Question

Brian Durkee/ Director of Operations, Numi Organic Tea:
Well Numi; Numi’s is a triple bottom line company which means our focuses are on people, planet and profit. Hi, I’m Brian Durkee. I’m the director of operations for Numi Organic Tea and a big part of my role at Numi is to really manage that, and uh; it’s beyond just taking care of your employees. Numi has fifty employees in the U.S. but the peoples who dedicate the majority of their time on Numi products; that number probably exceeds three hundred and those are the people I have to indirectly look out for.

The over view of how our, how our products are produced is that, we’re a tea company; we’re sourcing products uh, from primarily under developed comp, countries which is why we’re very big on fair trade and we insist on that, and our supply chain motto. We don’t move business overseas or we don’t do business overseas to reduce costs and to try to exploit a system. The tea is very labor intensive and it’s something that the U.S. is just not interested in getting involved with. I think some of the biggest challenges uh, in China is getting the people in China and the managers of the factories to understand how we want things done. To make sure one, our quality is there and two, the level of sustainability that we expect in the supply chain; how are they handling their waste, how are they packing our products and three, how are they treating their workers. That’s one of the reasons why we spend a lot of time in Asia. The owner of the company and myself spend a lot of time there meeting with factory managers, meeting with the workers; doing our own discovery process with the workers and we’re not trying to change their culture by any means but we are trying to improve the standard of living for them.

Ahmed Rahim/ Co-Founder & CEO, Numi Organic Tea:
They want to work with us and I think they see the size that we can grow to, and the size of business we can give to them. They see that these are Numi’s values. Hi, I’m Ahmed Rahim. I’m the Co-Founder and CEO of Numi Organic Tea. We have to give them the power and understanding of what they’re buying in to because this to say, you have to do this is, they could still do it with resentment but if you explain to them; hey if you do this, this is what you’re doing too to help the cause. Sure, you’re going to make some money off of Numi and you’re going to sell us a lot of product but it’s really important for them to understand why you’re doing it and for them to really buy into it and get excited about it.

Brian Durkee/ Director of Operations, Numi Organic Tea:
In nineteen ninety nine, we began working with our bamboo supplier uh, and we’ve grown with him tremendously and we are his largest customer and I believe we’ve always been his largest customer. We’ve spent a lot of time this year out there helping him improve his factory and providing him money and funds to get better workers, to get better work conditions, and to get a better factory in place; and he’s starting to implement changes himself and that’s when we’re having some success. We can leave a mark and then we can leave the situation, and have it continue to improve itself.

Brian Durkee/ Director of Operations, Numi Organic Tea:
Finally after a lot of trying we got these boxes done. They’re going to be done with recycled content now and one of the things I need to run by marketing…

Ahmed Rahim/ Co-Founder & CEO, Numi Organic Tea:
Is that the, is that the sixty five or the eighty five percent?

Brian Durkee/ Director of Operations, Numi Organic Tea:
It’s going to be a minimum of eighty five percent. But we…

Ahmed Rahim/ Co-Founder & CEO, Numi Organic Tea:
Wow!

Brian Durkee/ Director of Operations, Numi Organic Tea:
But we can’t do because of the mills’ obligation, and, and for the legal purposes; the mill cannot publish the percentage on the box. As you see here?

Ahmed Rahim/ Co-Founder & CEO, Numi Organic Tea:
Mmm Hmm

Brian Durkee/ Director of Operations, Numi Organic Tea:
So what we can do is put on the box, a tag line that says; “This box is made from recycled fiber.”

Brian Durkee/ Director of Operations, Numi Organic Tea:
My personal goal for Numi is to become among the elite as far as how we manage a sustainable supply chain. We’re looking at the most sustainable methods of packaging our goods, transporting our goods, and producing our goods and we’re able to accomplish that by not using solo wrap on our boxes, by using sustainable materials in our supply chain, and by minimizing our overall waste and footprint.

Ahmed Rahim/ Co-Founder & CEO, Numi Organic Tea:
If you’re working with chemicals, but you’re taking care of the farmers; but you’re polluting the farmers with the chemicals so it’s every single aspect of the supply chain. You can use virgin paper and tear down thousands of trees, where as you can use paper that’s been post-consumer waste and reuse it and put beautiful packaging on it and it looks great. People would have no idea uhm, that it was post-consumer waste. So, the whole supply chain from beginning, to the end product, to the shelf is so important for us.

Brian Durkee/ Director of Operations, Numi Organic Tea:
So we need to have a good forecast and we need to have a good plan in place. We can’t simply pick up the phone and order these materials. As far as profit, obviously a big part of my job is to make sure we’re profitable after managing the cost of goods and I have to manage the production processes. So, we’re always looking at ways to save costs which is kind of counter intuitive in the fact that you’re trying to spend money to improve the sustainability of your product. You’re trying to spend money to improve fair trade and you’re trying to spend money to improve the quality of your product but you’re also looking for cost reduction, and that’s one of the biggest challenges that I’m faced with.

In the early days we actually managed most of the business with Excel spreadsheets. We actually operated the business with QuickBooks which a lot of small companies do and now we’re servicing customers, at like; your Costco’s, the Target’s, the Save Ways, and we’re distributing product twenty two countries worldwide. So, our systems are very necessary to be compliant with all the different countries and the different languages, and weights and measures, and international regulations.

We manage all of the importing, all of the quality control, all of the sampling, all of the purchasing and inventory. We have three third party partners that we work with. One is here in California, one is up in Canada, and we’re beginning to work with one over in Asia where the tea is grown. If we were to own our own machinery we’d have to not only put back capital but in addition we’d have to deal with fluctuating costs as far as down time, machine time, worrying about the, the volume of products we’re making. Where at this point we go there and we simply contract them to put in the tea bags for us per our specification.

Until, about the time I came on we started introducing an ERP system where we have inventory management accounting system where we are managing our inventory in multiple countries all through the same software program. We simply push a button and say we need to make this product, and the system pulls all the lots and all the materials for us in multiple locations; and know that it’s accurate, and know the value of our inventory, and know the costs of goods very clearly. It really has helped reduce our costs, it’s helped improve our customer service and most importantly it, it, it’s helped us manage our business our business more efficiently, and it’s given us complete visibility of what we’re trying to do; and it keeps everyone on the same page. So anyone can log into the system and see exactly what’s going on and where we are. And it’s, that’s a big part of our transition. From going from what’s inside people’s minds to going, to replacing that with process. When you replace that with process that’s when you can really grow.

Provide your answers with a separate, numbered response to correspond to each of the following items:

How does Numi’s relationship with third parties address operations systems elements in areas related to product-mix, capacity, facilities, and layout? What is the benefit of their approach?

Describe the technologies and tools used by Numi in managing performance. Why did the tea maker eventually adopt a more complex information technology system?

Examine how Numi addresses each of the eight dimensions of quality. If one of them is not applicable, make sure to indicate why.

Answer 1

Numi Organic tea works with 3 third parties one in california, one in Canada and one in Asia whom they have hired on contract basis.The company focuses on continous improvement. by hiring the third parties they have managed to deal with fluctuating costs. Their product mix consists of a single product, i.e Organic tea. The most important elements of an operations systme are Input, process and output.By engaging third parties the company is able to operate in a process layout method where different processes are carried out in different locations.

Their input consists of raw materials, machinary, electricity, water, equipment, office furniture, labor, capital, information, technologies used etc. They have around 50 direct employees and 300 employees who work indirectly for them. The process is the conversion of the raw material, ie tea leaves to the final product, ie organic tea. The output is final product that is sold in the market.

Initially the company used to work on Excel sheets and they operated their business using Quickbooks which are accounting softwares primarily used by small and medium businesses. Eventually they had to introduce an ERP system where they had installed an inventory managemnt system. The company sold its products in almost 20 countries and hence they required a system where the data from these countries can be stored the languages, weights and measures and international regulations which were used in each country.Using the software has helped them manage their inventory in an efficiant manner and reduce the cost. The access to the data has incersed there by improve the visibilty. Anyone could login to the system and get a clear idea on all the details they required.

The eight dimensions of quality and given below.

1. Performance:

2. Reliabilty

3. Durability

4. Servicability

5. Aesthetics: The company is focussing on the packaging by using recycled fibre. The CEO comments that if the packaging is done using post consumer waste and use a beutiful packaging the customers wont know the difference.

6. Features

7. perceived quality:

8 Conformance of standards: The comoany takes care to maintain the standards by spending time with the managers, and the workers to make them understand what they are doing and why and to keep a check on the packaging, how they managae the waste and how the workrs are treated