberty to adjust to customer demands, TAM could acquire more sales and new customers.
- TAM’s issue against low-cost, low-quality competitors is that they sell low-quality products at higher prices. TAM should increase the quality and availability of its products to regain its reputation as a premium brand.
- Stock outages can be minimized by diversifying supply, ensuring that EML only supplies popular teas they have an abundance of, and relying on smaller local producers for less popular brands.
- It is likely that customers delay payments because of habits. Changing from 54 days to less than 40 days should discipline most of them, with only poorly-paying customers being lost.
- Holiday-based flavors for TAM failed not because of the quality of products but because of a lack of advertising. TAM could succeed if it puts more money and energy into marketing. It should continue to invest in diversifying teas and win customers over using quality.
- Other financial advantages and process efficiencies can be achieved through changing the leadership structure and improving employee retention. While Jack Reynolds was valuable to the creation and expansion of TAM, he is now a liability to the company.
References
Doyle, B., & Bell, A. (2014). Reading the tea leaves at tea and more: Resolving complex supply chain issues. Operations and Supply Chain Management: An International Journal, 2(3), 172-177.
Jacobs, F. R., Chase, R. B., & Lummus, R. R. (2014). Operations and supply chain management. McGraw-Hill/Irwin.