Addressing Operational Challenges at Tea and More to Sustain Profitable Growth Essay (Critical Writing)

Major Facts

Tea and More (TAM) is a specialty tea company that has experienced rapid growth, with revenues rising from $1 million to $25 million over the past decade (Doyle & Bell, 2014). However, TAM’s operations and management systems have struggled to keep pace with this extreme expansion. TAM’s supply chain involves purchasing tea ingredients from international suppliers, shipping to their Midwest production facility for packaging, warehousing inventory, and finally distributing to customers. Lengthy three-month lead times and unpredictable demand make supply chain management challenging. Stockouts are common when customer orders spike.

TAM has a field sales force responsible for customer accounts, but small accounts rely on contract sales reps with multiple brands. These reps are dissatisfied with the commission structure, high travel costs, and inability to earn commissions on website orders. Customers complain about poor sales coverage. TAM has attempted to drive growth by expanding tea varieties, but new products have not sold well despite competitors’ success (Doyle & Bell, 2014).

Raising prices in response to higher costs opened the door for low-cost competitor brands to steal customers. Flat profitability and declining competitive position are key issues. However, the most alarming challenge is high employee turnover, resulting in the loss of critical expertise and constant training of new hires.

TAM’s owner called an urgent summit to address these manifold issues but provided little direction. His short-sighted views fail to grasp the gravity of TAM’s situation. Operational areas are in disarray. Employees are dissatisfied and leaving. Customers are frustrated with stockouts and poor service. The TAM brand has lost luster. Meanwhile, agile competitors are stealing market share.

It is clear TAM’s runaway growth has surpassed its management and operations capabilities. It now faces an existential crisis. To thrive in the future, TAM must get control of growth by shoring up the supply chain, sales, marketing, HR, and other operational areas. The summit offers an opportunity to take drastic action to transform TAM for its next stage of sustainable, profitable growth. However, it requires strong leadership and operational excellence, which are areas where TAM has faltered.

Major Problem

Tea and More’s rapid growth has surpassed its operational capabilities, causing widespread issues. Poor supply chain management is leading to stockouts, long lead times, and inventory problems (Doyle & Bell, 2014). Salesforce challenges are negatively impacting customer service and small account coverage.

Attempts to expand into new varieties have struggled despite competitors’ success. Raising prices opened the door to low-cost rivals. Declining employee engagement fuels turnover (Wisner et al., 2019). These operational deficiencies severely hurt customer satisfaction, profit margins, and competitive position. Tea and More needs to urgently get control of its runaway expansion. It requires robust operations management, strategic sales and marketing, improved talent retention, and strong leadership to drive broad-based business improvements. Without major changes, the issues will only intensify as the company grows.

Possible Solutions

1. Hire a supply chain management vice president to design and implement formal forecasting, inventory management, and supplier relationship processes. This will improve visibility, reduce costs and stockouts, and enhance flexibility.
2. Conduct a sales compensation study and redesign incentives to drive small account coverage. Consider bringing some small accounts in-house with an inside sales team.
3. Perform market research to guide new product development, pricing strategies, and marketing. Take a strategic approach linking teas to brand identity and targeted customer segments.
4. Survey employee engagement and satisfaction. Develop retention programs focused on compensation, culture, training, and professional growth opportunities.
5. Engage an operations consulting firm to conduct an in-depth assessment of processes, organization structures, costs, systems, and more. Identify improvement opportunities.

Recommendation and Rationale

I recommend a hybrid solution focused on improving supply chain management (A), optimizing the sales force structure and incentives (B), enhancing employee retention (D), and securing operations consulting (E). Getting supply chain expertise and processes in place (A) is critical to addressing stockouts, costs, and long lead times through forecasting, inventory management, supplier flexibility, and order optimization (Griffin, 2021). For sales force issues (B), a revised compensation structure is needed to drive small account coverage, but bringing all accounts in-house could be cost-prohibitive. Improving employee retention (D) will maintain critical knowledge and reduce turnover costs. Operations consulting (E) will provide an unbiased expert assessment of issues and opportunities for improvements across the business.

Combined, these solutions address the core operational issues driving Tea and More’s decline while also providing a forward-looking assessment of strategic opportunities for growth and optimization. The supply chain and sales force initiatives target the immediate problems of inventory, stockouts, and customer coverage (Schniederjans et al., 2020). Employee retention and operational consulting efforts take a broader view of ingraining excellence and best practices across the business. This comprehensive approach can help Tea and More gain control of their rapid expansion through operational and organizational improvements. They will shift from a reactive state to a strategic position ready for the next stage of sustainable, profitable growth.

Implementation

To drive improvements across the supply chain, sales, employees, and operations, Tea and More should take the following steps over a six to nine-month timeframe:

1. Hire a Vice President of supply chain management to overhaul forecasting, inventory management, supplier relationships, and logistics. This leader will design processes to gain visibility into demand, reduce lead times, improve supplier flexibility, and optimize inventory and fulfillment.
2. Conduct a comprehensive sales compensation and incentives study. Utilize findings to redesign structures that drive small account coverage. Incentives for online sales and commissions addressing travel costs should be included.
3. Survey employee engagement and satisfaction. Look for root causes of turnover. Develop targeted retention programs focusing on compensation, professional development, training, and culture initiatives. Focus on high-turnover roles first.
4. Engage a top operations consulting firm to conduct a two to three-month assessment (Rothaermel, 2020). This review should include supply chain, sales, marketing, Human Resources, IT, finance, and other operational areas. Identify issues, waste, costs, and opportunities for improvement across processes, organization structures, and systems.
5. Designate an internal team from senior leadership to manage the consultant relationship and oversee the implementation of recommendations. This ensures recommendations translate into real improvement.
6. The owner and senior management team must take an active role in these initiatives for success. They need to communicate the vision, provide resources, lead culture change, and hold their teams accountable.

The first four initiatives build the foundation for major improvement across the core areas of supply chain, sales, employees, and overall operations. The internal team and senior leadership involvement ensure changes are executed and sustained (Stevenson & Hojati, 2019). When used together, these actions can assist Tea and More in achieving operational excellence and taking charge of their quick expansion. They will get ahead of issues instead of being in a constant reactive state to problems. The business can return its focus to delighting customers, engaging employees, and profitably growing revenues.

References

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.

Griffin, R.W. (2021). Fundamentals of management (9th ed.). Cengage Learning.

Rothaermel, F. T. (2020). Strategic management (5th ed.).McGraw-Hill Education.

Schniederjans, D., Nabavi, A., & Das, A. (2020). Enhancing financial performance through customer satisfaction: An application of the Kano model. International Journal of Production Economics, 229, 107737.

Stevenson, W. J., & Hojati, M. (2019). Operations management (13th ed.). McGraw-Hill Education.

Wisner, J. D., Tan, K.-C., & Leong, G. K. (2019). Principles of supply chain management: A balanced approach (5th ed.). Cengage Learning.