In the adult beverage industry—beer specifically—product moves quickly. In Florida the major players ship directly to all distributors. Their weekly volumes make it possible. But for the fast-growing craft beer segment, things are different. For craft beer, a centralized distributor houses inventory, so regional distributors can pick up some products while other products must be picked up directly from breweries. We will call the centralized distributor the Hub. Those who designed this model believed it would work, but in reality it’s laden with issues. And these issues are directly affecting revenue.
Problem 1: Whose Inventory Is It?
Recently the Hub changed its position on housing inventory. They decided they would no longer serve as a storage facility that stocks inventory for others to pick up on an as-needed basis (on average the regional distributors pick up every other week). From a cost and space perspective, it makes sense that the Hub would discontinue housing inventory. Due to pricing and contract agreements, they make no money in this process.
The problem, however, is that none of the other distributors were informed that they’d changed their position. The Hub is stocking six to eight weeks’ inventory, but they say it’s their inventory and they aren’t sharing because they need it. On the surface it’s a logical thought. In reality however, they get replenishment every three weeks, so they have inventory that could be moved out to the regionals. Remember, beer has a shelf life, so turning that stock is important. Why let it sit on the shelf if there’s need?
Result: Regionals can’t get product from the Hub (out of stock).
Problem 2: Transportation Dictates When Inventory Gets Picked Up
The transportation departments don’t want to send a truck to the Hub unless they’ve got a truckload of product to pick up. Picture this: it’s summertime in Florida, people drink cold beers on the beach all weekend long. Sales remain strong over the weekend. Come Monday, the buyer needs replenishment. The buyer submits the order to the planner. The planner won’t send the truck because… it’s not a full truckload.
Result: Replenishment isn’t coming (out of stock).
Problem 3: If You’re Going to Keg beer, You’ve Gotta Have Kegs
This problem piggybacks on transportation again. It’s very basic. Beer gets kegged at the brewery. The distributor picks up kegs. The distributor ships kegs to customers. The distributor picks up empty kegs from customer and returns them to the brewery. The brewery uses the kegs to do what? Keg More Beer! Now, those empties don’t make a truckload either, so the transportation department doesn’t want to send the empties back yet.
Result: Keg shortages = beer shortages (out of stock).
There’s something to be said about the beer distribution network. Seems like it’s a network that is shooting itself in the foot. And the trickle-down effect is pretty simple.
If you don’t have product, you can’t sell product. That’s no good.
My job: put some order to this disorder and get product into the hands of all our distributors in the most effective way possible. Sounds good to me.