BUSN 134 M6 Assignment 2 1

Summary

In this discussion, the owner of Last Wave Brewing and Wild Air Beer Works shares insights into the procurement process within the brewing industry. They explain how procurement evolves from simple purchasing to strategic contracting, focusing on ingredients like hops and grain. The speaker discusses the challenges of working with distributors and suppliers to secure favorable prices and the logistics of large orders for businesses such as liquor stores and restaurants. Additionally, the concept of private labeling and managing ongoing client relationships are highlighted, emphasizing the importance of forecasting and maintaining supply chains to ensure steady production.

Takeaways

• 😀 Procurement is crucial for brewery growth, focusing on securing the best deals for ingredients, packaging, and logistics.
• 😀 Brewing requires careful contract management, especially for ingredients like hops, yeast, and grain, to ensure consistent supply and pricing.
• 😀 Larger orders, like for packaging (e.g., cans and labels), involve negotiating with suppliers to manage costs and delivery logistics effectively.
• 😀 As the brewery grows, shifting from simple purchasing to strategic procurement allows for better price negotiation and supply chain management.
• 😀 Breweries often use a bidding process to secure competitive prices for ingredients and packaging, taking into account factors like shipping costs and volume discounts.
• 😀 Managing logistics, such as shipping and tolls, is critical to keeping costs low and ensuring timely deliveries to customers and distributors.
• 😀 Bars, restaurants, and liquor stores are key clients that require breweries to meet specific delivery schedules and quantities for their products.
• 😀 Private labeling allows breweries to sell beer under different brands for specific clients, such as yacht clubs or country clubs, without creating entirely new recipes.
• 😀 The brewery must plan production several weeks in advance due to the time required to brew, condition, and package beer.
• 😀 Maintaining long-term relationships with clients, especially with larger chains and venues, helps ensure consistent demand and steady sales.
• 😀 Cost management is essential in maintaining profitability, balancing ingredient costs, packaging, logistics, and the price at which beer is sold.

Q & A

What are the key responsibilities in the speaker's role regarding procurement in the brewery?

The speaker's role primarily involves sourcing raw ingredients (hops, grain, yeast), packaging materials (cans, labels), and managing relationships with suppliers. They negotiate prices, handle contracts for regular ingredients, and ensure that the brewery has the necessary materials to meet demand while keeping costs controlled.

How does the procurement process change as a brewery grows?

As the brewery grows, procurement becomes more structured, moving from simple purchasing to negotiating contracts with suppliers. The brewery starts to forecast demand and bid for ingredients at set prices, rather than buying on a one-off basis, allowing for cost savings and more reliable supply.

What role does negotiation play in procurement for the brewery?

Negotiation is crucial in procurement, especially for ingredients like hops and grain. The brewery negotiates with suppliers to secure the best prices, factoring in supply volumes, quality, and other terms. This helps them manage costs and ensure consistent supply for their beer production.

Why are hops and grain typically contracted, but yeast is not?

Hops and grain are contracted because the brewery uses these ingredients in large, predictable quantities, making it easier to plan for long-term supply. Yeast, on the other hand, has a short shelf life and is bought as needed, making it more practical to purchase on a more flexible, short-term basis.

How does the brewery manage packaging costs?

The brewery works with distributors and suppliers to source packaging materials such as cans, lids, and labels at the best possible prices. They compare quotes from different suppliers, taking into account shipping costs and quantity discounts to find the most cost-effective solution for their needs.

What is the difference between purchasing and procurement in the brewery context?

Purchasing refers to the straightforward act of buying ingredients or materials as needed, often without much strategic planning. Procurement, on the other hand, involves a more detailed process of forecasting demand, negotiating prices, and establishing long-term relationships with suppliers to ensure the best value for the business.

How does the brewery determine pricing and maintain profit margins?

The brewery considers the costs of ingredients, packaging, labor, and logistics when determining pricing. They aim to keep prices at a level that ensures profitability without pricing out customers or partners. Balancing costs with demand is key to maintaining healthy margins and competitive pricing.

What is private labeling, and how does it work for the brewery?

Private labeling involves creating a beer that is brewed by the brewery but sold under another entity's brand, typically a restaurant or club. This allows the brewery to offer a customized product without creating a new brew, as the private label is often based on an existing beer that the business already makes.

How does the brewery ensure timely supply for larger contracts, like with liquor stores or restaurant chains?

For larger contracts, the brewery ensures timely supply by negotiating delivery schedules, determining how much beer is needed, and planning production in advance. They work closely with distributors and logistics to make sure they can meet demand and maintain consistent supply for customers.

What factors does the brewery consider when choosing between suppliers or vendors?

When selecting suppliers or vendors, the brewery considers several factors, including price, quality of ingredients, delivery reliability, and shipping costs. They also factor in the supplier's ability to meet demand and the logistical implications of working with them (e.g., distance, shipping fees).