Supply chain for Terando
Management Case Study
Supply chain for Terando
One of the reasons why Goteh tea product is successful is because its distribution uses the traditional markets, unlike Fteh product which uses the modern retail chains. The traditional markets serve a large number of buyers, and the markets are widely distributed making it possible to reach a large number of consumers. The supply chain process for Fteh is complex, unlike Goteh. The demand is affected by promotional activities in the modern retail chains and special events like New Year festivities which do not occur throughout the year. Also, the large number of Fteh flavors makes it hard for the retail chains to concentrate on a single product to boost its sales. As a result, the demand for the different varieties of Fteh is not uniform.
The anticipated price increase causes the temporary demand. The company has a policy of publicizing a price upsurge two weeks prior the actual increase (Pujawan and Mahendrawathi 169). As a result, dealers and retailers carry out onward buying to respond to the cost increase by the factory (Pujawan and Mahendrawathi 169). The demand is not permanent since it’s only in the side of retailers and wholesalers and not on the side of consumers.
As a supply chain manager, I would recommend a reduction in the number of Fteh varieties. Unlike Goteh tea product, Fteh increases the difficulty in production and distribution. Some of Fteh flavors experience out of stock situations while other flavors experience excess inventory. Therefore, the marketing department should conduct a marketing analysis by involving consumers and retailers. They should identify which flavors have a high demand, why they are preferred more than others and what makes the customers less attracted to other flavors that experience excess inventory.
The company has a policy of declaring a price rise two weeks prior the actual date (Pujawan and Mahendrawathi 169). The company does this as a way of pleasing the retailers and suppliers. Changes in prices of commodities are a normal occurrence and the key players in the supply chain should be prepared for such incidents. The misinformation creates a temporary demand for the tea products resulting in a shortage of the products in the company warehouse as well the shortage of empty bottles at the factory. Some of the retailers also experience high inventory levels since the demand on the side of retailers does not correspond to the consumer demand. The changes in the price of tea products should be market driven, and the company should not inform retailers of price increases in advance.
The vertical integration and outsourcing of one-way product (OWP) favors the company’s distribution and sales strategies. The tea leaves are supplied by a company owned by Tehindo, allowing them to maintain high-quality products. The vertical integration allows for specialization since each department has its core area of operation, allowing them to avail high-quality products. If the company outsourced essential raw materials, then the production may be affected by low-quality raw materials, shortages and high costs of production. Outsourcing distribution has given the company access to new markets for its products. However, the company should not distribute Goteh a single distributor. The option may create future uncertainties in case the distributor is unable to fulfill their obligations. The company should employ other options by incorporating the modern retail chains for the Goteh product.
Pujawan, Nyoman and Er Mahendrawathi. “Managing Supply Chain Complexity in a Tea Manufacturing Company.” Operations and Supply Chain Management (2009): 167-171.