mjunction aids revolution in tea sourcing
Tea is a unique product whose quality could vary depending on diurnal weather conditions. This leads to swings in the price of tea. In India, tea is plucked from over a thousand gardens and produced in several hundred factories daily in summer. The quality starts deteriorating with time and hence it needs to be sold quickly.
Most of this tea is bought by major tea packaging companies. The remaining is purchased by several small buyers who either resell it as loose tea or to bulk tea consumers. The sale and purchase of tea has been facilitated by auctioneers who taste and value the tea. Until a few years back, these auctioneers followed a public outcry system to conduct the auctions, which was quite inefficient. The public outcry system was replaced with an Internet enabled auction platform since 2008-09. Even that system left much to be desired, prompting tea buyers and sellers to enter into private arrangements.
Tata Global Beverages, had private arrangements with multiple estates for procurement of tea. This gave them quick access to good quality tea compared to auctions. The price negotiations happened on a case to case basis. However, as the quantity of tea procured under such arrangements increased, the negotiations became more and more complex, with ambiguity about their efficiency.
mjunction worked with the client and its suppliers to restructure this 300-year-old procurement process to simplify it and make it more efficient. It proposed to restructure the process and customized its web enabled price discovery platform to facilitate the purchase negotiations. This culminated in the creation of a "supplier offer site" where suppliers could offer their products as per the requirements of the client as per a given schedule.
On implementation, this change reduced the unit cost of procurement for client and improved the cash cycle for the suppliers. The process also became more transparent and fostered trust between the stakeholders. Indeed, as more suppliers became aware of this novel way of procurement, they approached the client expressing the desire to be part of it.