This writing is about partial costs of making Oolong tea sourced from tea farms located in mountain areas height between 1300 to 2000 meters.
Excluding land costs, tea farm management fee, and farmers' expenses.
1. hand pick cost: NT$250-300 per 600 grams of dried tea leaves
2-1: make tea labor cost: NT$100-120 per 600 grams
2-2:cook tea labor cost: NT$20-30 per 600 grams
2-3:rounding tea labor cost:NT$80-100 per 600 grams
2-4:tea factory expense:NT$110-130 per 600 grams
So we can tell that the ordinary cost of 600 grams of tea is about NT$560-680.
Tea leaves' cost not included. However, we shall be able to find the original tea saplings' cost and make some calculations.
Nevertheless, we haven't calculate land costs, tea farm management fee, and farmers' expenses. In fact, the later two are part of operational costs. "Land costs" or I should say "share of land costs" include farm land taxes, and loan and interests determine by how one acquire this farm land. unless one inherits the land, and one does not want to sell her or his land, the return on investment of land usually sets for 20 years. Under this principle, we can calculate the share of payment/loan and interest per year.
I suppose "share of land costs" may be categorized in the section of "raw material cost."
As for the tea farm management fee and farmers' expenses, I suppose we can give it a reasonable number from the production quantity of that season. Because I don't know the real number of costs, if I sue 20/80 principle to determine the operational cost from the cost I know, which is NT$560-680, than I will get a range of cost about NT$700-850. Then, I use the 1/3 principle (raw material cost, operational cost, gross profit) to determine the price and it turns out about NT$2100-2550.
However, I would say that what I have mentioned above are idealistic. The reality is that with this price at the origin of production farm, we can buy its top ranking tea, not just an ordinary tea!
No matter what the current reality is, I will do my best establishing a new value chain system in Taiwan's business and upgrade it into industry.
The situation of those Taiwanese who are doing tea business is quite similar to that of the Western wine industry in the mid 20th century, in which it is on a transition point of becoming highly industrialized or not.
Back then, the trading mode of wine industry was pretty much like auction. Moreover, during that time the general public considered wine as a luxurious product for the upper class and the wealthy people. However, in 1976, wine from California, USA won the world championship in Paris, France. This caught people's attention all over the world because Californians use scientific methods producing their wine and are capable producing large number of wine relatively much easier. According to "economy of scale," when the total number increases, the cost-per-unit goes down. Hence, the product price should be cheaper than before. Under these circumstance, more and more people will be capable of buying wine.
Although my factors might seem quite persuasive for Taiwanese tea business participants to consider, there is a powerful psychological factor keeping my fellows from making changes. That is the "prisoners' dilemma!" briefly saying, no one knows if adopting the Californian way will better off. Even though people are not very happy with the current auction-like trading mode, it is still more preferable to the uncertainty of changes.
In fact, there are quite some other reasons keeping us make a difference. For instances, Taiwan is only 1/11th of California and in average each Taiwanese farmer only have about 1 hectare of land. In addition, it is much easier to choose one product from many stores in Taiwan. Moreover, price is usually the first consideration. Under these circumstances, most Taiwanese tea farmers prefer trading by themselves instead of establishing a pricing system and let the sales channels do the final tradings.
As for myself, I am working on finding people who have similar thoughts like me and try our best establish a pricing system and hopefully soon our tea business can become highly industrialized.
The structure of the Phalaenopsis industry is quite weird. This condition exists both in its international market and internal market of Taiwan. Under these circumstances, a company that wishes to join this industry can only do whatever it can to create or wait for the right timing to enter.
The Phalaenopsis international market is basically business-to-business which consists of suppliers, trading companies, and corporate buyers. Generally speaking, this is a closed system. First of all, because of development and production of Phalaenopsis requires advanced technology, those who are capable are only a few. On the other end, those buyers that are capable of buying Phalaenopsis counting by thousand and deliver by air are not that many either. According to the conditions just mentioned, the number of trading companies doing Phalaenopsis export or import could not be large either. Under these circumstances, we can infer that members of the Phalaenopsis industry more or less know each other. Careless actions will destroy corporate reputation. Hence, no one dares to change partner unless something extremely serious and awful happens. Therefore, the best time to enter the international Phalaenopsis industry would be when a new corporate buyer appears.
As for the Taiwanese Phalaenopsis market, both business-to-business and business-to-customer are quite weird. First of all, there are only a few wholesalers. Those wholesalers cannot offer the sufficient total profits that those suppliers need. Thus, suppliers must look for other clients such as none-floral corporations, floral shops, florists, and general customers. However, "access" is the most important factor getting the chance to sell Phalaenopsis to ordinary companies. As for floral shops, florists, and general customers, the issue is that they abuse the usage of "cost-performance ratio," in which they bargain the prices unreasonably low. Under these circumstances, most suppliers focus on international market. As for those wholesalers, they do what ever they can to expand their client variety. After all, the best time to enter Taiwanese Phalaenopsis industry is when completed collecting corporate accesses sufficient for ones total profits.
Last but not least, right timing is a very interesting thing. If we simply sit and wait, nothing will happen. We must do something or anything we can in order to let the right timing appears. Nonetheless, when will it appear is out of our control. We can only do our best and hope it will appear soon.
In the end, I am also working on doing everything I can to let this right timing appear. I believe that things I have done have meanings and values. I hope that I will meet my right timing soon!
In ancient time, human beings figured out “division of labor” because they have realized that everyone has strengths and weaknesses. By using everyone’s strength and avoiding weakness, they can optimize their production. According to this belief, human beings have made development on division of labor centuries after centuries.
Probably soon after they figure out cooperation among human beings, they soon came up with the idea of building boats to catch fish, riding horses to chase their prey, using hounds to catch prey, using cattle or horses to help farming. Then, several thousand years have passed until later 18th century when the industrial revolution took place. The Age of Machines has begun.
In mid-20th century, the mechanization of agriculture has begun. This is an efficient and significant change to the agricultural industry. Machines can work much faster and way more area than animals in the same amount of time. Although machines are way more expensive than animals, in long term, machines are cheaper than animals in maintenance. This is in accordance with the purpose of optimization. Find the best tools and methods in order to produce the most.
Having machines do labor-intensive work for us is a great application of division of labor. Actually there are more we can get out. Thanks to the information revolution taken place in 1980s, we now have computers and robots to do even more things for us. Using our moth orchids as an example, this kind of plant requires intensive care on their development and growth, temperature, humidity, water consumption, pests and diseases, and more. Monitoring 24 hours a day and 7 days a week will be the perfect solution. However, having 3 shifts of employees to take care of those orchids would be way too cost consuming. It is very unlikely that any orchid grower-company could afford such wage expense.
Under these circumstances, an automated plant factory would be an optimal choice for growing moth orchids. Besides looking after those orchids, there are so many other tasks we must do. And among those tasks, many of them must be done by us. For instance, open-ended issues like marketing and sales, customer services, attending exhibitions or conferences, and more. Hence, in order to concentrate on tasks computers and robots cannot do, we are impelled to adopt automation of greenhouse. In the age with consumer-oriented market economy, we are enthusiastic providing best services.
In conclusion, in the 21st century, the optimization of division of labor is doing tasks that can only be done by human beings and letting computers and robots do the rest. No matter how smart computers and robots will become, I still believe that the ultimate value of human soul and spirit is irreplaceable. Nevertheless, the lesson we must learn is how to demonstrate our essence and contribute the best to our society and the global community. Therefore, we are genuinely looking for partners cooperating with us making the best in Phalaenopsis industry for everyone.
The logic of “division of labor” is to minimize the effect of the limitation of doing only one thing at any given time in order to optimize the benefits of all who participate. Nevertheless, there are prerequisites to the success of this principle. First of all, those who participate must have mutual trust among one another. Otherwise they are narrow-minded in a win-lose competition. Secondly, they must have the will and motivation seeking optimization of them all as one entity. Some people just want the minimum labor and a few would even take advantages of others by being free-riders. Thirdly, their labor division should only be divided into humanistic level. It is human that decides what to do not task decides whom should do. Electronics factory has divided its task too narrowly and inhumane and thus causes tragedies.
Principles in The Wealth of Nations can also be applied to individuals and enterprises. Take the orchid industry as an example. In general, before to the end in which the customer gets the orchids, there are breed research and development, flower raising and production, marketing, sales, and logistics. Moreover, on the sideline there are human resource management, finance management, information management. There are many ways to accomplish the tasks mentioned above but I will only talk about the difficult way and the optimal way.
The hard way, which is the way most Taiwanese companies adopt, is doing everything except the logistics by themselves. However, most companies are family-owned small-size enterprises. You can imagine that they must be overloaded. As we all know that one person can only be involved in one activity at any given time, the efficiency and effectiveness of the working method mentioned above must not be good. But most Taiwanese owners accepted this situation and remain. What they have in mind is that even though such way of working is not good, it is still cheaper than hiring people to share the workloads. Their concerns are not only the actual money they pay out, but also the risk of training future competitors. This is because we cannot claim property right over natural product. This implies that an owner cannot stop his or her employees from quitting and open her or his own flower company. There is nothing wrong with this kind of thought. It is just somewhat pessimistic.
The optimal way is too have a team of 7 persons or the multiples of 7 for the 7 tasks I mentioned above. One way is to create a huge company hiring many employees. This is the hard way because not many companies have such wealth to do so. Moreover, even if the money is sufficient, willingness of doing so is another issue. It is quite difficult to manage a large company. The other way, which is more practical, would be to establish business alliances with different specific-function companies. Such cooperation has benefits like brainstorming, overall resource sharing, and time saving. Nonetheless, this is not easy to accomplish because it takes great fortune to meet the right person at the right time and place, and do the right thing together.
At the current stage, my priority is to get orders and really enter the world of marketing and sales. However, my goal is to become a strategic partner. What I mentioned above are the analysis of what I learn from systems thinking and strategic theory. I believe that the business world is the best place implementing those theories. Moreover, obviously I will get stimulation and thoughts during the process. After all, I am working on cooperating with others contributing my best.
Although I have grown up with Phalaenopsis, not until last year had I begun thinking of doing business with Phalaenopsis. Anyway, life is always full of surprises. I am saying so because I have been dreaming of becoming a scholar since I was a little child. In fact, I am now working on using the knowledge I have learned to do business. i believe that I can do something different.
In Taiwan, plum flower, orchid, bamboo, and chrysanthemum are called the four gentlemen of flowers. Among orchids, Phalaenopsis are called the Moth of orchids. It is very gorgeous and elegant. Thus, many people like to give pot Phalaenopsis as present to other they admire or appreciate. I grew up with pot Phalaenopsis because every year on special holidays my dad receives pot Phalaenopsis from those who admire him.
Under this circumstance, I have been surrounded by pot Phalaenopsis since I was little. I like the beauty and the wild nature of Phalaenopsis. It is somewhat like a cat, which is semi-domesticated. It needs watering, but only some once a week in Taiwan, which has a subtropical oceanic climate. Anyhow, Phalaenopsis is quite independent with its significant characters. Maybe living with Phalaenopsis has made me an independent person! I enjoy most of the time both alone and with others. Certainly, I still have down moments, but I am trying my best living with those uncomfortable situations.
Couple years ago I finally gave up becoming a full-time academic faculty in the university in Taiwan. Simply speaking, I couldn't find my way being myself and doing well in such a twisted system. I want to do the things I enjoy and make contribution to other people. therefore, I began examining things around me that I like and which I think I can make a difference for myself and other people around. After awhile, I finally put my eyes on the flower I grew up with.
Phalaenopsis is one of the moderately commercialized agricultural product in Taiwan. I am saying it is only "moderately commercialized" because it is not yet industrialized and is far from systematized. I started studying systems analysis since college in UC Davis. I also studied operations research in business school in Taiwan. Over these years, i continue studying systems thinking on my own. I am sure that I can help Taiwan's Phalaenopsis industry become systematized and provide happiness to Phalaenopsis buyers around the world.