How does inventory management work in the beverage industry?

Managing inventory can be complex and time-consuming, but, if you want to improve customer service, reduce lead times, and increase your cash flow, good inventory management is essential.   

Inventory shortages will result in missed sales. On the other hand inventory cost money and money tight-up in inventory cannot be spend on other things, e.g. marketing campaigns to improve sales.

Inventory management is all about balancing product availability with costs and working capital.

A proper inventory management process allows wine, beer and spirits importers to have the right inventory quantity, in the right place and at the right moment. Larger businesses may have a dedicated inventory manager who is responsible for overseeing inbound products, their storage and outbound shipments from within your warehouse. Smaller businesses may have inventory management integrated in sales or buying functions. Whatever your business size, proper planning is essential, which is only possible with efficient inventory management integrated into your supply chain. With some guidance and the right focus you will get a long way.

Hillebrand Gori customer case study: Cynthia Hurley French Wines

Temperature-controlled transport and inventory management is essential for Cynthia Hurley French Wines’ bespoke import portfolio. Cynthia Hurley French Winess is a US wine importer based outside of Boston, Massachusetts, which for the past 25 years has curated a portfolio of French and Spanish wines and has expanded their distribution footprint to 19 states. Cynthia Hurley French Wines has been working with Hillebrand Gori for more than a decade.

We spoke with Craig Gandolf, National Sales Director, from Cynthia Hurley French Wines who has been working with Hillebrand Gori for over 25 years of his career in the wine industry.  

“Cynthia Hurley French Wines is a smaller sized wine importer. Our suppliers are family owned properties with an emphasis on organic or biodynamic techniques.”

With the dedication and care that has gone into producing biodynamic and organic wines, equal care and consideration during transport and warehousing is essential. Managing temperature for example is fundamental when dealing with these sensitive wines. Inventory management is key part of this process, helping our customers to navigate common supply chain fluctuations, such as order quantity, supplier availability, and lead time demands. 

Cynthia Hurley French Wines has found that LCL shipments help to effectively balance these demands. 

“The benefits of LCL (groupage) shipments is a shorter wait time to assemble a shipment, year-round temperature control containers, more flexibility in load sizes, and extras such as insurance are factored in.”

Craig also noted that while paperwork seems to be easier with LCL, you have to remember that this is still a shared container in the eyes of US customs. To avoid unexpected delays upon arrival, all shipments on board need to have their paperwork in order to ensure the container is off-loaded smoothly and the product can be delivered seamlessly.

Shipping wines with Hillebrand Gori’s LCL (Groupage) service allows a more frequent ordering of smaller quantities, which results in a lower inventory level as the order quantity will cover a shorter time frame. 

What is inventory management in the wine industry?

Whether you are an importer, distributor, retailer or a producer inventory has a crucial effect on the business performance of your company. Too little inventory may lead to missed sales or poor customer service. Too much inventory not only locks working capital, but there is also a severe risk for obsolescence.

Inventory management is the process that balances supply and demand, taking into account the uncertainties and fluctuations in the supply chain. If demand is uncertain, your business will need more inventory to deal with the uncertainties. The same applies to product supply. If the supply of purchase orders is uncertain your inventory management process will need to adjust your inventory levels to accommodate for the variation in supply.

Inventory management techniques 

Fortunately, there are several techniques that can guide and help wine shippers with the complex process of managing inventory:

• Just-in-time management (JIT)

• Materials requirement planning (MRP)

• Economic order quantity (EOQ)  

• Days sales of inventory (DSI)

These techniques do not work in isolation but they can complement each other. Here’s a more detailed look at each technique.

Just-in-time

A just-in-time inventory management strategy aims for your warehouse to receive your products as close as possible to when you need them. The key success factor for this technique is a reliable and robust shipping operation. This not only involves the actual transport of your wines, but it also requires your supplier to have the goods ready for shipment when it is required. This strategy reduces safety stock, helping you maintain a lean inventory. 

Just-in-time inventory management has some drawbacks too. If demand unexpectedly increases, your business might not be able to get inventory to where it’s needed fast enough. In addition, delays in the supply chain can create a bottleneck and inventory shortages. Therefore, there will always be a need for safety stock to deal with the uncertainties in demand.

Days Sales of Inventory 

Days Sales of Inventory (DSI) helps to manage inventory by calculating the average number of days that a company takes to sell its inventory. It’s a way of assessing how long your current inventory will last, and therefore when new inventory will be needed. The Days Sales of Inventory depends on the safety stock and the minimum order quantity in relation to demand. The targeted DSI will not be the same for all products and can vary for fast movers, slow movers or strategic products.

Economic order quantity 

The Economic order quantity (EOQ) balances the order and transport costs and the costs of inventory, looking for the holistic minimum. Although the EOQ formula assumes that demand for your products is constant, which in reality will not be the case, it still provides practical guidance on the order quantities.

Materials requirement planning (MRP) 

Material requirements planning is an inventory management technique that focuses on the materials needed to manufacture a product to satisfy future demand. It is useful for producers to support them in the process of sourcing dry materials and packaging material anticipating the production planning and the future demand.

Proper inventory management is easier with MyHillebrandGori 

Inventory management is a vital part of smooth operations for your business. Inventory management should not be seen in isolation, but integrated with the order and shipment process and possibly in collaboration with your supply chain partners. Using myHillebrandGori, getting inventory management right has never been easier, with tools to keep you informed and help you manage every step of your supply chain. For a complete inventory management solution tailored for wine businesses, contact us for more information or get in touch for a quote.