Beverages in general, and beer in particular, are no longer commodities.
Drinks have become a statement, a reflection of your style, culture or health. Let me give you an example: The health-conscious ‘green’ beer advocate will fancy his fresh, organic Weizen, preferably alcohol-free, whereas the modern-day beer connoisseur will enjoy her low-carb pale ale with mango-ginger flavor for a tropical punch. In order to stay ahead in this competitive landscape, brewers have to innovate with new brands, flavors and targeted offerings for the abundance of next-generation beer lovers.
While customers are becoming increasingly demanding, the beer industry has seen a trend of consolidation between brewers, thus reducing their capacity over the years. The seasonal nature of the business also encourages brewers to work towards an optimal forecast, balancing demand and supply. With increasing supply chain complexity and extended product portfolios, this begs the question:
How do you optimize your brewing capacity?
In a nutshell, sales and operations planning (S&OP) is a process that matches individual plans across all functions to support business strategies, goals and targets. This single operating plan typically covers a time-horizon of 24 months and is reviewed on a regular basis, usually monthly. Let me add that every business’s S&OP process is not only unique in its nature, it’s perfectly matched to its industry, product, constraints and maturity levels.
How mature is your S&OP process?
This report by Lora Cecere describes today’s supply chain as traditional, tactical and cautious. Along these lines, S&OP is typically in an immature state. This means that organizations – especially global organizations – still predominantly use spreadsheets, email and other insufficient productivity tools. Do you recognize any of this?
The best way to boost your beer supply chain’s agility is to advance your S&OP process. In the long-term, a sophisticated S&OP process will boost your corporate performance and make your brewery more profitable by balancing supply and demand. Let’s break it down.
Curb that data hunger
The first big hurdle lies in gathering data. S&OP requires data from all fronts: Sales, inventory, product master data, cost and price information, and the like. Brewers have to be particularly aware of varying commodity costs, price pressures and regulations, all of which add more complexity to the equation. Practically speaking, seasonal factors such as weather, events and the promotions surrounding these factors should also be part of the data collection. The difficulty in aggregating this information lies in the nature of its dispersion: The data you need will be scattered across different departments, systems and silos.
Introducing a new product?
We all agree that brewers need to innovate with new brands and flavors to stay competitive. The integration of a business’s innovation pipeline with their S&OP process is key to success. In other words, any new introduction to your product portfolio, sales promotions or changes in recipes are significant and have to be in line with your S&OP. The existing brand portfolio must also be managed to the same extent, in order to control excess finished goods stock, raw material and container inventory. Bottom line: Make new product introduction and end-of-life management part of your S&OP process.
Create an unconstrained demand plan
What comes next is an intricate process of collecting, collaborating and forecasting to create a single plan to guide the business. The plan would consist of what and how much the brewer can sell, irrespective of supply chain constraints. By creating demand scenarios, the brewery can explore a variety of options and test which ones improve the effectiveness of their S&OP process and align them with business goals. The goal here is to create a complete picture of your demand.
Match demand with supply
Once the demand plan has been established, it has to be matched with a corresponding supply plan. Essentially, the supply chain network with its constraints needs to be modelled. It should mirror, for instance, tank capacity, empty container requirements, raw material inventory and shelf life, as well as intercompany connections including supply planning, critical materials and transportation. At this stage, you want to find out which decisions you have to take in order to meet demand and your business goals despite your unique constraints.
When sales meets supply chain
At this stage, you want to generate the most profitable plan possible for the brewery. This plan should be created jointly and cross-functionally, involving representatives from your sales, supply chain and innovation side – even HR, if necessary. The goal of this initiative is to identify gaps and to formulate recommendations to take to senior management.
The executive meeting
In the executive meeting, senior management reviews the recommendations and aligns the plan with business targets and goals. There are decisions that will need approval from senior management because a significant capital expenditure or investment may be required. The ultimate goal of this meeting should be to resolve any remaining concerns and issue a consensus plan.
Bottom line is, every company has its individual S&OP process, based on the nature of its industry, product and company structure. The S&OP best practices that I have highlighted in this post can be applied to a broad spectrum of industries.
Ready to learn more about S&OP and how to improve the process at your brewery? Explore our S&OP Portal now and discover more whitepapers, webinars and insights by Gartner.
How would you judge the current state of your S&OP process? Let us know in your comment below.