Although craft beer still makes up a small percentage of the beer market, tastemakers are increasingly favouring pilsners, pale ales and stouts over crisp session lagers. The craft beer industry is approaching a crunch point, with more small scale craft brewers competing for consumer loyalty than ever before. Developing a reputation for innovation and freshness remains crucial, but as craft beer heads towards the mainstream it won’t be enough. Your business needs to keep a tight handle on brewery inventory costs, including by fully understanding the supply chain for every brew. Here are four supply chain ‘quick wins’ you can implement in your brewery.
Develop Supply Chain Redundancy
Markets for agricultural commodities such as hops and grain can be volatile and are often difficult to predict. Brewers sometimes find that they have to use substitute hop varieties when their preferred hops are in short supply. Craft brewers are particularly susceptible to supply chain disruptions because they use specialty hops that typically yield less than the ‘alpha’ varieties that large commercial brewers, particularly in the event of adverse weather.
Brewers should split orders between several reliable suppliers. If possible, look for several suppliers that are in different geographical locations to reduce the risk of adverse weather on the supply chain. Working with several suppliers also reduces the impact of any one supplier going out of business, as happened when many American hop growers switched to growing crops such as soy or corn following a glut in the hop market in the late 2000s.
Manage Supplier Relationships
Although the brewing industry is growing, the market is still in its infancy and so there are limited suppliers competing for business. In this context, careful supplier relationship management is necessary to ensure that suppliers consistently deliver, achieve low lead times and don’t leave you without brewery inventory during a supply shock. Keeping track of procurement data is crucial to ensure that your suppliers are not standing in the way of higher output and lower lead times.
Carry Safety Stock if Necessary
Carrying large reserves of safety stock tends to be expensive. As a brewer, you already have to pay for warehouse space to hold beer that is fermenting and conditioning so using even more warehouse space to hold safety stock is an unnecessary expense most of the time. That said, for some critical ingredients, it may make sense to keep a reasonable buffer of brewery inventory to ride out any supply chain disruption.
Order Ingredients ‘Just in Time’
Successful breweries are responsive. If a new brew is popular with customers, the brewery needs to be able to scale up quickly. With brewers increasingly dabbling in experimental, short run beers, forecasting a season’s stock requirement and ordering brewery inventory several months ahead is unlikely to be commercially feasible for many breweries. Moving to a ‘just in time’ procurement approach can reduce wasted ingredients, keep carrying costs to a minimum and provide your brewery with the flexibility to quickly ramp up production if you stumble on the next craft beer darling.
Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.