Supply chain risks

The wine, beer and spirits supply chain is a finely-balanced system, vulnerable to external threats such as geopolitical, weather, cybersecurity and other events. Any disruption is a supply chain risk for alcoholic beverage importers, with lost or damaged shipments, high inventory costs, and customer dissatisfaction all at stake when things go wrong. 

Whether you’re a new importer researching the market, or a seasoned business wanting to keep ahead of the curve, having an understanding of the current supply chain risk landscape is the first step to being able to effectively manage the risks that could seriously disrupt your business. 

Join us as we investigate the main supply chain risks alcoholic beverage importers face, as well as their causes, and how to address them in this article.

Increased Stock Levels Due to Full Load Strategies

Having enough inventory readily available to meet demand is key to growth and success for wine, beer and spirits import businesses. However, excess stock can also become a problem. 

Some importers work to reduce their transport costs by only shipping full loads. However, these importers may face excess inventory and elevated working capital investment. Similarly, importers who order larger quantities to fill containers are increasing their cycle stock levels as a result, which can lead to overstocking and inefficient use of space and capital.

How to address this supply chain risk: 

• Leverage technology for better inventory management
• Maintain real-time inventory visibility 
• Carry out regular inventory audits

Lead Time Uncertainty

Long and unreliable lead times (e.g. the time it takes for a winery to produce the stock ready for a shipment) can lead to stock-outs and inefficient operations. Uncertainty in lead times can also force suppliers to produce-to-order, leading to delayed production and increased uncertainty in replenishment. 

Lead time variability also has a significant impact on safety stock, creating the risk of both stock-outs and overstock (when you have bought in more wine, beer or spirits than you can sell). Importers may hold large safety stock levels to try to offset unreliable lead times, but this can actually increase financial risk if the stock isn’t sold. Similarly, unpredictable ordering behaviors can also disrupt supplier production schedules. 

Unexpected changes in customer demand, raw material shortages, and many other fluctuations also contribute to longer order-to-delivery times, affecting the reliability of the entire supply chain. Without robust forecasting and visibility tools, managing stock buffers effectively becomes challenging, leading to errors in inventory management and increased supply chain uncertainty.

How to address this supply chain risk: 

• Supply chain management can help you avoid delays in your fulfillment processes. 
• Use a lean logistics strategy: eliminate waste, improve quality and increase value.

Handling and Operating Costs

The cost of buying and transporting your wine, beer or spirits inventory likely represent a good portion of your overall supply chain costs. However, strategies to minimize freight costs can sometimes lead to increased handling and operating costs instead. 

For example, when loose-loading is used to maximize container space, this can incur higher labor costs at export and import warehouses. Similarly, small order handling in LFL (Less than Full Load) services, particularly at export and import warehouses, can also be labor-intensive and costly.

How to address this supply chain risk: 

• Consolidating shipments
• Route optimization 
• Real-time visibility of inventory
• Automation in warehousing 
• Cross-docking to minimize warehousing space

Fragmented Supply Chain Management

The supply chain is made up of many different stakeholders, each with limited communication with other parts of the chain, and different priorities.

For example, a disconnect between those responsible for freight, and those managing inventory may lead to suboptimal decisions that increase overall supply chain costs and complexity. A lack of integrated planning across departments can also impede efficient stock management and overall Return On Investment (ROI) improvements.

How to address this supply chain risk:

• Use technology to connect stakeholders and share data
• Leverage logistics tech for better data management 
• Improve your supply chain visibility

Cost Risks in LFL/LCL Services

Less than Container Load services are popular worldwide thanks to the flexibility and lower costs they offer. However, LCL shipping can also create some cost risks for importers. This includes the need for high utilization rates in LFL services, which can present a risk if the volumes do not meet expectations, potentially leading to negative profit margins. In addition, high handling and local distribution costs due to small, frequent orders can drive up expenses for midsize customers.

How to address this supply chain risk:

• Ensuring you have the correct shipping documents in place to avoid delays and extra costs.
• Taking out adequate insurance coverage to ensure any handling errors don’t leave you out of pocket. 
• Real-time tracking can help you to spot when there is a problem, and have a contingency plan in place to take action if needed.

We can help to manage your supply chain risks 

With increasing uncertainty - in geopolitics, climate, consumer trends, and technology - the ability to understand and overcome risks to your supply chain processes is more vital than ever. 

At Hillebrand Gori, our expertise in global wine, beer and spirits supply chain management puts us in the perfect position to help you turn risk into opportunity. Explore how we could help increase the visibility of your supply chain and make better-informed decisions here.

Reviewed by Hillebrand Gori