Managing Supply Chain Complexity in a Tea Manufacturing Company I Nyoman Pujawan*
Department of Industrial Engineering, Sepuluh Nopember Institute of Technology, Kampus ITS Sukolilo, Surabaya 60111 Indonesia E-mail: firstname.lastname@example.org
Department of Information Systems, Faculty of Information Technology, Sepuluh Nopember Institute of Technology, Kampus ITS Sukolilo, Surabaya 60111 Indonesia E-mail: email@example.com
In this case we present issues facing supply chain management in a tea manufacturing company. The company manages two types of products, ready-to-drink jasmine tea and ready-to-drink fruity tea, each having different complexity issues in their supply chain management processes. The case explains characteristics of the products, the supply chain structures, and the nature of demand. The case is expected to facilitate discussions of various supply chain concepts such as the bullwhip effect, supply chain coordination, and vertical integration versus outsourcing.
Keywords: supply chain complexity, information distortion, case study, tea manufacturing
1. The First Meeting
It was Friday, June 27, 2008. The coordination meeting between the marketing, distribution, and production departments was taking place. “Some stores have been out of stock of some types of Fteh in the last few days,” the distribution manager of Tehindo, a producer and distributor of tea products in Indonesia, informed the attendees. Fteh is their brand name for ready-to-drink tea with a fruity flavor. “We have too many product variants of fruity tea. Such a significant shortage has never happened
to our main product, Goteh. Why don’t we focus on Goteh? Its sales volume is high and demand fluctuation is low,” the operations manager added. The marketing manager responded after a brief of silence, “It is indeed true what the operations manager mentioned. But, if we want to enter wider market segments, it is a must for us to keep innovative products with more variants in the market. In the future, there is no doubt that innovative products like Fteh with various flavors will hold a strong market segment. Their contribution to revenue is increasing over time.”
* Corresponding Author This case was prepared solely to provide material for classroom discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors have disguised some names and other identifying information to protect confidentiality. The views presented here are those of the case authors and do not necessarily reflect the views of Operations and Supply Chain Management: An International Journal. Copyright © 2009 by Operations and Supply Chain Management: An International Journal and the authors. If you are an instructor and wish to adopt the case for your class, please contact the corresponding author or the special issue editor to obtain the teaching notes.
Pujawan and Mahendrawathi : Managing Supply Chain Complexity in a Tea Manufacturing Company Operations & Supply Chain Management 2 (3) pp 167-171 © 2009
“But too many variants of Fteh increase the difficulties in production and distribution activities. Our performance looks bad because we often experience out of stock situations for certain variants, but an excess of inventory for other Fteh products,” the distribution manager continued. The marketing manager insisted that the increasing number of new variants of Fteh has enabled the company to hold a strong segment of teenagers. The classic Goteh did not really embrace the teenager segment of the market.
Table 1. Product variants for Goteh and Fteh Product Group
Goteh (Ready-to-drink jasmine tea) Fteh (Ready-to-drink fruity tea)
Glass bottle Tetra pack Tetra pack Glass bottle Tetra wedge Can Plastic bottle PET...