Analysis of the Logistics Cost of Ceylon Tea Supply Chain: A Study on Small Scale Tea Factories in Yatinuwara

Abstract

The tea supply chain is one of the oldest supply chains in Sri Lanka. It provides a significant contribution to balance tea demand and supply. However, Sri Lanka’s share of world tea production and world export is gradually decreasing. The twin goals of cost reduction and service enhancement can be achieved through effective management of logistics activities. Therefore, the study carries out to calculate the logistics cost in the tea supply chain based on five small scale tea factories in Yatinuwara. The logistics cost in the tea supply chain was analyzed by transport cost, warehouse cost, and package cost. The study found that transport cost has occupied half of the total logistics cost in the tea supply chain in Sri Lanka. Warehouse cost was the lowest cost component of the total logistics cost. The portion of the labour cost is very high for all the logistics activities in the tea supply chain. The contribution of the logistics cost to the overall tea production cost remains at one-digit percent among the small-scale tea factories in Sri Lanka.