Lean Manufacturing for Craft Breweries

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When it comes to a lean business the idea at its core is to maximise customer value while minimising waste. Lean manufacturing means creating more value for customers with less resources. Lean manufacturing can be transferred to the brewery industry especially that of craft beer. As a craft brewery, it is difficult to do things cheaper than the competition but you can do it better by using a new marketing paradigm that is aimed at distributing beer in the market place differently.

The basic process used to manufacture beer is as follows:

  1. Soak malted barley and other ingredients in hot water to make wort, a liquid extract that contains the sugars that will be fermented into alcohol
  2. Boil the wort, add hops as a bittering agent and filter the resulting mixture
  3. Once the wort is cooled, add yeast to ferment, mature and lager the beer in fermentation tanks
  4. Bottle the beer

Reducing Craft Beer Waste

A good tasting beer is a fresh beer. Generally, the brewery industry has a three-tiered distribution system. This is where producers of beer, wine and spirits must sell to wholesalers, who in turn sell to retailers and restaurants. To avoid out of stocks, wholesalers keep one to two months of inventory stock in their warehouses at room temperature. Unlike wine, this is problematic as beer deteriorates with age, and then furthermore this is accelerated at temperatures above 33 degrees Fahrenheit. Furthermore the exogenous factors cause the loss of fresh flavour and taste. The rate of degradation doubles with every 18-degree Fahrenheit rise in temperature. So, from 32 degrees to 50, twice as much deterioration is happening; at 68, it’s four times as much; at 86, eight times. The findings are that about 70 percent of the degrading process happens in the wholesaler’s warehouse.

To eliminate this degradation substantially, especially for craft beer, the breweries are asking wholesalers to reduce their beer inventory stock from a one or two months to just five days, and keep it all refrigerated. So, instead of estimating needs and placing orders for one two months ahead, participating distributors record and report their daily sales to the brewery company which in turn supplies enough to cater for their five-day supply. This system pushes inventory stock costs back onto the breweries, however they are rewarded with consistent and fresh products hitting the shelves. Distributors faced costs of supplying refrigerated storage but that cost is offset by the reduction in their warehouse space and carrying cost of the excess inventory stock. However, the benefit is the freshest beer to the end consumer.

Brewing craft beer is substantially different to wine and spirits so therefore there needs to be different distribution mechanisms in place. It is difficult to be cheaper than your competitors so you need to think smarter and craft your beer better. Lean manufacturing is just one strategy of how to maintain a craft beer that is consistent in quality, taste and freshness that will be beneficial to your bottom line as well as to the consumers taste buds, gaining brand loyalty.

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Melanie - Unleashed Software

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.

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