English Tea Shop: creating shared value, the right way
Suranga Herath, CEO of the English Tea Shop, discusses the importance of sustainability, transparency and creating shared value at every level of the supply chain.
It’s rare to see a successful company, operating a tried and tested business model, turn around and completely reinvent itself. The old adage “If it ain’t broke, don’t fix it,” comes to mind; why subject your business to radical upheaval and the risks therein? Because it’s the right thing to do. “We wanted to find a model that empowered people,” recalls Suranga Herath, CEO of English Tea Shop. “We were a production house before English Tea Shop was born, a very ordinary tea business that packed all sorts of brands. It was that kind of a company because we thought business was simply about capability and maximising resources.”
In 2008, Herath’s company was packing 70 different brands of tea for exportation to the US, UK and Europe. In 2010, the company made the move from Sri Lanka to the UK. “That was the moment of truth for us,” says Herath. “Coming from Sri Lanka, a nation famed for its tea and spices, we had this huge passion for people, naturally, because it’s a very labour-intensive industry. We realised that the traditional tea industry didn’t empower the people at the bottom of the pyramid. That needed to change.” The right course of action was, for Herath, obvious and imperative, regardless of its challenges.
“The shift was very risky. It was a huge transformation from being an ordinary, conventional business, to leaving the auction system, leaving the large plantation companies that supplied us and moving to a very small number of small-scale suppliers of tea and ingredients, with the goal of becoming 100% organic, which we accomplished within two years,” says Herath. Nine years later, English Tea Shop has grown 65% annually over the past seven years, and last year reported revenues in excess of US$28mn across more than 50 markets. We spoke to Herath about his quest to empower people at every point in the supply chain, guarantee transparency and fairness, and transform the lives of thousands of small-scale farmers across Sri Lanka, India, New Zealand, South Africa and beyond.
“We enhance transparency and fairness along our value chain by creating shared value,” explains Herath. English Tea Shop’s model stems from the work of Harvard Business School Professor, Michael Porter. “This is the principle on which we run our business. In essence, this means that by being an ethically-minded business, we not only help improve the world around us but also help our business to grow sustainably,” says Herath in an interview with the Soil Association. He continues: “Which is why we work closely with the farmers who grow our organic tea, they provide constant inspiration as we see the challenges they face on a daily basis. Their hard work and dedication make us strive for success because as we succeed, they succeed.” Porter himself notes that “Shared value is not social responsibility, philanthropy, or sustainability, but a new way for companies to achieve economic success.”
English Tea Shop’s next step in creating shared value across its supply chain involves a partnership with the Soil Association, a certification non-profit based in Bristol. “They’re leading from the front and we’re helping fund their efforts to build a platform,” says Herath. “English Tea Shop is one of the pioneer brands that is going to be tested on the model. All our supplies, the entire value chain will be a guinea pig for a process that, hopefully, creates transactional transparency from farm to cup.”
Herath sees the increased transparency in his supply chain as an opportunity to simultaneously operate in a more ethical way and create value for the company. He notes that the rest of the market is taking note. “The rise of the CPO role, as well as the dramatically increased focus on supply chain management and the entire procure to pay process, has been elevated. And it’s in response to market demand, because the market is demanding prominence, authenticity, transparency. That’s what’s elevated the procurement function as a whole,” Herath posits. “Of course, for our business, it was just natural. We are, I think, a perfect example of how the procurement process has evolved.” Thinking back to the auction method that English Tea Shop used to use, Herath reflects that, “nine years down the line, what we now have is a very complex supply chain management system, a big team led by master blenders and procurement specialists, adopting new technology. I think the requirement was clearly for a process, leadership and people that create win-win solutions. It’s no longer just about going to the sources and buying tea. This is about finding better yields for both parties, achieving better quality, better efficiency, saving in every possible way for both sides, and knowing very well that we’re entering into long-term relationships.”
From the very beginning, English Tea Shop has cultivated its small network of growers by investing in technology and sharing knowledge, working to convince other growers to take up organic farming practices. “We had to inspire other people to buy into organic small farming to expand our supply base,” says Herath. “From the simplest things, like giving suppliers a long-term contract, to building big storage facilities to hold stocks because we didn't have the luxury of working off an auction that gave us weekly demand.” The process worked, and English Tea Shop’s positive impact on its growers’ lives has continued to spread. “In 2018, we launched a sustainability impact report. The results showed that we had impacted over 1,352 farmer families, in terms of investing in them, paying for their organic and Fairtrade certifications, paying for their new technologies, supplying them with irrigation solutions, and building and helping them develop regional schools.” Herath maintains that this sort of investment at the base of the pyramid is essential to the creation of shared value. “If you don't do these things, then our kind of model cannot be a success, because how do you expect small farmers to be planning or taking risks without that support? It so unfair,” he says. “We had to take the risk, we had to take the burden, and we had to build those growers’ capabilities to ensure they could be sustainable and the brand is sustainable.”
Looking to the future, Herath and English Tea Shop aren’t content to rest on their laurels. “We’re on a mission to improve upon our energy use and reduce waste. For 2020, we've set ourselves the goal of being completely free from single-use plastic. This year we’ve already completely revamped our core ranges; they’re now plastic free and non-GMO.” Herath concludes: “We want to be the leading independent tea brand, and be known for our own unique creating shared value model. We've just entered China, we got into Chile last year and we're working on Brazil now. We want to keep expanding, but we want to do it the right way.”
NTT DATA Services, Remodelling Supply Chains for Resilience
Joey Dean, the man with the coolest name ever and Managing Director in the healthcare consulting practice for NTT DATA and is focused on delivering workplace transformation and enabling the future workforce for healthcare providers. Dean also leads client innovation programs to enhance service delivery and business outcomes for clients.
The pandemic has shifted priorities and created opportunities to do things differently, and companies are now looking to build more resilient supply chains, none needed more urgently than those within the healthcare system. Dean shares with us how he feels they can get there.
A Multi-Vendor Sourcing Approach
“Healthcare systems cannot afford delays in the supply chain when there are lives at stake. Healthcare procurement teams are looking at multi-vendor sourcing strategies, stockpiling more inventory, and ways to use data and AI to have a predictive view into the future and drive greater efficiency.
“The priority should be to shore up procurement channels and re-evaluate inventory management norms, i.e. stockpiling for assurance. Health systems should take the opportunity to renegotiate with their current vendors and broaden the supplier channel. Through those efforts, work with suppliers that have greater geographic diversity and transparency around manufacturing data, process, and continuity plans,” says Dean.
But here ensues the never-ending battle of domestic vs global supply chains. As I see it, domestic sourcing limits the high-risk exposure related to offshore sourcing— Canada’s issue with importing the vaccine is a good example of that. So, of course, I had to ask, for lifesaving products, is building domestic capabilities an option that is being considered?
“Domestic supply chains are sparse or have a high dependence on overseas centres for parts and raw materials. There are measures being discussed from a legislative perspective to drive more domestic sourcing, and there will need to be a concerted effort by Western countries through a mix of investments and financial incentives,” Dean explains.
Wielding Big Tech for Better Outcomes
So, that’s a long way off. In the meantime, leveraging technology is another way to mitigate the risks that lie within global supply chains while decreasing costs and improving quality. Dean expands on the potential of blockchain and AI in the industry.
“Blockchain is particularly interesting in creating more transparency and visibility across all supply chain activities. Organisations can create a decentralised record of all transactions to track assets from production to delivery or use by end-user. This increased supply chain transparency provides more visibility to both buyers and suppliers to resolve disputes and build more trusting relationships. Another benefit is that the validation of data is more efficient to prioritise time on the delivery of goods and services to reduce cost and improve quality.
“Artificial Intelligence and Machine Learning (AI/ML) is another area where there’s incredible value in processing massive amounts of data to aggregate and normalise the data to produce proactive recommendations on actions to improve the speed and cost-efficiency of the supply chain.”
Evolving Procurement Models
From asking more of suppliers to beefing up stocks, Dean believes procurement models should be remodelled to favour resilience, mitigate risk and ensure the needs of the customer are kept in view.
“The bottom line is that healthcare systems are expecting more from their suppliers. While transactional approaches focused solely on price and transactions have been the norm, collaborative relationships, where the buyer and supplier establish mutual objectives and outcomes, drives a trusting and transparent relationship. Healthcare systems are also looking to multi-vendor strategies to mitigate risk, so it is imperative for suppliers to stand out and embrace evolving procurement models.
“Healthcare systems are looking at partners that can establish domestic centres for supplies to mitigate the risks of having ‘all of their eggs’ in overseas locations. Suppliers should look to perform a strategic evaluation review that includes a distribution network analysis and distribution footprint review to understand cost, service, flexibility, and risks. Included in that strategy should be a “voice of the customer” assessment to understand current pain points and needs of customers.”
“Healthcare supply chain leaders are re-evaluating the Just In Time (JIT) model with supplies delivered on a regular basis. The approach does not require an investment in infrastructure but leaves organisations open to risk of disruption. Having domestic centres and warehousing from suppliers gives healthcare systems the ability to have inventory on hand without having to invest in their own infrastructure. Also, in the spirit of transparency, having predictive views into inventory levels can help enable better decision making from both sides.”
But, again, I had to ask, what about the risks and associated costs that come with higher inventory levels, such as expired product if there isn’t fast enough turnover, tying up cash flow, warehousing and inventory management costs?
“In the current supply chain environment, it is advisable for buyers to carry an in-house inventory on a just-in-time basis, while suppliers take a just-in-case approach, preserving capacity for surges, retaining safety stock, and building rapid replenishment channels for restock. But the risk of expired product is very real. This could be curbed with better data intelligence and improved technology that could forecast surges and predictively automate future supply needs. In this way, ordering would be more data-driven and rationalised to align with anticipated surges. Further adoption of data and intelligence and will be crucial for modernised buying in the new normal.
These are tough tasks, so I asked Dean to speak to some of the challenges. Luckily, he’s a patient guy with a lot to say.
On managing stakeholders and ensuring alignment on priorities and objectives, Dean says, “In order for managing stakeholders to stay aligned on priorities, they’ll need more transparency and collaborative win-win business relationships in which both healthcare systems and medical device manufacturers are equally committed to each other’s success. On the healthcare side, they need to understand where parts and products are manufactured to perform more predictive data and analytics for forecasting and planning efforts. And the manufacturers should offer more data transparency which will result in better planning and forecasting to navigate the ebbs and flows and enable better decision-making by healthcare systems.
Due to the sensitive nature of the information being requested, the effort to increase visibility is typically met with a lot of reluctance and push back. Dean essentially puts the onus back on suppliers to get with the times. “Traditionally, the relationships between buyers and suppliers are transactional, based only on the transaction between the two parties: what is the supplier providing, at what cost, and for what length of time. The relationship begins and ends there. The tide is shifting, and buyers expect more from their suppliers, especially given what the pandemic exposed around the fragility of the supply chain. The suppliers that get ahead of this will not only reap the benefits of improved relationships, but they will be able to take action on insights derived from greater visibility to manage risks more effectively.”
He offers a final tip. “A first step in enabling a supply chain data exchange is to make sure partners and buyers are aware of the conditions throughout the supply chain based on real-time data to enable predictive views into delays and disruptions. With well understand data sets, both parties can respond more effectively and work together when disruptions occur.”
As for where supply chain is heading, Dean says, “Moving forward, we’ll continue to see a shift toward Robotic Process Automation (RPA), Artificial Intelligence (AI), and advanced analytics to optimise the supply chain. The pandemic, as it has done in many other industries, will accelerate the move to digital, with the benefits of improving efficiency, visibility, and error rate. AI can consume enormous amounts of data to drive real-time pattern detection and mitigate risk from global disruptive events.”