1.1 TEA INDUSTRY IN INDIA
India is the largest producer as well as consumer of black tea in the world. India is the third largest exporter of black tea in the world. Tea estimates dominate tea production in India with an estimated share of 84%, the remaining 16% being from the bought leaf factory from small sector holders. Production is largely cut, tear and curl category and orthodox tea is mostly exported.
Following are the set of assumptions made before designing the online system
- Tea Estates are large and few in number
- Buyers are even fewer
- Tea Estates at least has one computer operator
- Tea Estates are able to Grade, Mark, Weigh, Package etc own Tea
- All Buyers/Sellers registered onto website
The scope of the paper encompasses the provision of an e-auction system for auctioning of tea at the various auction centers. The system proposes to enhance and simplify the activities of the auctioning process thus reducing the time taken for the auction process. Activities involving the Producers, Warehouses, Auctioneers and Buyers would be covered by the e-auction system. The following areas fall out of the purview of the system:
- Warehouse Inventory Management
- Sampling and Assaying of Tea
- Settlement of Funds
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The new e-auction system provides a workflow channel to enable various stakeholders and business users to coordinate various activities.
2.0 AUCTION SYSTEM
The e-Auction system is installed in all the six Auction Centers (Calcutta, Siliguri, Guwahati , Kochi, Coimbatore and Conoor). The various users of the system like Producers, Warehouse, Auctioneers and Buyers will be provided with logins and password and are entitled to access the various functionality of the system appropriate to their respective roles. Each Auction center provides admin functions to TTA, who is only entitled to carry out functions like registration, incorporation of changes in policy and maintenance of masters.
Tea auctions are a major vehicle for the primary marketing of Tea in India helping in better price discovery and also providing a guaranteed transaction protocol for the primary tea sale transactions. Auctions are held under the direct supervision of the auction organizers i.e. the Tea Trade Associations of the respective auction centers. The auction system is a complex interplay of the different entities involved in the various phases of the auction process. The Tea Auctioning process proposed through this document is for an auction system to be designed to facilitate the auctioning of tea.
3.0 CATEGORIES OF TEA
Tea Type would include
Categories would include:
Sub Categories would include:
Activities are performed Supplier, Buyer, Website, Warehouse /Verifier and Auctioneer.
- Selects the Mark, Types, Grades, etc from the ones defined by TTA Admin
- Add all Payment/Invoice Generation details for each lot
- Sends the tea to the warehouse.
- Verify Catalogue and pull out any Teas if required
- Wait for auction
- Generate Pre Auction catalogue
- Inform buyers about pre auction catalogue
- Input all tax structure details (annually)
- Catalogue finalization
- Monitoring of bidding process
- Matching of buyer
- Handling of lot division among buyers
- Dispute resolution
• Website / TTA Admin
- View pre auction catalogue
- Request for free samples
- View final catalogue
- Bid on Teas
- Divide lots if required
- Make Payment
- Accept delivery
- File Disputes (if required)
- Leave Feedback
- Receive invoice from Seller
- Match invoice with buyer
- Accept Payment
- Deliver Tea
- Store tea
- Free Samples request handling
- Make sure verification is done
- Invoice generation
- Payment Handling
- Views AWR details and creates e-catalog
- Assays the tea and distributes all the required samples
- Adds his own valuation and comments on the tea
- Takes part in the auction process by performing matching and knockdown
- Issues contract notes to the buyer
- Receives payments and forwards them to the producer
• Warehouse / Verifier
5.0 AUCTION MODELS
Always on Time
Marked to Standard
The Tea brought in by the Producers will be deposited in designated Warehouses and after assaying by the Auctioneer, will be available for auction through the system on specified days as decided by the concerned Tea Trading Association. The Buyers will then bid for the tea based on their requirements. After knockdown, the Contract Notes will be issued by the Auctioneers to the Buyers. The Buyers will take delivery of tea from the Warehouses against the Delivery Orders issued by the Auctioneers.
The system enables session based auctioning of tea in a secure yet transparent manner thereby leading to a fair price discovery of tea based on various auction rules.
6.0 PROCESS MODEL
- Producer generates invoice and forwards tea to the warehouse
- The warehouse generates the AWR once it receives the tea
- The auctioneer views the AWR details and creates the e-catalog
- Buyers views catalog and requests for samples
- Auctioneer assays the tea and distributes all the samples and adds his own valuation.
- Buyer performs his valuation and adds comments based on the received samples
- Buyer bids on the tea
- Auctioneer performs matching and knockdown
- Auctioneer issues contract notes
- Buyer makes payment to the auctioneer which is forwarded to the producer
- Auctioneer issues delivery order upon receiving of the payment
- Buyer takes delivery from the warehouse based on the delivery order.
The entire process is divided into four main steps.
- Pre auction
- Supplier will fully prepare tea, ie weigh, mark, grade, type, categorize, package etc
- These are uploaded onto website 2 Weeks before auction date.
- Ships it to the warehouse for storage/ verification.
- Pre auction
- Pre-auction catalogue is generated from the details uploaded by the suppliers
- Details are verified by the verifier provided by the Tea board.
- Buyers would be invited to come on website to view this catalogue
- Buyers can request for free sample, up until 1 week before the auction. Details are forwarded to seller
- Sellers can pull Teas from pre-auction catalogue up until 3 Days before auction
- The final catalogue is prepared 2 days before auction, which is viewed by buyers from the verified details along with the name of the verifier.
- Buyer bids on Teas as per requirement.
- Bidding can be simultaneous or session wise.
- Automatic / Manual knockdown.
- Buyer can choose bidders and quantity, from list if he wishes to divide the tea
- After matching is done, cost is calculated and receipt is generated (automatically based on Seller Inputs)
- Warehouse generates contract note.
- Buyer verifies goods and rates the seller. He comments on the Seller and verifier. Publicly viewable ratings and comments
- Seller is paid by the warehouse.
- Incase of dispute, the verifier will resolve the issue.
• Step 1
• Step 2
• Step 3
• Step 4
The strength of the system largely depends on the speed at which information is disseminated to the participants and its capacity and capability to process the orders. System and the concept requires high level of risk mitigation and risk analyses measures. Failure or non performance upto adequate levels could mean losses into crores of Rupees. The existing system helps Tea growers in price discovery. It helps removing middlemen and projects a better market scenario for the growers enabling them to sell at the actual market rates. The system is designed to be capable of giving information to market participants who are logged into the system.
This information can also be used for display in tea portals, price feed to information vendors like Reuters, digital display boards at the tea trade associations or at the participant's office or information kiosks at various locations
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