Supply Chain Management Case Study: Tea and More

Tea and More (TAM) is a company that has achieved tremendous success and profitability as a purveyor of fine teas and varied food specialties. Because it supplies upscale gourmet shops and restaurants, the firm experienced steady growth characterized by increasing market share and profitability. Building on that momentum, TAM embarked on a rapid expansion initiative to enhance its market share and become a leading company in its industry. However, despite the potential gains from expansion, the company now faces significant challenges in several areas, including supply chain management, marketing, long-term strategy, and value creation. In order to enhance its productivity, the company needs to develop appropriate strategies to address these problems.

Tea and More has a history dating back to 1985, when it was founded in Los Angeles as Global Tea by three sisters (Doyle & Bell, 2009, p. 165). Since its inception, the company experienced tremendous growth and profitability; revenues had increased to nearly $25 million by early 2009. However, the firm has encountered several issues that have threatened its success over the past few years, largely as a result of its rapid expansion initiative over the past decade. During this period, Jack Reynolds bought out his partners' share in the company, which gave him the final say in most operational and sales decisions. As he increased his working hours, he became temperamental, and the firm faced several challenges that threatened its effective operations and productivity.

First, the firm developed a complex supply chain after Jack shifted from direct importation of selected teas to an arrangement with Earl Morgan Limited (EML). Order definition and compilation became a major challenge under this new supply chain mechanism, given that EML requires a three-month lead time for any production run. Second, TAM is experiencing difficulties with its sales representatives regarding the most suitable approach for sales. Representatives have expressed concerns about the seeming inability to make regular calls on smaller, distant customers due to rising gas costs. Management, meanwhile, has declined to establish a new sales arrangement, fearing that salespeople will stop making in-person calls to customers. Attempts to prevent sales staff from deducting their commission before turning in cash have also proven futile. Third, the company has lost competitive advantage to rivals who market their products through eye-catching displays and magazine advertisements. Finally, TAM faces numerous challenges from the low-price market, as competitors reduce prices to attract more customers.

The major problem at Tea and More is poor inventory management, driven by the complex supply chain issues that characterize its operations. Poor inventory management is evidenced by the long lead time, which forces ordering to be carried out in bulk through EML. In addition, the company is experiencing a low product turnover rate and high storage costs because of excess inventory (Harrison, 2013). The poor inventory management at TAM has been compounded by an ineffective corporate culture rooted in autocratic decision making. This culture has contributed to widespread distrust and criticism, a lack of employee responsibility and ownership, stifled innovation, and decreased worker efficiency. The ineffective corporate culture has in turn generated poor customer service and strained customer relations, due in part to the absence of a formal Customer Relationship Management (CRM) system.

Given the far-reaching impacts of Tea and More's poor inventory management, there are several possible solutions that can be utilized to resolve the problem. The first possible solution is to change the company's corporate culture from autocratic decision making to a leadership style that improves stakeholder relations. Because autocratic decision making has been a primary cause of this problem, this process would require examining the company's norms and establishing a culture that promotes collaborative decision making and problem solving. The advantage of this approach is that it would improve stakeholder relations. However, it is disadvantageous in the sense that changing a corporate culture involves numerous requirements and may not necessarily resolve the inventory issue on its own.

The second possible solution is establishing Supplier Relationship Management (SRM), a comprehensive approach to managing an organization's interactions with its suppliers. This approach would streamline and enhance the effectiveness of supply chain processes by increasing the supplier base, resolving existing communication issues, and focusing supply chain processes on actual demand. The advantages of this solution include its focus on relationship building and its mutually beneficial nature for both the company and its suppliers (Rizza, 2015). Its disadvantage is that it requires relatively expensive technology to function effectively. The third possible solution is lean management, which would involve changing the existing corporate culture and management approach. Advantages of lean management include a reduction of product mix-ups, decreased inventory levels, and shorter production lead times; however, it does not focus on customers — only on suppliers.

The most suitable solution for addressing the major problem at Tea and More is establishing a Supplier Relationship Management (SRM) system. This is primarily because the central problem at TAM is the complexity of its supply chain operations, which has in turn affected the company's profitability and its relationships with customers. The establishment of SRM is well suited to address poor inventory management by improving relations with key stakeholders. The rationale for this choice is that SRM will help engage suppliers in a manner that reflects the priorities of the organization and its customers (Procurement Leaders, 2013). While changing the corporate culture and implementing lean management could help address some of TAM's problems, neither approach would effectively target the firm's relationships and interactions with its suppliers.