What do the following groups have in common:
Mom + Camera + LLC
Brewery operator + Finance background
Nothing. They both have better compliments
If we are ever on the phone, ask me about moms & cameras, I have a hilarious story.
Finance people are great at reading spreadsheets and raising capital. While these are admirable skills, they miss the boat on a few key ideas when it comes to running a the brewery. One example would be, your brewery is not exactly like the apartment complex they helped sell three years ago. Another area I see finance people struggle is with inventory. Between us, you would have more success partnering with an economist than finance. While economist move slow, they know their limits and usually have a great risk guage.
Let’s talk about “the inventory.” What do your raw materials, packaging items, beer in tanks, and finished goods mean to you? After countless glazed conversations I get the sense that inventory is misunderstood by brewery owners. Couple that with the adjustments I see and I am going to upgrade “misunderstood” to “nuisance.” I say nuisance because inventory is mishandled in most breweries. Inventory needs TLC and a lot of attention.
Typical inventory cycle:
- You must order it
- You must pay for it
- You must store it properly
- You must remember how much you have on hand
- Repeat
Folks, your inventory should speak to you. When you arrive to the brewery you should hear “Good Morning, will you be using me today?” Inventory hates to sit around and be forgotten. Remember, loves attention. The source which makes your liquid gold has a cost. The longer it sits around the more it cost you. Why, because the cash tied up in inventory could be used for a better use. Most breweries unknowingly operate with a costly Just-In-Time ordering system. The reason for this is two-fold. Cash flow and storage. It would be more advantageous to place a larger order to maximize on shipping cost and quantity breaks. At the same time we want to minimize the shelf life of our inventory on hand. This sort of complex materials planning takes a group effort. The procurement people must be on the same page as the production people. If you(reader) are both procurement and production, it’s ok, setting up the process now will pay back 10x when you have departments.
How do we balance cash flow and storage?
First way to achieve balance is to start respecting the inventory. By respect I mean start tracking it properly. We suggest dedicated brewery software to manage this process We are strong supporters of Ekos Brewmaster Software for maintaining inventory and managing brewhouse activity. Count it bi-weekly to begin. Once you get a handle on it you can count it monthly. Respect it people!
Second way to achieve balance is to understand what the carrying cost of your inventory. This is critical for scaling. Living on estimates is ok when you are small, once you get to a certain size, it could negatively affect the business.
Third way to achieve balance is to align yourself with a brewery specialist you could lean on for resources. We have many proven processes, metrics, and tricks to shorten the runway for success. Who doesn’t love a shortcut!
-cf