The Tea and More Company’s Problem and Solutions

Major Facts

In 1985, three sisters with a shared passion for fine teas founded Global Tea in Los Angeles. Jack Reynolds and his two friends bought the company and renamed it Tea and More (TAM). Eventually, Reynolds bought the stakes held by the other partners and occasionally engaged new investors but retained the overall decision-making powers (Doyle & Bell, 2014). Despite expanding sources of the firm’s teas to include China, India, Taiwan, Sri Lanka, and Japan, TAM continued to experience challenges in shipment sizes and reliability throughout the mid-1990s.

TAM and Earl Morgan Limited (EML)’s operational modalities were incompatible and were characterized by long lead times and protracted bidirectional communication, occasioning inventory management failures. Additionally, TAM experienced problems dealing with the contracted salespeople who were dismissive of small clients (Doyle & Bell, 2014). TAM also had challenges in debt collection, which was aggravated by untimely invoice issuances, non-enforcement of the credit code, and ineffective communication of the late payment policy. It was also unable to develop and market new innovative product varieties due to budgetary constraints (Doyle & Bell, 2014). Further, TAM’s profitability and market share declined due to increased production costs in response to rising operational expenditures.

Major Problem

TAM’s major problem is the concentration of all executive decision-making powers within one person. After buying the company from the original owners, Jack purchased the stakes held by his two partners and assumed sole ownership of the firm (Doyle & Bell, 2014). Although he occasionally admitted new investors, he retained absolute control and full decision-making powers. For instance, he has been unwilling to approve budgetary allocations for marketing since he believes TAM’s products are superior.

Possible Solutions

One possible solution to the problems facing TAM is to decentralize decision-making across the entire hierarchical structure of the organization. According to Darvishmotevali (2019), delegated authority creates a degree of freedom in a company, enhancing creativity and the quality of managerial resolutions. Allowing departmental managers to contribute and make decisions in their areas of expertise increases the potential for making the right choices for the business. Additionally, providing employees with the authority to make decisions improves their morale by demonstrating that their input is valued. In this regard, decentralization and delegation of decision-making powers could significantly improve TAM’s operational effectiveness.

Moreover, TAM should streamline the activities and operations of the contracted and permanent salespersons for increased efficiency through a more customer-centric approach. The failure of the non-permanent salespeople to engage the small account holders led them to consider giving business to competitors (Doyle & Bell, 2014). Subramanian (2018) contends that efficient customer relationship management is critical in improving sales and enhancing profitability. Therefore, TAM should reengineer the operations of its customer service department to ensure that it becomes more effective and customer-centric.

Further, TAM should restructure its supply chain by integrating another supplier and evaluating ways to procure the selected teas directly from the source without engaging intermediaries. The sophisticated system has created misunderstanding, additional administrative burdens, and procurement challenges. Ates et al. (2021) assert that such a system undermines operational effectiveness and the performance of a business by impeding such critical functions as inventory management. Therefore, TAM should reorganize its supply chain by onboarding an additional supplier and sourcing the teas directly from the source.

Choice and Rationale

Decentralized decision-making is the most critical choice for improving the overall operational effectiveness of TAM. The rationale for this choice is that a significant proportion of the organization’s problems can be attributed to the lack of delegated management and concentration of managerial decision-making powers in Reynold’s hands. This implies that the business has been running without the expert input and contribution of departmental managers and company executives.

Implementation Plan for Delegated Decision-Making

Implementing decentralized decision-making will commence with determining the specific tasks to be delegated and formulating clear instructions to facilitate smooth operations. This will be followed by granting the necessary authority and autonomy to the departmental heads to execute those functions. Notably, this will demonstrate complete trust to the managers to whom the duties have been delegated. TAM will also encourage managerial consultations, especially where the input of other departmental heads can enhance the quality of decisions.

Appendix

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

Poor customer service by the contracted salespeople has led to the loss of sales in TAM. To address this, the organization should consider engaging these customer service representatives on a permanent basis. That strategic decision would increase their level of loyalty due to the enhanced organizational citizenship behavior, which stimulates efficiency, productivity, and performance (Kumari & Thapliyal, 2017). In this regard, TAM should employ the contracted workers on permanent terms.

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?

TAM has been losing its major customers to competitors offering low-quality products at reduced prices. To restore its brand power and attractiveness, the company should reinforce its market position as the supplier of premium teas and provide adequate budgetary support for developing new innovative products. According to McAlister et al. (2016), sufficient financial allocations are critical to enhancing a firm’s ability to create and introduce new products into the market. Therefore, TAM should ensure adequate monetary provision to reinforce the firm’s market position as the supplier of premium tea products.

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?

TAM can minimize stockouts and other inventory challenges by reorganizing its supply chain through such options as onboarding a new supplier and making direct procurement of teas from suppliers. According to Atnafu et al. (2018), overreliance on a single supplier increases a firm’s vulnerability to supply disruptions, especially in highly specific products. Additionally, TAM should develop an in-house system and capacity for collecting and accurately analyzing customer ordering patterns to enhance the predictability of trends. These two strategies will improve TAM’s inventory management and eliminate the production and delivery challenges in EML.

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?

To reduce debt collection time from 54 to less than 40 days, TAM should ensure timely invoice issuance, innovatively promote adherence to the firm’s credit code, and effectively articulate the company’s late payment policy. Liu et al. (2021) argue that an effective invoice management system should integrate timeliness and accuracy as fundamental pillars. Implementing these strategies will guarantee predictable and consistent payment patterns without alienating or upsetting the customer base.

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?

TAM should embrace continuous innovation and experimentation with new tea varieties, primarily due to the success registered by competitors. However, the company should audit the failures and shortcomings recorded in previous instances and address the gaps contributing to the setback of Christmas Mint. Notably, TAM should continue with the experiments and utilize them as opportunities for exploring new exciting products and markets. Relying on basic teas and refusing to venture into new products will ultimately erode brand value and the firm’s market share.

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

Additional financial advantages and process efficiencies can be obtained from interrogating TAM’s product pricing, particularly on the reasons underlying the rise in such operational costs as labor, shipping, and materials. The organization should also enhance operational effectiveness by ending Reynold’s absolute control of the firm, which has created bureaucracy and rendered the executives and business directors dysfunctional. This implies that TAM does not realize the economic significance of these offices.

References

Ates, M., Suurmond, R., Luzzini, D., & Krause, D. (2021). Order from chaos: A meta‐analysis of supply chain complexity and firm performance. Journal of Supply Chain Management, 1–28. Web.

Atnafu, D., Balda, A., & Liu, S. (2018). The impact of inventory management practice on firms’ competitiveness and organizational performance: Empirical evidence from micro and small enterprises in Ethiopia. Cogent Business & Management, 5(1), 1–16. Web.

Darvishmotevali, M. (2019). Decentralization and innovative behavior: The moderating role of supervisor support. International Journal of Organizational Leadership, 8(1), 31–45. Web.

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. Web.

Kumari, P., & Thapliyal, S. (2017). Studying the impact of organizational citizenship behavior on organizational effectiveness. International Academic Journal of Organizational Behavior and Human Resource Management, 4(1), 9–21. Web.

Liu, L., Wang, B., He, X., Wang, J., Zheng, Y., & Yan, Y. (2021). Establishing an electronic invoice management platform based on an information system. Journal of Physics: Conference Series, 2004(1), 1–7. Web.

McAlister, L., Srinivasan, R., Jindal, N., & Cannella, A. (2016). Advertising effectiveness: The moderating effect of firm strategy. Journal of Marketing Research, 53(2), 207–224. Web.

Subramanian, K. R. (2018). The connection between your employees and customers. Journal of Advance Research in Business Management and Accounting, 4(8), 1–14. Web.