training report tea21

i

ACKNOWLEDGEMENT

First and foremost, I wish to express my deepest gratitude to Dr. G. Chandrasena,

honorable Vice Chancellor, Uva Wellassa University and Dr. S. C. Jayamanne, Dean,

Faculty of Animal Science and Export Agriculture and Dr. L. M. H. R. Alwis, Head,

Department of Export Agriculture for giving me the opportunity to carry out this

valuable training program under their supervision and guidance.

Then I would like to pay my gratitude Dr. K. G. Premathilake, Coordinator of Tea

Technology and Value Addition degree program for facilitating and make arrangement

regarding industrial training program.

Further, I would like to appreciate Ms. A. G. A. W. Alakolanga, Lecturer, Department of

Export Agriculture and Ms. K. P. M. Kahandage, Temporary Lecturer, Department of

Export Agriculture for their assistance and supervision as my supervisors. I would like to

express my sincere gratitude to Mr. Sarath Sirisena, Managing Director of Lanka

Commodity Brokers Ltd for facilitating the industrial training program. Also I wish to

render my sincere gratitude for kind guidance, assistance and knowledge provided by

Mr. J. R. Algama, Director and Mr. Manjula Jayasinghe, Assistant manager, (External

Supervisor), of Lanka Commodity Brokers Ltd. I offer my thankfulness to board of

directors, senior managers, tea executives and all other LCBL staff for providing their

guidance, supervision and assistance during the training period.

Finally, I am most thankful to my parents and all of colleagues who helped me in

numerous ways to complete this industrial training program a success.

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TABLE OF CONTENT

ACKNOWLEDGEMENT ..............................................................................................i

TABLE OF CONTENTS...............................................................................................ii

LIST OF TABLES ........................................................................................................iv

LIST OF FIGURES ....................................................................................................... v

LIST OF PLATES ........................................................................................................vi

LIST OF ABBREVIATIONS......................................................................................vii

CHAPTER 01 ................................................................................................................ 1

INTRODUCTION ......................................................................................................... 1

1.1 Background...….. ............................................................................................. 1

1.2 Organizational Profile ................................................................................... 1

1.3 Overview of the Training Programe................................................................ 2

CHAPTER 02 ................................................................................................................ 3

TRAINING ACTIVITIES ............................................................................................. 3

2.1 Warehouse ....................................................................................................... 3

2.1.1 Requirements for Warehousing of Tea .................................................... 4

2.1.2 Unloading of Tea ..................................................................................... 5

2.1.3 Issuing of Good Received Note (GRN) ................................................... 6

2.1.4 Delivery of Tea ........................................................................................ 6

2.1.5 Routine Work of Warehouse ................................................................... 8

2.2 Cataloguing Department ................................................................................. 8

2.2.1 Cataloguing Procedure ............................................................................. 8

2.2.2 Solving the Problems of GRN ............................................................... 11

2.2.3 Teas Against Cataloguing....................................................................... 12

2.2.4 Current Cataloguing Rules..................................................................... 12

2.2.5 Abbreviated Price List ........................................................................... 13

3

2.2.6 Re - Sale of Tea...................................................................................... 13

2.2.7 Private Sale ............................................................................................ 13

2.3 Sample Room ................................................................................................ 14

2.3.1 Sample Room Procedure........................................................................ 14

2.3.2 Preparing Short Samples ........................................................................ 17

2.3.3 Bulking of Bin Tea for Office Private Sale ........................................... 17

2.4 Tea Room ...................................................................................................... 18

2.4.1 Valuation of Tea .................................................................................... 18

2.5 Selling of Tea ................................................................................................ 21

2.5.1 Selling of Out Lots ................................................................................. 22

2.6 After Sale Procedure ..................................................................................... 22

2.7 Claims by a Buyer ......................................................................................... 23

2.7.1 Claim Procedure..................................................................................... 24

CHAPTER 03 .............................................................................................................. 26

PROBLEMS IDENTIFIED AND SUGGESTIONS ................................................... 26

3.1 Problems........................................................................................................ 26

3.1.1 Warehouse.............................................................................................. 26

3.1.2 Sample Room......................................................................................... 26

3.1.3 Cataloguing Department ........................................................................ 26

3.2 Suggestions.................................................................................................... 27

3.2.1 For the Warehouse ................................................................................. 27

3.2.2 For the Sample Room ............................................................................ 27

3.2.3 For the Cataloguing Department............................................................ 27

APENDICES................................................................................................................ 28

4

LIST OF TABLES

1.1 Activities Undertaken During the Training Program 2

2.1 LCBL Warehouses 3

5

LIST OF FIGURES

2.1 Basic Flow Diagram of 81 / 54 Warehouse 4

6

LIST OF PLATES

1.1 Company Logo 1

2.1

Tea Stacking

8

2.2

Types of Tea Sample

18

2.3

Tea Tasting

21

2.4

Colombo Tea Auction

22

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LIST OF ABBREVIATIONS

CTTA - Colombo Tea Traders Association

DO - Delivery Order

GRN - Good Received Note

LCBL - Lanka Commodity Brokers Limited

BM - Broken Mixture

BOP/BOP Sp - Broken Orange Pekoe/ Special

BOP1A - Broken Orange Pekoe 1A

BOPA/ BOP1 - Broken Orange Pekoe A/ 1

BOPF/BOPF Sp- Broken Orange Pekoe Fannings/ Special

BP - Broken Pekoe

BPS - Broken Pekoe Souchong

BT - Broken Tea

FBOP/FBOP1 - Flowery Broken Orange Pekoe/Flowery Broken Orange Pekoe1

FBOPF Ex Sp/ Sp- Flowery Broken Orange Pekoe Fannings Extra Special/ Special

FBOPF/FF - Flowery Broken Orange Pekoe Fannings/ Flowery Fannings

FBOPF1/FF1 - Flowery Broken Orange Pekoe Fannings1/ Flowery Fannings1

FF Ex Sp/ Sp - Flowery Fannings Extra Special/ Special

FNGS/ FNGS1- Fannings/ 1

OP/ OP1 - Orange Pekoe/ 1

OPA - Orange Pekoe A

PD - Pekoe Dust

PF - Pekoe Fannings

1

CHAPTER 01

INTRODUCTION

1.1 Background

This report is based on the experience, activities, information, practical and other

related functions gained from the industrial training program. The duration of the

industrial training was one month under the supervision of both external and internal

supervisors.

1.2 Organizational Profile

Plate 1.1: Company Logo

The Lanka Commodity Brokers, the most recent entrant to Tea Broking in the world‟s

largest Tea Auction Centre, Sri Lanka, and regarded as the most aggressive,

commenced operations at the sale of 1st/ 2

nd July, 2003. Their weekly quantities have

increased several folds with more and more factories entrusting their tea for sale

through them. They have approximately 23.5 % share of the weekly main sale high

and medium grown quantities and approximately 17 % share of total weekly low

grown catalogues, ahead of some established Brokers. On an average, they offer

approximately 1800 - 2200 lots per week comprising of nearly 1.2 million of kg per

week.

The principal activities of the company are tea, rubber and sundry produce broking

and providing financial accommodation for the produce suppliers in respect of the

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above services.

Lanka Commodity Brokers Ltd is a limited liability company incorporated and

domiciled in Sri Lanka. The registered office of the company is located in Colombo

and the principal place of business is situated at No. 722, Kotte road, Rajagiriya.

1.3 Overview of the Training Programe

This training report is to provide the details of all the activities which were covered

within the period of industrial training program which lies from 12.01.2015 to

06.02.2015. The summary of activities and their time periods which have been

allocated during the training program are as follow (Table 1.1)

Table 1.1: Activities Undertaken During the Training Program

Activities Place Time Duration

Warehousing and Sampling No. 81/54, Negambo Road, Peliyagoda

12.01.2015-16.01.2015

Cataloguing No.722, Kotte road, Rajagiriya

19.01.2015-23.01.2015

Tea Auction visits Ceylon Chamber of Commerce

26.01.2015-30.01.2015

Tea tasting and Valuation No.722, Kotte road, Rajagiriya

02.02.2015-06.02.2015

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CHAPTER 02

TRAINING ACTIVITIES

2.1 Warehouse

The Lanka Commodity Brokers does not have their own warehouse to unload tea

therefore they have rented seven warehouses within approved demarcations of the

byer-laws of public auction. (Table 2.1)

Table 2.1: LCBL Warehouses

Address

Capacity

Area (ft2)

No. of Bags

No. 81/54, Negambo Road, Peliyagoda

39,085

35,177

No.19, Dawalasingharamaya Road, Mattakkuliya

31,242

28,118

No.79, Biyagama Road, Thelwatte, Kelaniya

38,000

34,200

No.570/20, Weralathudawa Road, Mabole, Wattala

36,400

32,760

No.46, Aniyakanda stores

23,000

20,700

No.809/05, Mabole, Wattala

35,000

31,500

Calculation of rough warehousing capacity in terms of number of bags will be done

by multiplying of square area of warehouse by 90 %. Because the rest of 10 % of the

flow area should be kept free for the walking paths within the warehouse. Outdoor

training was completed within one week at the warehouse located in No. 81/54,

Negambo Road, Peliyagoda. Their sample room is located at upper flow of above

mentioned

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No.81/54,

Negambo road,

Peliyagoda.

81/54B, 18,750 Sq.ft.

G.R.

Offi.

81/54A, 20,335 Sq.ft.

Figure 2.1: Basic Flow Diagram of 81 / 54 Warehouse

2.1.1 Requirements for Warehousing of Tea

The warehouse should be registered and obtained the permission from Sri Lanka Tea

Board under regulations of 1981 to unload tea. For that purpose the warehouse should

complied the following requirements which were implemented by the CTTA.

Warehouses should be located within the municipal limits of Colombo or

within 3km off the Colombo - Negombo main road with the Welisara town

limit as a demarcation point or 3 km off the Colombo - Kandy main road with

the Kiribathgoda town

Name board should be displayed in front of the warehouse

Flow - diagram of the warehouse should be illustrated and displayed

Fire points should not be expired

Pest control treatments should be properly conducted

Weighing scales should be properly calibrated

Tea sacks should be stack on wooden pallets

Number of sacks that have been stacked one over another should not exceed

ten bags

5

When sacks are stacking one over another with two different lines with

different weights, the heavy sacks line should be stacked below the light sack

line

If the distance of the warehouse from the door of entering to the deepest end

exceeds 70 feet, hand pallet jacks or carts should be provided

Spacing of walking paths should be kept adequately

2.1.2 Unloading of Tea

When a lorry is arrived to the warehouse the lorry driver must obtain the two copies

of Tea Invoices which were issued by the factory with the dispatched tea to the

security personnel in the warehouse to get a turn number. This will facilitate to make

unloading order according to the arrival order of lorries. After issuing a turn number

they will keep records on lorry number, name of the driver, and DL/ NIC number

back of the Tea Invoice and forwarded it to the warehouse office.

According to the tea invoice a Tally Card (Appendix A) was written down by

the officers in the warehouse. Genarally unloading is done by contracted workers

of LCBL while unloading a supervisor should be inspects the bags with tally card.

And tick off the bag number of respective line as running number in tally card.

When tea sacks are unloading, the general advice was prepared to weigh several bags

randomly because there is no time to weigh all the sacks in a tea lot. Generally

number of sacks

to be weighed is recommended as follows,

3 bags for 10 bags line

5 bags for 15 bags line

6 bags for 20 bags line

10 bags for 30 bags line

15 bags for 40 bags line

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When bags are weighing, they put a circle on running numbers for proper weight bags

and put a note on the bags which are less or excess weight. Normal recommendation

is to weigh all the in the entire line bags if they found any low weight bag at first.

Finally, the supervisor should mark the location of the warehouse where the tea lines

are stacked in the tally card for the easiness of future operations.

After completing the unloading, the supervisor should hand over the tally card to the

computer operator in the office.

2.1.3 Issuing of Good Received Note (GRN)

Details regarding tea lots which are unloaded are fed into the warehouse computer

system according to the tally card and issued a GRN in a 4 ply paper (Appendix B).

GRN should be issued separately based on the selling mark wise. Issued GRN should

have a proper authorization by the officer in charge after double checking to tally the

tea invoice and tally card. Issued GRN is forwarded to security personnel and after

double checking of it only factory copy is issued to the driver. If any problem is

identified during the weighing such as short or excess of weight, defects of bags etc.

those are mentioned as remarks on the bottom of the GRN.

Four type of GRN forward

White - Head office – Circulation

Red - Factory

Green - Head office – Cataloguing Department

Yellow- Warehouse

2.1.4 Delivery of Tea

Currently buyers will automatically get the electronic Delivery Order (DO) after

completing their payments on purchased tea before the prompt day. LCBL issues

separate DO‟s for each and every line. This is done by the authorized person (DO

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clerk) of the Accounts Department after submission of the payment slip by the buyer

as a proof. After authorization of the printed copy of DO by the buyer with his pre-

defined signature and rubber stamp, the valid DO is forwarded through the lorry

driver or the supervisor who comes with the lorry to collect their tea from the

warehouse.

Two ply delivery tally card is prepared by the warehouse staff and they can write

down the details of several DO„s of several purchasing of same buyer on one tally

card. When delivering is taken place one copy of the tally card is checked by the

supervisor of the warehouse and another copy of the tally card is checked by the

security personnel by writing running numbers when teas are unloading.

Simultaneously, LCBL delivery seal is punched on the tea sacks by the supervisor

when workers of the buyer are taking the sacks out. All the sacks should be weighed

before loading to the lorry. But, this is the responsibility of the buyer when they are

taking the delivery out after weighing tea. After teas are taken out from the

warehouse, the broker is not liable for any weight loss or any other defect in the tea

lots.

If incorrectly weighted lines are found by the workers of the buyer, they should

inform that to the warehouse people and they will issue a short or excess note to the

buyer. If a short note is issued, the buyer will issue a credit note to the broker and the

shortage is arisen with reference from already issued GRN to factory as remarks;

shortage arisen from the factory the broker would credit it to factory and debit it to

buyer, but if a shortage is taken place without any reference to GRN the broker has to

credit it to him-self and debit to the buyer. If an excess note is issued the broker will

issue a credit note to the buyer and ask him to pay for the excess and debit it to the

factory.

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2.1.5 Routine Work of Warehouse

Normally, LCBL warehouses are open from 8.00 am to 5.00 pm in working days and

from 8.00 am to 12.00 noon in Saturdays. Both unloading and deliveries are taken

place during these time periods.

(a) (b)

Plate 2.1: Tea Stacking

(a) Stacking Procedure at Warehouse, (b) Stacking on Wooden Pellets

2.2 Cataloguing Department

This is the most critical section of the brokering firm and must be properly

manipulated to achieve the success of the firm. Unless it will negatively affects on the

firm to make huge problems in the industry and resulting loss of business. Because tea

brokering is mainly depend on the trust of the tea industry. If the firm causes any

damage to the reliability in the tea industry, they will lose the business. Cataloguing is

the major activity that firm has to be concentrated in the tea industry.

2.2.1 Cataloguing Procedure

This is the normal procedure of Cataloguing Department when Ex - Estate catalogues

are scheduled to be closed on Thursday and main sale catalogues are on Friday

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Details of the unloaded tea to the warehouse are fed in to the system by the

computer operator according to the tea invoices and transferred it as an Excel

work sheet to the head office

It is downloaded by the people of Cataloguing Department and fed into the

main system there. This process will continue from Monday to Friday

At the beginning of the next day the Listing of Bin is obtained by the officers

of Cataloguing Department by mentioning the required time period; usually

from the end time of the previous listing of bin to the time of current listing of

bin obtaining and this may consists of all the details regarding unloaded tea

from previous day to present. Finally, listing of bin is checked manually to

tally it with the copy of tea invoices which is forwarded to the Cataloguing

Department by the warehouse. If any mistake is found it is corrected as an

alteration in the list for further processing

Simultaneously, the summarized list of issued GRN„s of previous day is

obtained and manually checked it out to tally with forwarded white copies of

GRN„s of the previous day

Rarely, collection list consisted of the details of unloaded tea to the warehouse

is obtained to send to the factory (to know whether their tea are catalogued or

violated) when they were requested by factory

A „Daily Processing‟ is run in every morning within their system by the

officers of Cataloguing Department about unloaded tea lots and systemized

previous day to filter it from out the violated lines being catalogue

Only after this daily processing they can have the total lines and quantities that

LCBL can contribute on each and every catalogue that scheduled to be closed

at the end of the week. Final figures of this lines and quantities will be offered

10

to the Convener respectively in the catalogue wise (Convener will issue the

„All Brokers Daily Total Report‟ for each day by combining relevant details of

other seven brokers with cumulative figures from date of closed of previous

catalogue to the date. These details will helpful for the Convener for decision

making on closing of catalogues; catalogues can close separately if any

catalogue exceed pre defined number of lots can be included for sale)

After catalogue closing instructions are given by the Convener, final „Daily

Processing‟ for a particular catalogue is run by the cataloguing people and the

final document is obtained which includes all details to be offered for the

catalogue excluding all violations within the LCBL catalogue

Similarly LCBL Cataloguing Department obtains individual reports for seven

other brokers for the tea lots containing the „Sharing Marks‟ with LCBL and

other brokers, respectively to each broker, e-mails them and shares the details

among the all brokers

Then, LCBL will extract the relevant shared mark list from the shared mark

lists of other brokers and downloaded documents are fed into the system and

run a process to combine LCBL lists with other broker sharing to produce

„Other Broker Sharing List‟ and check the list manually to remove the

violation from being cataloguing

Finally, Cataloguing Department officers will close the catalogues and take

three copies of the proof catalogue to deliver them to,

Tea board audit

Colombo Chamber of Commerce consultant

Sample room

11

At the end of a closing catalogue, Acknowledgements (Appendix C) are

printed as a proof of legal document in selling mark wise to provide the details

of unloaded tea, whether they are catalogued or violated

Closed catalogue of last Thursday/ Friday is sent to the Printing Department

on Monday for multiplying purposes and printed copies of finalized catalogue

are delivered to the sample room for broadcasting catalogues among the buyer

while buyers are collecting their sample tray

LCBL samples of closed catalogue are received to the head office on

following week after closing the catalogue and these are being valued and

liquored in the period of Wednesday to Friday in coming the week after arrival

to the tea room. Finally, on third week after catalogue closing they are sold at

the auction

Lot numbers are given only after closing down of a catalogue and after arrival

of recently closed down proof catalogue

2.2.2 Solving the Problems of GRN

Officers are checked GRN and if there is any mismatch or mistake encountered in

issued copies of GRNs and summarized sheet of GRN, there are several measures to

overcome those issues.

Before cataloguing – making an amendment on respective GRN for the

factory

After cataloguing – marking it on alterations at the end of the catalogue

and announcing before taking bids and informing it to the factory

Before prompt date – making amendments to both the buyer and the seller

to correct the mistake

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After prompt date – issuing a short or excess note for either buyer or seller

according to the requirement and claiming the loss

2.2.3 Teas against Cataloguing

The tea lines which are subjected to both of the above categories would be removed

from cataloguing and send them for violated or shuted-out catalogue and those will be

catalogued on the next auction catalogue.

2.2.3.1 Violations

This incidence is occurred due to problems caused by going against cataloguing rules

when tea are unloaded and systemized during they are cataloguing. This is happened

due to the fault of the factory if they dispatch several lines of same grade under

several invoices. This can be happened within the broker itself and among other

brokers if there is a sharing.

2.2.3.2 Shut Outs

This is happened due to the close down of catalogues before the scheduled date. Lines

which have been entered to the system after closing down of the catalogue will be

shut - out.

2.2.4 Current Cataloguing Rules

These cataloguing rules are implemented to control the producers by sending their

same category of tea under same MF/ BF number with several different invoices in

small quantities or small number of bags. This is because of controlling the tea lots to

be sold within a limited time period and to make a fair market to all producers.

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2.2.5 Abbreviated Price List

Abbreviated price list is obtained at the end of the selling of each catalogue at the

auction. This is obtained using the data fed by the LCBL authorized person in the

auction room at the time of selling. These data will be extracted from the seller‟s

catalogue and fed only the details on buyer of particular lot and price of sale

respective to the lot. This price list is obtained for the purpose of confirmation of sale

before finalizing. This is done by both ways of contacting buyer over the phone and

tallying with seller‟s catalogue with the auctioneer. If there is any mistake

encountered, all necessary alterations are made to correct it.

2.2.6 Re - Sale of Tea

Already purchased tea at the auction can be allowed for the re-selling at the auction

through a broker. This is usually done by the buyer after they are purchasing of tea.

Because due to some of the reasons the buyer does not required already purchased tea

lot tea after some period of time in the future. This can be due to the cancelation of

the order of foreign buyers or cancelation of shipments or any other practical

problems. In this scenario, the buyer has to obtain a special approval from Sri Lanka

Tea Board by nominating a broker for selling of tea. But, the risk about the quality of

tea should bear by the ultimate buyer of tea.

2.2.7 Private Sale

Normally, private sale of tea is practiced when there is a direct contact with the buyer

and seller. Here, buyer should get the approval from Sri Lanka Tea Board while

nominating selling broker to facilitate private sale contract. The selling broker should

prepare the „Private Sale Chit‟ and produce it to the Cataloguing Department.

Relevant documentation is done by the Cataloguing Department; Sellers contract-

Private sale, Buyers contract and Ratification form are prepared. After issuing the

14

buyers contract, the buyer should pay money to the broker. But, DO will be issued

only on receipt of the Tea Board ratification. This ratification should be done by the

panel consist of two independent brokers collaborating with Sri Lanka Tea Board.

2.3 Sample Room

LCBL sample room (Appendix D) established at the upper flow of the warehouse

addressed, No. 81/54, Negambo Road, Paliyagoda. Sample room is also operating in a

routine chart according to the pre-determined schedule. This is the place where

samples of closed catalogue are distributed among all buyers. Therefore, this is the

place that should be properly manipulated and organized to get the favorable and

reliable output from the sample room.

2.3.1 Sample Room Procedure

When catalogues are closed on the scheduled, date there is a deep rooted and well-

established routine chart for the operation of warehouse in well-organized manner.

There are three sets of boxes to store tea samples of current sale, next week sale and

coming up sale to improve the traceability.

Usually, the proof catalogue of the closed catalogue will receive on the next day;

Saturday, after closing of catalogues. This is used for drawing balance samples from

the tea lots after drawing of advanced samples. For the drawing of balance samples

many staff members of the LCBL sample are distributed among all the warehouses in

addition to the permanent samplers to obtain samples more quickly. These should be

transported within Saturday or Monday to the sample room and rest of the staff should

unload them and distribute among the 4 kg boxes and fill the boxes in lot number

wise. Similarly, they engage in the putting lot numbers in advance samples according

to the invoice number after receiving the proof catalogue. Within Monday they have

to complete the task for the purpose of ready to fill the buyers‟ tins from Tuesday

15

onwards.

Normal procedure is to start the filling of buyers’ sample tins from Tuesday. Prior

to that rough checking of filled grades with proof catalogue is done by the in

charge of sample room, who is an experienced person in the field to check whether

any issue has been occurred during filling of 4 kg tins. After that, they will fill the 2

sets of LCBL sample tins named “Reserved set” and “Sale batch”. This sale batch is

used for the valuation of tea at the tea room of head office. Reserved set is kept for

handling quality claims of the loss of the sale batch.

After filling of LCBL samples, 4 ounce purchase samples are prepared to issue to the

buyer after purchasing of tea for quality checking and for the sample hand blending to

determine the ratios of blend. Finally, these samples are kept on the racks according to

the sequence of lot numbers. Therefore, the sample room has to keep the samples of

three forward batches until the buyers collect them after the sale.

After completing these processes only the sample room staff starts to fill the sample

boxes of buyers in two ounce samples. Usually, filling the sample boxes of major

buyer is started early and filled as full boxes. Then, sample boxes of medium level

buyers are filled and sample boxes of small buyers are filled at last as half boxes.

Sample trays containing filled sample boxes are stacked in a separate place to

facilitate buyers to collect them. All staff of the sample room is divided in lot number

wise for the traceability. There is a predetermined order of activities to sample room

staff for easiness of management. There is a specific and experienced team for filling

of sample tins as well as broadcasting tins and collect filled tins as well. Normally,

filling of sample boxes is completed during the time period of Tuesday to Thursday.

Collection of those by the buyers is normally started Thursday onwards after

receiving the printed copies of the closed catalogue.

16

In addition to that, the staff of the sample room has to enwrap several sets of short

samples of dust catalogued lots for delivering to the Pettah buyers.

Ex-estate samples are stored in an Air Conditioned room until sampling is done and

samples do not discharge directly into 4 kg boxes and use polythene bags to avoid

contamination. The reason for that is the Ex-estate teas are considered as the best

quality tea among Ceylon tea. Before closing the Ex-estate catalogue on Thursday, in

the evening staff of the sample room will enwrap 2 ounce samples in air mail paper

for the head office. When receiving the closed Ex-estate catalogue on Friday morning

LCBL enwraps 7 sets of 4 ounce samples and 14 sets of 2 ounce samples for 21

buyers who request to take foreign bids. All the time LCBL uses air-mail papers for

wrapping of Ex-estate tea to maintain the quality. Only one experienced worker is

used to handle all the matters regarding Ex-estate tea.

According to the normal routine of LCBL sample room in Thursdays two workers are

allocated for bulking of Bin tea for the ‘Office Private Sale’. Then staff of the sample

room prepares two ounce wrapped samples from each lot in a particular catalogue

called “Full set” to keep about 6 months for handling of any issue regarding the

quality.

Friday morning is some what free for the sample room hence most of the sampling

activities are already completed. Evening session they engage in cleaning the sample

room and get ready for the next sale. Here, a set of 4 kg boxes laid on table and used

to fill sample tins in current week are put on the ground and cleaned the tables. The

set of boxes which was used week before previous week is taken and tin out the tea to

make office private sale grades. Also the used samples can be kept at sample room for

another two weeks until they sell out. This is one of the major reasons for using three

sets of boxes called „A‟, „B‟ and „C‟ for filling of samples according to the three sales.

17

Again on Saturdays, except several workers all other workers of the sample room are

distributed among the warehouses to draw balance samples.

2.3.2 Preparing Short Samples

Short samples are prepared for several purposes as mentioned below.

As a request of other brokers for samples when there is any sharing marks

with LCBL

Due to the request of the buyers who do not have enough sample tins for

collection of whole catalogued lots

As a request of the buyers who do not have sample tins and purchase only

very specific grades

For the distributing of dust catalogued tea samples to the Pettah buyers

2.3.3 Bulking of Bin Tea for Office Private Sale

Office private sale is to sell out the remaining portion of tea samples after drawing all

necessary samples. Approved, approximate amount that can be sold through the office

private sale by Tea Board is 2 % from the total sample allowances. These are referred

as “Bin Tea” and graded as sweeping grades. Buyers who are registered in the

Colombo Tea Auction are only authorized to join with the office private sale. Here,

several similar grades are bulked together to make one sweeping grade.

SWP1 OP - OPA, OP, OP1

SWP2 FBOP - FBOP, FBOP1

SWP3 FF - FF, FF1

SWP4 Pekoe - Pekoe, Pekoe1

SWP5 FF Sp - FF Sp, FF Ex Sp, FF Ex Sp1

SWP6 BM - BOP1A, BM

SWP7 Dust - Dust, Dust1, PD

18

SWP8 Sample room and office waste

SWP9 Warehouse sweepings

These grades are sold at the office private sale held on Friday at the head office

premises.

(a) (b)

Plate 2.2: Types of Tea Sample

(a) 4 kg Sample Boxes, (b) Prepared Purchase Samples

2.4 Tea Room

2.4.1 Valuation of Tea

This is basically done after receiving the samples of already closed catalogue to the

tea room of the head office. Valuation is done by the seller/ selling broker who goes

to sale the particular lot at the auction. According to the normal LCBL procedure, all

catalogues are handled by different sellers. Selling of some of those catalogues is

rotated among two different sellers who handle a particular catalogue in LCBL. Even

though some of the activities are changed according to the sellers‟ procedure,

valuation of a particular catalogue remains constant as a norm.

Theses valuations are conducted based on the market demand and supply, quality of

the tea, available quantity, selling mark on buyers‟ interest etc. These valuations are

used as the basement for asking prices at the auction when demanding prices for tea.

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2.4.1.1 Valuation of Leafy Catalogue

This is the largest sub catalogue of the LCBL catalogue. Therefore, usually this

contains approximately 650 - 750 lots per week in that catalogue. Therefore, valuation

of leafy catalogue is based on the dry leaf appearance of tea, which is the main

character considered by buyers. Valuing and commenting on tea are done at the same

time which is on Tuesday or Wednesday of the previous week before the sale.

Because, that is the best time to get an accurate idea on market when determining the

prices. For valuation of leafy tea they use standards. Standards are the tea of same

grade and same selling mark which are sold out at the auction of current week. These

standards are used with their prices to give valuations for tea of the coming week.

After valuation of tea, those are double checked to make modifications and compared

with other brokers‟ samples in order to achieve best prices in the auction.

2.4.1.2 Valuation of Tippy Catalogue

This is the second largest sub catalogue in LCBL catalogue which consists of 450-550

lots. Therefore, valuation of this is done very fast and according to the existing market

condition. Usually, here the standards for valuation of grades are not frequently used.

The standards are used only if those are necessary for the valuation. Valuation and

commenting on tippy catalogued tea is done in a similar manner same as the leafy

catalogue in previous week.

2.4.1.3 Valuation of High and Medium Catalogue

This is almost always similar to the above catalogues.

2.4.1.4 Valuation of Dust Catalogue

This is almost always similar to the above catalogues. Only difference is the liquoring

of sharing marks with other brokers‟ samples to check the quality of tea.

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2.4.1.5 Valuation of Off Grades and BOP1A Catalogues

In compare with other catalogues, off grades and BOP1A catalogues are checked on

the week before the previous week for sale. Here, only the comments regarding tea

which are catalogued previously. For that, they comments on both dry leaf appearance

as well as liquor of tea to check any contamination are associated with tea. Valuations

are given just after finishing of the next sale after having an idea about the market.

2.4.1.6 Valuation of Premium Flowery Catalogue

This is also done in the previous week before the sale. Almost always valuation and

commenting are done at the same time. Valuation is done by comparing several

samples considering the same sharing mark, several samples of the same range of

quality, prices of available buyers in the market.

2.4.1.7 Valuation of Ex-estate Catalogue

Same as the valuation of other catalogues, ex-estate catalogue also valued in previous

week prior to the auction after obtaining better understanding on the market. But,

commenting on the tea is done just after closing down of ex-estate catalogue on

Thursday. Ex-estate tea are checked on Friday based on both dry leaf appearance,

color of infusion as well as cup characteristics of the brew or liquor. In this catalogue

tea samples of other brokers‟ are liquored which are having sharing with LCBL. This

is to ' of the quality with that of other brokers tea.

After completing these valuations and commenting reports secretaries obtain

complete Valuation Reports (Appendix E) for tea in all eight catalogues in selling

mark wise as a one report and e-mail them to the sellers as early as possible to aware

them about the valuation prices and allow them to discuss with the broker to increase

the valuation prices.

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(a) (b)

Plate 2.3: Tea Tasting

(a) Tea Cup Preparation for Liquoring, (b) Tasting of Prepared Batch

2.5 Selling of Tea

According to the normal procedure, all tea are sold at the public auction under a

favorable transparent condition. Normally, auctioneer who values the tea is sold at the

auction. He seats at the middle of the rostrum and takes bids by announcing asking

prices respective to the selling mark and grades. Two assistants who seat on both

sides of the auctioneer in the rostrum support him to identify buyers, taking bids etc.

When auctioneer starts to take bids, he adjusts asking prices according to the market

condition of a particular day. Importance is the valuation price to determine the asking

prices. When asking prices are announced, buyers give their prices by raising the

prices and auctioneer knocks down the lot by hammer after he has obtained a

maximum price. Tea lots which do not obtain acceptable prices keep out from the

selling as „Out lots‟. But if a certain lot receives an insufficient price for selling it is

kept as a registered unsold lot to obtain the highest price when asking price under the

approval of the buyer. Tea lots which do not obtain any of bids, keep as no bid lots of

the auction.

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2.5.1 Selling of Out Lots

All of the out lots of the auction should be sold out within two auction days.

Otherwise, they are re-catalogued and results considerable damage to the seller or

producer of tea. Therefore, selling brokers try to sell the out lots within the auction

premises or by visiting to the buyers premises. First, they try to sell the registered out

lots for particular registered buyers and remaining out lots are sold out by visiting the

buyers‟ premises in auction days. Lots which cannot be sold out within this time

period are declared as „Unsold Lots‟ and those are re-catalogued for the next

immediate sale.

Knocked downed prices are fed into the LCBL system by computer operator in the

chamber to obtain the abbreviated price list to check and confirmation of buyers with

their tea clacks to finalize the sale. Only after confirmations are completed, they

transfer the data into the main system.

Plate 2.4: Colombo Tea Auction

2.6 After Sale Procedure

After confirmation of the sale, all the documentations are handled by the Account

Department and they prepare the Buyers Account respective to each buyer by

mentioning all tea lots that they have purchased and Seller‟s Contract and Account

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Sale which indicate the tea lots which are sold out at the auction respective to the

buyer, prices and the final value that the seller will receive after deducting all the

charges of the broker. Buyers account is forwarded on the next day after ending of the

sale and seller‟s contact is delivered within the next two days after the sale.

According to the bye laws of CTTA a deposit of 10 % is made by the buyer on the

lots knocked down to them and is paid by 12.00 noon of each Friday. This is for the

confirmation of sale and to recover the loss if the lots are rejected by the buyers.

Balance payments are settled before the buyer‟s prompt date. Buyer‟s prompt date is

at 1.00 p.m. on 6th

day after sale and the seller‟s prompt date lies at the 1.00 p.m. on

the next day to the buyer‟s prompt date. Selling broker settles all the payment to the

seller after deducting all the expenses, brokerages and other costs that the seller has to

pay to the broker.

In main sale category, after all payments are settled by the buyers, buyers will be

getting electronic DO by LCBL directly through the DO clerk in Account Department

to collect their tea from warehouses. In Ex-estate category, after settling all the

payments by the buyers delivery instructions are directly given to the estate over the

phone through a secretary by advising them to deliver the tea directly to the buyer‟s

warehouse.

2.7 Claims by a Buyer

To consider about any claim, it should be informed to the broker within 52 days from

the date of purchasing. Otherwise broker is not liable to work on any claims. These

claims can have several forms. Most probably these claims are based on the quality

issues of tea lots that buyers are purchased. Major quality claims arise due to variance

of bag to bag, purchase sample to bag sample and tin sample to purchase sample.

Other than that, there may be quality claims on bag damages, tea are not up to the

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recommended standards etc.

When acceptable quality claims arise the broker is liable to settle them out within 21

days after claims are received. Otherwise, the broker responds to the buyer by

informing the reasons for the rejection of the claims. If claims are accepted, payments

should be made within 14 days. If the claim is on the basis of tin sample to purchase

sample difference the tea executive should visit the buyer and inspects within 48

hours and does whatever the things necessary. Drawing samples for any type of the

claim must be done under the supervision of the broker‟s tea executive. Therefore, tea

executive should visit to the buyer‟s warehouse to collect samples for checking

variance.

2.7.1 Claim Procedure

To make a claim, first of all, the buyer should inform the respective broker by a letter

what the claim is about, what they are going to do and what are the things that they

expected from the broker. This letter is directly sent to Managing Director of LCBL

and the letter was forwarded to the respective Claim Department after mentioning the

received time. The reception of the letter of claim is confirmed to the buyer by an e-

mail. The seller or producer also informed by the broker about the claim and what it

is. The tea executive visits the buyer and draws the necessary samples after producing

of „Claim Inspection Report‟. After receiving the necessary samples, usually, the

respective selling broker who sold the lot inspects the samples. In fair cases, they give

the approval for the claim after discussing and come to an agreement about the matter

with the seller.

After obtaining the approval only the Claim Department prepares the credit note for

the seller and the debit note for the buyer and forwards it to the accounting branch.

After getting the approval from the accounting branch, the payment cheque is

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prepared for the buyer and sent to the Claim Department. The payment cheque is

forwarded by the Claim Department to the buyer and DO is obtained to collect tea

from the buyer‟s warehouse. This DO is sent to the seller by registered post after

stamping with authorized LCBL rubber stamp in the back. The seller should collect

the lot from the buyer‟s warehouse and brings into the factory to re-bulk properly and

sends back under a new invoice. Weekly Tea Market Report (Appendix F)

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CHAPTER 03

PROBLEMS IDENTIFIED AND SUGGESTIONS

3.1 Problems

3.1.1 Warehouse

Due to the inadequacy of the space practicing of most of the CTTA standards

in the warehouse is being unrealistic task. Because they cannot be maintained

such as recommended stacking procedures, walking paths etc

Hygienic condition of the warehouse is at somewhat insufficient level

therefore, some tea sacks are affected with undesirable quality issues

Due to manual handling of tea sacks, some of those are badly damaging

Huge damages are occurred on tea sacks when delivering and steeling of tea is

taken place because of the buyers laborers are going inside to the warehouse to

collect their tea

3.1.2 Sample Room

There is a possibility to loss the quality of tea due to the increase of

temperature inside the sample room at daytime

During night time and rainy periods there is wet condition inside the sample

room due to lack of infrastructure facilities in there. This may result loss of

quality since tea is getting wet when stored in the sample room

3.1.3 Cataloguing Department

People of the Cataloguing Department have to manually check „Other broker

sharing lists‟ to remove the violations from being catalogue an practicing it

become difficult

Cataloguing department main computer system is still at the developing stage.

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3.2 Suggestions

3.2.1 For the Warehouse

It is better to implement a proper warehousing system in LCBL to maintain

the quality of tea and to reduce huge amount of overhead costs such as store

rentals and costs on wages and staff salaries.

Warehouse should be mechanized to reduce the manual handing of tea sacks

to reduce the costs for workers as well as to protect the tea.

Implement measures to prevent the entrance of workers of the buyer inside the

warehouse to collect their tea to safeguard tea and to maintain hygienic

condition.

3.2.2 For the Sample Room

Sample room should be modified or transferred to another place which is in a

favorable condition to keep the quality of tea samples in their original

condition.

3.2.3 For the Cataloguing Department

Main computer system in cataloguing department should be developed to

check the violations of other broker sharing marks systemically to make the

process fast and with more accuracy with reduced human resources.

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APENDICES

Appendix A

Tally Card

Appendix B

Good Received Note

GOODS RECEIVED NOTE

DATE:

GRN NO:

MARK: MF CODE:

Invoice No:

Grade

Number of bags

Net weight Gross

weight Location

number Balance

chest

Remarks:

…………………………………

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Appendix D

LCBL Sample Room Layout