Tetley keeps tea on the shelves

Predicting demand in food and drink retail is notoriously difficult, and never more so than during the COVID-19 pandemic.

In March and April 2020, panic buying in supermarkets in the UK, caused a spike in demand of up to 100%. Many manufacturers and distributors simply struggled to meet demand, which caused many basic products like toilet rolls, tea and pasta to disappear from the shelves.

John Burdett, Global Operations Director for Tata Consumer Products Ltd. (TCPL),leads the end- to-end supply chain operations for TCPL’s tea and coffee businesses. Tata Consumer Products Limited is a focused consumer products company uniting the principal food and beverage interests of the Tata Group under one umbrella. Its key beverage brands include Tetley in UK, Eight O Clock Coffee in USA and Tata Tea in India.

CHALLENGE

Manufacturers often strive for high levels of asset “Many manufacturers apply this ‘rule utilisation to maximise the return on their capital of thumb’ of operating their assets at investment. This may run assets harder in the short- 85-90% utilisation, whereas I wanted term, but can mean they are left with little capacity to to take an approach that was tailored play with in the case of sharp spikes in demand. to our business and customer needs, The principles of supply chain management are and the work of Jan and her team simple. To deliver on time, in full to the customer helped us do that,” John explains. at lowest possible cost, in a sustainable and responsible way. If customer demand is stable, it is Through their membership of the Supply easy to predict. This means that buffers (inventory or Chains in Practice (SCIP) industrial forum. John capacity) can be minimised. Promotional strategies and his team at TCPL undertook collaborative such as Buy-One-Get-One-Free (BOGOF) distort research with Prof Godsell, over five years. This the demand signal, making it less predictable. explored different configurations to optimise Larger buffers need to be put in place to ensure that the supply chain through buffer management. customer demand can be fulfilled. Understanding They examined the trade-offs between demand patterns for individual products and the inventory and capacity buffers and the commercial strategies that drive them (demand alignment of buffers with commercial strategy. profiling) is an essential aspect of supply chain management. SOLUTION

Using sales and stock data, the demand TEA CATEGORY WEEKLY SALES GROWTH VS LAST YEAR profile for TCPL’s products were analysed at a sku (stock keeping unit) level. 100.2

Models were developed which tested different configurations of supply chain, .0 stock level and investment. They identified an optimal level of utilisation that would 1.0 10.9 9. keep the business competitive, while 0.9 2.0 1.2 .1 allowing spare capacity to deal with -.3 -2. -1.5 -1.3 -. -.2 -1. fluctuations in demand. 01.02.20 0.02.20 15.02.20 22.02.20 29.02.20 0.03.20 1.03.20 21.03.20 2.03.20 0.0.20 11.0.20 1.0.20 25.0.20 02.05.20 09.05.20 1.05.20 John used these recommendations to help shape the supply chain set-up and Source: Neilsen strategy. The true test of this came when panic buying, triggered by the COVID-19 pandemic, resulted in a huge wave of John remembers: “It was both an exhilarating time and a 100.2 demand for tea in supermarkets. frightening time. Because of the buffer management approach we had in place, we were able to deliver 35% surge capacity to “We could react extremely quickly to supply our customers and consumers and keep the UK drinking .0 the rapidly moving market conditions, tea. This meant we could react extremely quickly to the rapidlyTetley 00 and gain competitive advantage.” moving market conditions,1.0 and gain competitive advantage.” 10.9 9. 0.9 2.0 1.2 .1 500 -.3 -2. -1.5 -1.3 -. -.2 -1. IMPACT 00 01.02.20 0.02.20 15.02.20 22.02.20 29.02.20 0.03.20 1.03.20 21.03.20 2.03.20 0.0.20 11.0.20 1.0.20 25.0.20 02.05.20 09.05.20 1.05.20

300 2 Applying this work, TCPL had spare capacity,2 optimal stock levels and a highly 239 232 flexible and committed workforce who200 could transfer their skills to multiple lines. Retailer sales out (T) Retailer

PRE100 AND POST PANIC BUYING & SUPPLIER IMPACT They were able to take the lead in market Government announces share during this period, showing how a RETAIL SALES BY TEA BRANDwork from home flexible supply chain can be used to react 0 Tetley quickly to the market and gain competitive 00 2019 01.02.20 0.03.20 1.03.20 21.03.20 2.03.20 0.0.20 11.0.20 1.0.20 25.0.20 02.05.20 0.02.20 15.02.20 22.02.20 29.02.20 advantage. avg week

500 John reflects: “For me, this was the perfect test bed. It was our supply chain competing 00 against our competitors’ supply chain with no influence of brand or advertising. 300 2 It demonstrated the effectiveness of our 2 239 approach which we had been researching 232 200 and developing for five years.” sales out (T) Retailer

Data driven determination of buffers 100 Government announces is critical to ensuring a sustainable and work from home responsible supply chain. TCPL are 0

seeking to become the market leader in 2019 01.02.20 0.03.20 1.03.20 21.03.20 2.03.20 0.0.20 11.0.20 1.0.20 25.0.20 02.05.20 0.02.20 15.02.20 22.02.20 29.02.20 their tea business and John sees supply avg week chain optimisation as a critical part of this Source: Neilsen delivering this vision.

For more information about our Supply Chain research, visit: www.warwick.ac.uk/fac/sci/wmg/research/transformation/supply_chain

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