Margins in the coffee business are becoming tighter and tighter, and specialty coffee roasters and retailers are increasingly finding new ways to streamline their businesses. Lean manufacturing is an emerging trend in the food and beverage industry, although it has been critical to the success of key players in the automotive and industrial goods sectors since the 1970s. Food and beverage producers have been relatively uninterested in reducing inventory and implementing lean production principles in their businesses. Given lean manufacturers are taking market share from their competitors, could a lean approach give your business an edge?
What is lean manufacturing?
Lean manufacturing is, at its core, about improving customer value by reducing waste. Lean involves isolating the value adding steps within a production process, thereby making it possible to eliminate work that does not add value. Lean manufacturing is essentially focussed on making better products more quickly with less waste – doing more with less. Lean manufacturing has three main principles, referred to as pull, one piece flow and pulse.
In an inventory context, lean manufacturing can significantly reduce the burden of inventory carrying costs on a small speciality coffee producer. Holding reserves of safety stock is expensive; for smaller roasteries, higher storage and handling expenses can cut into already slim margins. For this reason, establishing a large safety margin is not typically a good reason for keeping inventory.
Pulling Beans Through the Roasting Process
In a lean roastery, demand from cafes and other clients should ‘pull’ coffee through the production process. In other words, the production process is generally initiated in response to customer orders. In theory, at the end of an ordering period (whether daily or longer), actual customer orders should then prompt the roastery to order the beans and other inventory that it needs to produce roasted coffee.
In reality, slightly less frequent orders may be more appropriate for coffee importers – in that case, a lean coffee producer may consider there is a reason for keeping inventory in the form of a very small buffer of safety stock. When orders are processed, inventory is reallocated from safety stock to production and an order for fresh beans is triggered. Although this approach is less lean than holding no safety stock, it still means that ordering is in response to customer demand. Take care to ensure that the volume of safety stock is kept low.
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Sorting, Roasting and Packaging in One Continuous Process
For a roastery to operate with as little inventory as possible, beans must move smoothly through the entire production process rather than being siloed. ‘One piece flow’ essentially means sorting, roasting, packaging and, if applicable, grinding coffee beans in one continuous process. A coffee roaster that is not operating under a lean model might sort a large volume of beans and then, once a large volume is sorted, move on to roasting those beans.
Larger producers will almost always achieve one piece flow as it simply is not economic to leave machinery unused for a large part of the day. Smaller roasteries, and particularly speciality coffee producers, might find it tempting to roast all of the beans in one go, ready to be packaged. Unfortunately, taking this batch by batch bulk approach is a reason for keeping more inventory than your business really needs. Another consequence is that your roasted coffee ends up being less fresh.
Scaling Production to Demand
In lean inventory, ‘pulse’ is thought of as the speed or ‘heartbeat’ of your business. In lean manufacturing, the idea is that the business can scale its operations to customer demand. In order for stock out risk (one of main reasons for keeping inventory) to be eliminated, a business must be able to increase output to match rising demand. So, if customers are ordering a tonne of beans a day and you work a seven hour shift, you should aim to roast around 150 kilos an hour, but if demand picks up, the volume of coffee your team roasts will also need to increase.