Background
The
Tetley Group purchases over 100 different types of tea
from over 2000 different tea estates in 20 different countries.
When this is combined with herbs, flavours and packaging
materials, very large volumes of raw materials are shipped
to manufacturing plants in the UK, India and USA. Additionally
large volumes of finished product are exported to N.America
and Europe. Over 80 different port combinations are involved
and over 30 different carriers and forwarders were used.
Much of the raw materials were purchased on a delivered
basis. Tetley wished to take control of their global supply
chain, to improve product and information visibility,
reduce costs and develop relationships with a reduced
number of key service providers.
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Activities
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We were asked to assist them in this major project.
The first step was to map out the present situation
and obtain an accurate picture of the logistics spend.
To achieve this we developed a cost-to-serve model covering
annual volumes, broken down by all origin/destinations,
terms of purchase, carriers used and freight rates.
We then divided the world into 5 key regions for a staged
project rollout. The next step was to enter into negotiations
with all the main suppliers in a region to change the
terms of purchase. From this point we prepared an Invitation
to Tender, which was given to 18 different shipping
lines and 2 global forwarders in a series of face to
face meetings. The ITT was constructed in such a way
to enable suppliers to quote on any number of regions,
thereby allowing Tetley to gauge the benefits or otherwise
of global versus regional service providers.
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Outputs
·
The design of a clear and universally agreed financial
model, accurately showing detailed logistics spend
· Successful re-negotiation of raw tea purchasing
terms
· Full understanding of shipping costs and services
by Tetley
· A decision to appoint a limited number of regional
shipping lines on annual contract terms |
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Results
·
A saving in overall shipping costs of 12%
· Detailed carrier performance measures are in
place
· Tetley have now got full visibility and transparency
of product and information flows
· Tetley are now developing their own in-house
expertise in global freight management
· Work has commenced on working with some key carriers
on e-business offerings
· An understanding by Tetley on the benefits of
an integrated supply chain – the choice of carriers
impacts destination ports and warehouse location
· A change in UK warehouse locations |
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