TEA Logistics Services, Inc.
TEA Logistics Services, Inc. (TEA) was started in 2005 by
three siblings in a family that had a long history of involvement in logistics.
TEA began operations primarily as a freight brokerage in the United States, matching
shipper loads with carrier capacity. While this operation was profitable, it
did not give TEA the opportunity to develop deeper partnerships with its
clients. So, in 2010, TEA decided to become an asset-based third party
logistics (3PL) company that focused on three verticals: electronics,
automotive, and pharmaceutical in the United States. Their assets included
temperature-controlled and dry van trailers with overthe-road tractors,
delivery vans, and leased distribution center capacity. TEA continued its
brokerage operation until 2012 and then decided to cease that operation and
focus on 3PL activities.
The success of the brokerage operation gave TEA numerous
contacts in the shipper community. One of them, Systa Technologies, was a major
U.S.-based assembler of high-end computer servers and storage units. Systa,
based in Houston, Texas, had assembly facilities in California, Alabama, and
Minnesota. Systa relied on 3PL transportation and warehousing companies to
provide their logistics services. TEA proposed that it act as a 3PL and 4PL
(non asset-based provider) to manage Systa’s transportation and distribution
needs. In 2014, the contract was signed and TEA became Systa’s sole provider of
logistics services in the United States.
While Systa was a world leader in the quality of its
products, it was being pressured to increase margins because of global
competition. One of its major costs of assembling servers and storage capacity
in the United States was labor. Systa made a strategic decision to open a new
assembly facility in South Africa. It chose South Africa for three reasons.
First, South Africa has abundant and low cost labor. Second, the Chinese have
been investing billions of dollars in building infrastructure in South Africa
to accommodate the eventual relocation of assembly plants from China to South
Africa. Third, China was not selected for the facility because its labor rates
are on par with those in the United States. Systa has proposed to TEA that it expand
into South Africa as well so it can handle all of Systa’s logistics needs in
that country. TEA has never operated outside of the United States.
1. What opportunities do you see for TEA to expand globally,
specifically to South Africa?
2. What challenges do you see facing TEA in making this
3. If TEA were to accept the offer, how would you suggest
that TEA enter the South African market when establishing its operations?