It’s Friday: Are you ready to start your weekend with a cold pint of beer? Here’s a fun fact: Did you know, your regular beer bottle is refilled an average of 15 times? So far, our Beer Friday series has dealt with the rising popularity of craft beer and SKU-mageddon in the beer industry. The latter plays a role in today’s topic: why brewers should love to recycle.
In light of the SKU proliferation in beer, it is increasingly important for brewers to thoroughly assess the movement of their empty containers to manage inventory levels. The planning challenges of empty containers are:
- Accurately predicting the return of empties from customers.
- Ensuring the supply of containers to the production sites where they are needed.
The ultimate goal of tracking and predicting the return of your empties? Reducing the purchase of new containers and hence lowering capital expenditure.
As you can see in the graph above, brewers can save up to 90% in replenishment costs assuming a bottle is returned 20 times. Given this significant savings potential, forecasting beer returns should be a crucial activity for any brewer out there.
In this week’s installment of our Beer Friday series, I will advocate that there is a need for a stronger focus on planning, forecasting and collaboration in order to manage empties and minimize the costs of replenishment.
An accurate sales demand forecast forms the basis of empties management as it dictates both how much production is needed and how many empties will be returned. It should take into account fluctuations in demand and cover a time span of 12 to 18 months. A poor forecast will lead a brewer to maintain unnecessarily high levels of inventory and excessive replenishment of containers. With the right demand forecasting solution, you will be able to take into account seasonal and intra-monthly variations predominant in the beverage industry. This will eliminate unnecessary costs for the replenishment of empty containers.
Can your demand forecasts accommodate seasonal and intra-monthly variations?
Forecast the return of containers
The primary driver of container purchases stems from the amount and timing of returned containers. Your forecasting tool should be able to track all empty containers that are in circulation and any changes, such as delays or losses, should be based on sampling data.
How do you create an accurate forecast for your container returns? Start by combining trade losses and historical returns together with population estimates and sales demand forecast. You can make informed decisions when you’re able to see the effect of price, promotions, and deposit cost increase on expected container returns and therefore container purchases.
Can your forecasts give visibility of your container returns? And allow quick but accurate predictions of container requirements?
Avoid surprises: Empty talk
Brewers can benefit from collaborating with their downstream partners. On a distributor level, forecasting is not a priority. In reality, you often see orders being placed strategically to allow for discounts or to fight price increases. Taking an end-to-end approach, however, brewers could collaborate with their downstream partners to generate sales forecasts.
By collaborating, brewers will obtain a more accurate sales forecast, being able to account more precisely for their container need. In addition, collaboration can also provide information about container inventory held at partners, further improving container returns forecasting.
Do you have the tools in place to ensure an end-to-end approach to forecasting?
Silo systems & sub-optimal plans
If you are still employing planning and scheduling in many loosely integrated IT systems, you will recognize the following scenario: you generate forecasts in one tool, the filling line capacity is projected in another and yet another system captures the movement of finished goods inventory. All these silo systems make the most optimal plan for their function only, not the most optimal plan for your supply chain as a whole.
Integrating inventory planning with your production and distribution can ensure your products do not exceed the capacity of the warehouse and the transportation network.
In addition, integrating container planning and production planning can improve network decisions. For example, finding a cost-effective location for your production. It might be cheaper to setup production at a brewery that has a slightly higher production variable cost if there is a large amount of containers available there. This would be cheaper than shipping containers to a site with a slightly lower production variable cost.
Ask yourself, is your demand planning integrated with supply chain planning and production planning?
The bottom line?
An integrated planning platform ensures that inventory and capital expenditures on containers are built upon forecasted demand.
Are you aware of how much money you are currently spending on replenishing those empties? I’d be curious to hear how you ensure that production requirement is met with minimal purchases of additional containers. Let me know in your comment below!