Tea Case

Topics: Bottle, Supply chain management, Forecasting Pages: 12 (2823 words) Published: April 22, 2015

1. Flow of products and information within Tehindo’s supply chain

Distribution Facilities
There are three key players in Tehindo’s supply chain: the tea leaves suppliers, ten factories across Indonesia and the distributions facilities, which includes sales center, distributors, wholesalers, retailers. - Tehindo corporate organization owns a total of over 1500 hectares of tea plantations in West Java. - Ten manufacturing plants are spread across three island in Indonesia: Sumatera, Java and Bali. - Tehindo use 4 types of channel to distribute their tea products. Beside the flow of product downstream the supply chain, Tehindo has to manage the upstream flow of empty bottles. The glass bottles are sent back to the factories for reuse in new products. With many players in the supply chain as well as two flows of products, Tehindo supply chain appears to be very complicated. As a result, a miscommunication of information between the key players can cause a disruption in the whole supply chain. 2. The challenges facing bottled Goteh and Fteh products:

a. Goteh’s challenges:
Firstly, Goteh has only few product variants, which makes it easier to forecast in comparison to Fteh. There is only one flavor of jasmine tea with three different styles of packaging. With only one flavor, Goteh outperforms Fteh in terms of sales volume. Secondly, according to the information given, Goteh is mainly sold through the traditional market, which are small grocery stores. One advantages from this practice is that it is not affected by the promotions from wholesalers and retailers in the supply chain that can cause fluctuations. However, due to the nature of small grocery stores, the transparency of demand information can be very limited. Getting demand information from these small grocery stores can be more challenging than from the wholesalers or retailers. Lastly, most of Goteh products are RGB, return glass bottle. Empty glass bottles are sent back to the factories, which creates a complex reverse logistics activities. Not only does the company has to manage the flow of products downstream, it also has to make sure the flows of bottle backwards to be continuous so that it will not affect the manufacturing process. However, there is always a lag in the process, as people usually do not return the bottles right after they finish them. Most consumers, and small grocery shops, compile all of their bottles and send them back to the factories by the end of the month to reduce their transportation cost. Thus, there might be a surplus or a shortage of bottles at certain points of time. Furthermore, some players in the supply chain may have high inventory levels, which cause a shortage in empty bottles throughout the system.

b. Fteh’s challenges:
Fteh have many variants of products. It offers four types of packaging styles with 5 – 8 flavors for each style. Thus, the variety of product is much higher, and demands are more spread out among different products. As a result, it is hard for the company to forecast the demand and determining stocking policies. In contradiction to Goteh, most of Fteh sales are through modern maker outlets, which often include wholesalers and retailers. Even though technology improves the information between the players in this type of supply chain, each player has different marketing initiatives, which can cause a disruption in demand. For example, a promotion from one of the retailers may increase the demand significantly for a short period of time, which result in the bullwhip effect in demand forecasting. In addition, wholesalers and retailers may choose to purchase more than the actual demand prior the price increase. Thus, it is essential but costly for Tehindo to keep a close relationship with these players in order to satisfy the real customer demand. Fteh also offers glass bottle packaging, which creates difficulties in managing reverse logistics activities. The higher involvement...
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