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Lipton SCm Essay

Abstract

The global tea industry has experienced remarkable growth with emergence of niche markets driven by constantly evolving customer preferences. This has spawned the introduction of convenient tea – the so called tea on the go as well as the rising popularity of specialty tea such as fruit teas and green tea to cater for the interests of people with a busy lifestyle and the health conscious individuals. As a result, many companies, some with a global presence such as Coca-Cola Company, have entered the tea industry; further heightening the competition. .The Lipton Jebel Ali-Factory is one such company dealing with production of different tea products. Re-processing of tea at the Jebel-Ali Factory is carried out using materials imported from seven different countries. This calls for highly effective supply chain management so that appropriate stock levels are kept to avoid wastage. It also calls for effective co-ordination of transport, warehousing and storage to assure the smooth operation of the company. The company is also increasingly called upon to evaluate customer needs in order to maintain a competitive edge in the marketplace. The Jebel-Ali Tea factory provides a classic example of how process technology capabilities and product/market needs can be successfully married

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to produce a functional entity which is abreast of consumer needs and constantly exceeds the market expectations. As this case study also illustrates, the Jebel-Ali Factory offers an appropriate paradigm of how a company can co-opt effective supply management practices to gain a competitive advantage in the marketplace.

Background

Fender (s.2-4) identifies the three periods of environmental evolution in businesses. The period of unified demand is characterized by a unique product principally defined by the producer, characterized by mass production and economies of scale and produced by an organization structured on a Taylorian basis. Here, businesses are product oriented, not market oriented.  Market segmentation manifests in the period of diversified demand, with evolution of competition, a wide product offering, decreased batch sizes, and management by data processing and MRP. .Fender calls organizations displaying these features “Automated” Taylorian organizations. Here, sales are primarily attained due to superior product features. In contrast, the period of personalized demand is associated with international competition, a reduced marketing life cycle of products constantly evolving retail structures, and an increase in number of items and brands,. Additionally, large fluctuations are witnessed in sales with increasing difficulties in sales predictions. This period is also characterized by decreasing economies of scale and a bloated inventory occasioned by the wide variety of items.

The tea industry has evolved from the period of unified demand and is in various stages of the period of diversified and personalized demand, depending on the product offerings. Different market segments in the tea industry can be clearly delineated: consumers on the go who prefer convenient tea and health conscious persons in need of green tea, fruit tea and other offerings; customers for cold tea and customers for hot tea; traditional tea takers and those preferring specialty teas. Competition has heightened with entry into the tea industry of global giants such as Coca-Cola (through Honest Tea) and Pepsi-Co. constantly evolving retail structures and the large numbers of brands are also clearly evident.

A successful organization which must create, maintain, sustain, and grow its market share in the tea industry must of necessity create the appropriate supply chain management processes. This is especially true of organizations subsisting in the period of personalized demand: goods must be tailored to the exact customer specifications and delivered in the right quantity, state, time, cost, and place and to the right customer

As Fender (s.26-27) notes, eeffective productivity, quality of service, flexibility, and time must all be factored in. Productivity is underpinned by a successful cost and volume driven strategy, factory automation and focus.  Product and or service differentiation is cited as a vital component of enhancing service quality. Production and deliver lead times need not be unnecessarily long.

2. The Global Tea Industry

The tea industry was worth $ 1.7 billion in 2005, with production levels hitting the 3.5 million levels in 2006 (Sanne van der Waal 7). Tea is the most consumed drink after water, with consumption levels exceeding those of coffee and carbonated drinks combined (Unilever Middle East Online). The tea market is controlled by India, China, Sri Lanka, Indonesia, and Kenya which produce close to three quarters of the entire world’s output. African countries including Kenya, Malawi, Tanzania, Zimbabwe, and South Africa contribute 25% of this output. Other major players are Turkey and Vietnam (Sanne van der Waal, 2008 p. 18). (Kinyili 5). Global tea output has doubled over the past thirty years to outstrip demand, persistently creating an oversupply of tea (Sanne van der Waal 7)

2.1 India tea industry

India is the world’s leading tea producer, contributing 31% of all global output. Tea produced in India includes the Orthodox tea, CTC, and Green Tea.  The country is also home to the flavored Darjeeling Tea, Assam, and Nilgiri tea.  Total turnover of India’s tea industry is estimated to stand at Rs. 10,000 crores

Tea is grown in Northern and Southern India. Indian tea is sold mainly through auction, in the auction centers of Calcutta, Coimbatore, Cochin, Siliguri, Guwahati, Coonor and the N.I., teaauction.com Indian tea is also sold through private agreement with tea importers (teaauction.com online)

2.2 China tea

Tea in China is grown in eight provinces: Anhwei, Huang-Shan, Yunnan, Fukien, Wu-I Mountains, Amoy, Chekiang, and Hunan.

Chinese tea is marketed and sold solely by The National Native Produce & Animal By-Products Import & Export Corporation of the People’s Republic of China. Anhwei is well-known for its red tea and Wu-I Mountains for its 2,000 varieties of tea especially the Oolong variety (teaauction, 2008)

2.3 Sri Lanka

Sri Lanka is the world’s third largest producer of tea with a market share of 9% and the global leader in tea exports (teaauction, 2008 online). Sri Lanka produces most of the orthodox tea in the world (Sanne van der Waal, 2008 p.18).

2.4 Kenya tea industry

With an average production of 300 million kilos every year, Kenya is the fourth largest producer of tea in the world, contributing 10% of global tea output. The country is also the second largest global tea exporter, contributing 21% of total world exports. It is reputed to be the producer of the best quality black tea in the world and Kenyan tea is used to blend other teas Kenya produces mainly CTC tea with small amounts of green tea and black orthodox tea. The main types of tea grown in Kenya include Assam – C Sinensis variety Assamica (Masters) Kitamura, China – C Sinensis Variety Sinensis (L), and Cambod – C. Sinensis Variety Assamica (Kinyili 5).

Majority of the exports (84%) are through the Mombasa tea auction, with 10% of the tea being directly exported through private arrangements with tea importers. Major importers of Kenyan tea include Pakistan (23.7%), Egypt (18.5%), the U.K. (15.5%), and Afghanistan (13.7%). Others are Yemen (6.1%), Ireland (4%), Sudan (3.9%), and United Arab Emirates (2.1%) (Kinyili 9-13)  Shipping through Mombasa Port and a little is air freighted from JKIA in Nairobi or Moi International Airport in Mombasa

3. Market Fundamentals

            3.1 Economics of tea: price

World tea prices have been steadily increasing caused by tight supply resulting in part from a 10% decline in production in Kenya. The primary pointer of tea prices- FAO Composite Price has maintained its upward trend, rising by 11.6% in 2006 and 6.5% in 2007 to stand at $1.95 per kg. (FAO Newsroom Online)

3.2 Tea Consumption

Global consumption of tea rose by 1% in 2006 to hit 3.6 million tonnes. Consumption in China also rose by 13.6% while that of India grew by 2.51%.FAO projections indicate that the world consumption of black tea will rise to 2.8 million tones over the next ten years (FAO Newsroom, 2008 Online). Close to 60% of the world’s total output is locally consumed with the rest being exported. India consumes close to 81% of the tea it produces whereas local consumption in China stands at 73%. African countries consume close to 7% of the tea they produce (Sanne van der Waal 7, 18).

3.3 World Tea Output

World tea output is also on an upward trend, rising by 3% to hit 3.6 million tones in 2006. Increase in world output was driven by a 3%, 9.5% and 28% growth in India, China and Vietnam output respectively (FAO Newsroom, 2008 Online). Over the last decade, production has risen by 18%, 12%, 153%, 67% and 41% in India, Sri Lanka, Vietnam, Kenya, and China (Sanne van der Waal 19).

3.4 Trade In Tea

Global trade in tea in 2006 largely remained unaltered at 1.55 million tones. It is estimated that black tea output will steadily expand by an annual average of 1.9% over the next decade to stand at 3.1 million tonnes in 2017. it is also estimated that production of green tea will grow by an average annual rate of 4.5% to stand at 1.57 million tones over the same period.  (FAO Newsroom, 2008 Online).  Close to 50% of all the global tea output is imported by 7 countries. These are Russia (11.3%), the United Kingdom (9.2%) and Pakistan (8%). Other major importers of tea include the U.S. (7.4%), Egypt (5.4%), Iraq (4.5%), and the U.A.E. (3.8%) (table 2, appendix)

3.5 Environmental Issues

The tea industry has had a major impact on the environment. The industry has negatively affected the environment due to massive decimation of forests to pave way for tea plantations, uncontrolled pesticide use which has led to water pollution and reduced soil biodiversity, and high use of energy (Sanne van der Waal 8).

3.6 Production Costs

Rising production costs have mainly been attributed to the high costs of fuel, labor, and electricity. Other factors said to contribute to the rising production costs include poor agricultural methods, ballooning overheads, changing climate, and aging tea bushes. Poor infrastructure in the tea producing areas has also been cited as an important factor leading to high costs as has been diminishing productivity. High production costs coupled with the tumbling tea prices have led to stiff competition in the industry with leading producers increasingly shifting from plantations to smallholder farms. Since smallholder farmers are less strictly regulated by governing authorities, this trend has resulted in mounting environmental concerns and disquiet on the quality and traceability of their products (Sanne van der WaalOnline).

4.0 The Lipton Jebel-Ali Factory

Lipton is the global leader in both leaf and ready to drink tea segments. The company boasts of a market share that is three times bigger than that of its closest competitor. With a market presence in more than 120 countries, Lipton is the leader in the Gulf Cooperation Council (GCC) trade bloc with its total share of the market exceeding 70%. The Lipton factory in Jebel Ali, UAE, is the second largest tea-bag factory in the world with an annual production of 6 billion tea bags. The Jebel-Ali factory is involved in the blending, packing, storage and distribution of   black, green, and specialty tea varieties. Production has steadily risen from a low of 4, 728 tonnes in 1999 to currently stand at 25,000 tonnes (see table1, appendix).  The factory currently serves 53 countries all over the world. More than 30% of its output is exported to Eastern Europe and Canada (Unilever 2008 Online; Unilever Middle East, 2008b, Online).

The Jebel-Ali Factory was established in 1988 in the Jebel-Ali Free Zone and is part of the Unilever Gulf FZE, a subsidiary company of Unilever Arabia which is a strategic business unit of the Unilever Group. The Unilever Group boasts of 400 brands cutting across home and personal care and food products and is home to the world famous Lipton and Brooke Bond brands of packet tea. Products include black and green teas with the Yellow Label, Early Grey, Rainbow, Pyramid and Green Tea brands. Lipton brands come in several flavors – chamomile, Darjeeling Himalaya, English Breakfast, GT Citrus, Rosehip Peach, Royal Ceylon, Russian Earl Gray, and Lipton 3d. Regular black tea can be grouped into three categories. These are tea bags, loose tea in tins, and loose tea in packets (Fields Online)

4.1 The Supply Chain

4.1.1 The Supply Side

4.1.1.1 Tea

The supply chain of tea starts in the plantations or in the smallholder tea firms. The tea planted in the smallholder farms is then ferried to factories for processing. Tea produced in plantations is processed within the plantations’ precincts. Once the tea is processed, it is transported to the auction centers or sold directly through private agreements with the importers. A vast majority of the tea sourced by the Jebel-Ali Factory is from Unilever factories. Tea bought in these auction centers is then shipped to the warehouses at Barwil before onward transmission to the Jebel-Ali Factory. Some of the tea to be re-processed is sourced from UBD in Dubai.

The Lipton Jebel-Ali Tea Factory sources its raw materials from

•         The Philippines – more than half of the factory’s raw materials are sourced from the Philippines. Total Filipino imports constitute 66% of the company’s raw materials

•         Sri-Lanka – imports from Sri-Lanka make up 35% of its total imports.

•         India – India is also a major source market for the factory. Imports are shipped from the port of Assam. The Factory sources approximately 31% of all its tea needs from India. 50% of the packet teas are reprocessed from tea sourced from Assam-India.

•         Indonesia – the factory sources a small quantity of tea from Indonesia primarily for its Green Tea products

•         Kenya –imports from Kenya constitute 14% of its total raw materials and rose by 23% to hit 1.6 million kilos of tea (Kinyili 5). The factory uses around 50% Kenyan tea for the tea bags.

 It takes 4 weeks to ship tea from the Mombasa port in Kenya to the Jebel-Ali Factory, 2 weeks to ship the tea imported from the port of Assam in India, and 3 weeks to ship in the tea from Indonesia. Other countries from which the Jebel-Ali factory sources its raw materials include Pakistan (6%), Nepal (4%), Egypt (3%), and the Netherlands and U.K (1% each).

4.1.1.2Processing

The Jebel-Ali Factory is sectioned into six: the blending area, warehouse, loading bays, services area,   packaging lines, and offices. Processing is highly automated. Blending is the first step carried out in this process. Sack picking is first performed and state of the art magnets plus sieves, blending drums and silos used to complete the blending process. The packing process is carried out in five stages. First, the cartons are set up in an automated process before the Perfecta machine is used to do the actual packaging. The lid closer machine is then employed to seal the cartons and the inner over-wrapping machine utilized to enfold the resulting package.

Finally, use is made of the Cermex case packer to complete the packaging process. Different artwork clusters are used for export products and products made for the Arabia market. Products for Arabia are inscribed in English and Arabic only whereas products for overseas markets have additional inscriptions in French, Russian, Uzbekh and or Kazakh depending on their export destination. Different box types are also designed for the different products. For the Yellow Label tea bags for the Arabia market, different configurations of the caddy box are used. The rainbow tea bags for Arabian consumption are packaged in lid boxes whereas the Early Grey and Green Tea brands for the Arabia market are packaged in 2 sizes of caddy boxes.

Loading is the final step in the re-processing. Here, pallet stretch-wrapping is carried out before the products are transported by pallets so that they can be loaded into trucks which will take them to storage places or distribution vehicles. Loose-load pallets are used for export products whereas the euro pallets are used for products made for the Arabia market. The factory has received international certification for quality, consumer safety, environment, and occupational health. The company has qualified for ISO 9001:2000, ISO 14001 and OHSAS 18001 HSE standards. The Jebel-Ali facility has also bagged numerous awards among them the “Best Hot Beverage of the Year 2007” at the inaugural Arab Beverages Forum in Dubai and the Award for Excellence in Consistent TPM Commitment 1st Category (Unilever Middle East Online; JIPM, 2007 Online; tpmonline 2008).

Distribution

 Once the tea is re-processed in the factory, it is sent to co packers for packaging and returned to the factory for either export in overseas markets or local distribution.  Export of the finished product is accomplished through airfreight using the Dubai International Airport or the Jebel-Ali Port. Distribution in UAE and the rest of Arabia is through the road and shipping.

4.1.1.3 Packaging Material

The material used to package the finished product is sourced both locally and from international markets. Material sourced locally takes 2 days to arrive at the Jebel-Ali Factory whereas the imported material needs at least four weeks.

4.1.1.4 RM (Flavors)

The RM (flavors) is sourced from the international markets in a process which takes 4 weeks. These are stored at the GA4 warehouses for onward transmission to the Jebel-Ali Factory.

4.1.1.4 Customer Specific Documentation Needs

Several documentations are carried out before export of the finished products to international markets. These include:

•         packing list

•         invoice ( 3-8 originals) & proforma-invoice

•         Bill of lading ( 3 original +  5 copies)

•         certificate of origin

•         export declaration

•         health certificate

•         PHYTO SANITORY certificate

•         analysis certificates (Certificate of confirmation & Certificate of analysis)

•         quality certificate

Additionally, approvals are obtained from:

•         The Dubai chamber of commerce

•         Embassy Stamps (Yemen, Egypt)

•         Export inspections (e.g. SGS, BVQI)

•         Dubai Municipality

Official contracts entered into by the company in the supply chain management include

•         Quality Contract

•         Intercompany Supply Contract

•         Service Level Aggrement

The service level agreements were introduced in an effort to deepen relationships with the company’s customers as well as better identify their needs and abilities so that service can be improved. The international service agreements delineate the administration and responsibilities of the company, inventories, transfer price methodology, transportation agreements, Packaging materials and RM commitments and lead times, quality agreement, contact list and the key performance indicators (ICCFOT and forecast accuracy).

4.1.1.5 Logistics

The Lipton Jebel-Ali Tea Factory works with PWC. This partnership has enabled Jebel-Ali to effectively manage the transportation, storage, shipping, planning, labor and consumer research.

4.1.2 The Demand Side

4.1.2.1 Major Markets

The Lipton Jebel-Ali Tea Factory sells its Yellow Label, Green Tea, Early Grey, Pyramid and Rainbow brands to the GCC states of the UAE, Saudi Arabia, Kuwait, Bahrain, Oman, Qatar, and Yemen. Countries outside the Middle East where the Yellow Label brand is sold include the African nations of the Ivory Coast, Cameroon, Nigeria, Senegal, Ghana, South Africa, Kenya, Liberia, Morocco, Algeria, Egypt, Sierra Leone and Gambia. Other countries include the Russia, Ukraine, Kyrgyzstan, Georgia, Armenia, Kazakhstan, Turkmenistan, Azerbaijan, Tajikistan, Uzbekistan, and Belgium (table 3).

            The company’s Green Tea main markets are in Kyrgyzstan, Georgia, Armenia, Kazakhstan, Turkmenistan, Azerbaijan, Tajikistan, Uzbekistan, Egypt, Jordan, Lebanon, Syria, and Iraq. Others are Turkey, South Africa, Ukraine and Canada. Outside the GCC countries, the Pyramid brand has its market in   Egypt, Jordan, Lebanon, Syria, Iraq, Turkey, South Africa, Korea, Korea, Singapore, Malaysia, Hong Kong, France, Russia, Greece, Switzerland, Belgium, Portugal, Sweden, Poland, the U.K., the Netherlands, Chile and Canada. Canada and the Asian countries provide the major market for the Brooke Bond tea.

            Sales projections for 2008 for Africa and the Middle East and Europe are estimated at 1055, 93 and 236, 01 million tonnes respectively. UNICA, Ghana, South Africa and Ivory Coast are projected to drive the growth in sales in the AMET region through purchases of 578, 141 million tones, 365, 41 million tones, 61, 419 million tones, and 50, 96 million tones respectively. European sales will largely come from France, Belgium and the U.K with projections of 204, 5, 4 and 26, 61 million tones respectively. Russia and the Ukraine will contribute 245, 443 million tones with Canada chalking in 25 milliohm tones. It is estimated that Canadians consume 9 billion cups of tea annually, with a per capita consumption of 61.4 liters or 270 tea cups per person annually. The major tea consumed is Regular teas though the specialty teas especially the Green Tea is increasing in popularity.   Consumption of Green Tea rose by close to 20% in 2007. Estimates put the Canadian tea market at $388 million (Tea Association of Canada, 2008 online)

Asia will provide 1,45 million tones primarily due to purchases from Hong Kong (0,25 million tones) and Singapore (1,2 million tones).The Maghreb (73,9 million tones) and Mashreq (9, 652 million tonnes) countries are expected to contribute 83,552 million tones of sales

4.1.2.2 Customer Analysis

Strong sales in tea in the Middle East are primarily attributed to the health benefits associated with the drink. Other factors cited as contributing to increased consumption of tea include an expanding population, demographics, and the culture of the people who generally favor tea over other drinks. .Jebel-Ali’s major international target markets can be segmented into two. The first segment comprises consumers on the go and the second health conscious customers. Consumers on the go lead busy lifestyle and need convenient products whereas health conscious consumers are on the lookout for products with health benefits and would thus prefer products such as Green Tea (A Nielsen, cited in Field, Online).

4.1.2.3 Critical success factors of the company’s international sourcing units

•         Customer service excellence and mindset

Jebel-Ali is focused on total satisfaction of the customer, an undertaking reiterated in Lipton’s core values- to enable customers drink better and live better and to take care of environment through promotion of sustainable farming techniques (Unilever Middle East Online). Because of the customer-oriented focus, the factory has launched several products which are as a direct response to consumer preferences. These

•         High quality products

The factory produces high quality products which have met all the industry standards

Jewel-Ali Tea Factory has acquired certification in ISO 9001 quality, ISO 14001 Environment, OHSAS 18001 HSE, and SQF2000 for HACCP. Additionally, the company is FDA approved. Quality and consistency lie at the heart of the company’s manufacturing strategy

•         Competitive costs –

       The Jebel-Ali Factory has an efficient energy management program that has significantly cut down on its production costs. This was achieved through the installation of a proper energy accounting system. The company pioneered the use of slip-sheets in place of wooden pallets hitherto used in the transport of its tea products. This initiative is expected to slash the company’s ocean freight costs by between 10-20%, lessen environmental impacts, and do away with wood-related attacks on tea in the duration of the shipping process. A successful launch has encouraged the company to introduce similar initiatives in Sri Lanka, Kenya, and Indonesia. (Crouched, 2008 online).The factory is located in the Jewel-Ali free zone which offers numerous incentives as well as low labour costs which have enabled the company to be a cost-effective producer.

•         Continuous improvement culture (TPM)

The Jewel-Ali factory has consistently won the Award for Excellence in Consistent TPM Commitment 1st Category (JIPM, 2007 Online; tpmonline 2008).these awards are s testament of the company’s commitment to continuous improvement.

•         Strong local market to give critical scale to operations and platform for expansion

The Jebel-Ali Factory commands over 80% of the local market. Sales in GCC countries have been on a steady incline, expanding by 3% to stand at $281 million in 2005. 59% of all sales of black tea in the GCC countries are due to tea bags, with 40% of the sales coming from the packet tea. The rest (1%) of the sales are contributed by the tinned tea. The Lipton brand is reported to command a huge share of the tea bags market, accounting for more than 80% of the market. Loose leaf sales are dominated by the Brooke Bond brand. Additionally, Lipton has a 50% market share of the green tea market, which accounts for about 3% of total global tea sales (A Nielsen, cited in Field, Online).

•         Integrated supply & demand planning and IT systems

The company has adopted an enterprise resource planning (ERP) system as well as integrated IT into all its systems. Since tea is a highly perishable commodity, appropriate stock levels are thus kept and trends in consumer preferences recorded so that innovative products can be introduced.

•         State of the art equipment

The Jewel-Ali Factory is fully automated with the latest blending, packing, and loading equipment. Additionally, the factory boasts of a team of extremely versatile and skilled engineers who have been severally contracted to carry out system conversions and overhauls in many places of the world. As a result of the advanced automation in the factory, lead times have been significantly cut, asset write-offs precluded and cost savings on spare parts attained (Unilever Middle East, 2008b Online).

•         External factors:

–        Infrastructure; ease of in/export, logistic facilities, communications, transparency

The Jebel-Ali Factory is located in the Jebel-Ali Free Zone (Jafza). The factory therefore enjoys low labor costs and uncomplicated import/export facilities (Unilever Middle East, 2008b, Online). The Jebel-Ali Free Zone is the fastest growing free zone in the world. Jafza is located next to the Jebel-Ali Port which is the largest port in the Middle East and is only 30 minutes drive from the Dubai International Airport. Additionally, the world’s biggest cargo airport – the Jebel-Ali International Airport- is nearing completion in this zone. The zone is linked with a six-lane highway which enables the ferrying of goods from sea to air in less than 20 minutes.

 Jafza is not characterized by bureaucracy, a factor that has enabled the unrestricted growth of businesses. Additionally, a host of incentives are offered to businesses located in Jafza. These incentives include complete foreign ownership, exemption from corporate and income taxes for half a century, exemption from local labor and foreign currency inhibitions and total repatriation of profits and capital. Currently, the free zone is home to over 6, 000 companies and was the first free zone in the world to acquire world class certification, ISO 9001:2000. The free zone is well located, standing midway between Asia, Europe, and Africa thus providing easy reach to the over 2 billion customers present in these areas. (Jafza, 2008 Online; Jafza 2008b Online).

–        Stable currency

The UAE dirham has been pegged to the US Dollar at a stable rate of $US 1= Dh 3.675 since 1980. The country recently announced that despite weakening of the dollar they would maintain the dollar standard especially since no correlation between supply of money and inflation had been demonstrated and since the country was committed to a common GCC currency (Xinhua online).

Consolidation of operations

Unilever has closed down a significant number of factories over the last 8 years. This was carried out so as to reduce complexities and enable the company concentrate on its core business. As Fender ( s.5) notes, a business in the third period of environmental evolution, the period of personalized demand, needs to engage in lean production. In this state, conventional SCM approaches do not usually work and as such a new approach is usually required. Fender further notes that “Push” planning systems don’t work or work poorly and that costs of production are constantly increasing necessitated by reducing economies of scale. Further, bloated inventories are seen to weigh heavily on the firm.

Nowhere is this true than in the tea industry. Coming against a backdrop of  global oversupply of tea that has consistently out stripped the demand, changing climate, mounting environmental concerns, falling tea prices, rising production costs of tea, increasing market segmentation and stiff international competition, this was a sound  move to help it cut down on costs. As opposed to outsourcing, the company is better able to control supply of materials from its affiliated factories than it would by outsourcing thus enabling shorter lead times and boosting the overall SCM process.  This has meant that Unilever is increasingly functioning as marketing and sourcing entity, thus improving the overall efficiencies of its strategic business units (SBUs).

Conclusion

The global tea industry is experiencing tremendous growth, fuelled in part by changing consumer preferences. World output of tea is also increasing, with a global oversupply of tea and low prices. The Jebel-Ali Factory is a leader in the re-processing of tea and commands a huge share of the Arabia market. Sales of its Lipton brands has been enhanced by a strong culture of tea taking in the GCC countries, a rising population and changing demographics, international demand for specialty tea, and the brand visibility of Lipton. Strong sales are further aided by the high quality associated with its products. Supply chain management plays a critical role in the successful functioning of the company and has helped the Jebel-Ali factory to maximize its profitability. This is evidenced by efficient logistics including efficient transport of raw materials from their source countries, warehousing and storage, the re-processing, packaging and loading as well as the eventual distribution to the final consumer. All this is done in an ethical and sustainable manner. In summary, the Jebel-Ali Factory has perfected the MTO strategy and attains success through effective productivity, quality of service, flexibility, and time. Productivity is underpinned by a successful cost and volume driven strategy, factory automation and focus.  Quality of service offered by the factory is boosted by production of differentiated products.

Works Cited:

Croucher, Martin.  2008. Lipton reinforces green supply chain operations in Middle East.

August, 3.Maktoob Business. 2008. http://business.maktoob.com/NewsDetails-20070423178346-Lipton_reinforces_green_supply_chain_operations_in_Middle_East.htm

FAO Newsroom.2008. Tea prices to maintain upward trend in 2008. 14 February, 2008.

http://www.fao.org/newsroom/en/news/2008/1000784/index.html

Fender. 2008. Strategic context of supply chain management. Sections 1& 2

Field, Roger. 2006. Tea Turns a new leaf in Middle East. April 09, 2006.

Jafza. 2008. Jafza at a Glance. http://www.jafza.ae/en/about-us/jafza-at-a-glance.html

Jafza. 2008b. Value Proposition. http://www.jafza.ae/en/jafza-offerings/value-     proposition.html

JIPM.2007. News Release: Announcing about 2005 TPM awards from out of Japan

  http://www.jipm.or.jp/en/news_release.html

Kinyili, Jacinta M. 2003. EPC www.epckenya.org

Lipton Introduces New Eco-Friendly Initiative. June 30,2008.

            http://www.eyeofdubai.com/v1/news/newsdetail-23692.htm

Sanne van der Waal. 2008. Sustainability Issues in the Tea Sector. Somo. June 6, 2008.

http://216.239.59.104/search?q=cache:IkZzaS2cXO8J:somo.nl/html/paginas/pdf/Sustainability_Issues_in_the_Tea_Sector_EN.pdf+%22lipton+jebel+ali+raw+materials%22&hl=en&ct=clnk&cd=14&gl=ke&client=firefox-a

Tea Association of Canada. 2008. Industry Statistics.

http://www.tea.ca/Page.asp?PageID=122&ContentID=743&SiteNodeID=132&BL_ExpandID=

Teaauction.com. 2008.  http://www.teauction.com/industry/indiantea.asp

“The market leader in tea based beverages.” 2008.  Unilever. 2 August, 2008

             http://www.unileverme.com/our-brands/foods-beverages/lipton.asp.

Tpmonline. 2008.The Screening Committee of TPM Awards officially announces

2003 TPM Award winners. http://www.tpmonline.com/articles_on_total_productive_maintenance/tpm/tpmawards2003.htm

Unilever Middle East. 2008. 01/08/2006. http://www.unileverme.com/our-           company/news-media/pressreleases/2006/liptonexpands.asp

Unilever Middle East. 2008b. Overhaul of machines successfully completed.

http://www.unileverme.com/our-company/news-media/news/machineoverhaul.asp

Xinhua. 2008. Official: UAE to maintain .dollar-peg policy.

            http://news.xinhuanet.com/english/2008-04/08/content_7940355.htm

Appendix

Table 1: Factory Expansion

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