An uncertain start to 2024 left many customers limiting their discretionary spending and distillers looking for ways to cut costs or postpone supply reorders until they understood the financial impact of the market shift.
Luckily, finding purchasing efficiencies not only reduces your cost in the long run, but it also has the added benefit of allowing you more control over lead times.
Purchasing Efficiency
Here are some strategies for incorporating purchasing efficiencies, their benefits and potential watch outs that you should consider before implementing:
1. Labels
- Digital printing is ideal for its flexibility and for shorter-run projects. It has the advantage of labels being easily edited during the print run. This allows you to adjust the year and batch number on press and print multiple years’ worth of labels at one time, greatly reducing your cost per label set.
- If you are not printing digital, there are still ways to take advantage of the price breaks by purchasing multiple SKUs or years of labels at once. Consider standardizing your label sizes across your SKUs. This saves on cutting dies, simplifies set up for your printer and creates some economies of scale when purchasing. Creating a standard label that is more evergreen by incorporating a blank, write-in spaces for batch number, alcohol, and year allows for incredible flexibility.
- Cost savings for placing larger orders may allow you to include more premium features such as embossing, debossing, or hot foils. All these treatments are quality cues to the consumer and increase the overall price perception of your packaging.
- A word of warning: speak to your label producer about how to properly store your labels if you order multiple years’ worth of inventory in order to ensure labels don’t age prematurely.
2. Closures
- While a custom closure is an amazing means of communicating the quality of your spirit, purchasing multiple years’ worth of stock at one time is not recommended for closures. Regardless of the shank material you choose, corks have a surface treatment that allows for optimal insertion and extraction that will break down over time and cause the cork to become
more rigid and brittle. - Of course, storage is key to keeping your top of bottle in tip-top shape! It is imperative that:
- Closures are transported in vehicles that have a closed, clean, dry, and odor-free environment.
- Bags remain sealed prior to use.
- You only use food-grade disinfectants – and absolutely nothing containing chlorine!
- Once put into your storage, they remain in a clean, dry, well-ventilated, odor-free, temperature-stable area that can easily be kept free of sunlight and volatile chemicals.
- Here are several recommendations for how you can use strategic ordering to secure ideal pricing for your closures:
- Sign on for a multi-year commitment rather than purchasing and storing 1 large order for multiple years of closures.
- Similarly, a blanket PO allows you to take advantage of the price breaks of a larger order with a more gradual payment structure.
- Place your order prior to a new year to avoid any potential annual price increase.
- Enter a safety-stock inventory agreement. This allows for quicker response time for fluctuating demand.
3. Bottles
- You won’t too far along in your bottling process if you don’t have the bottle. Although we do seem to be past the Pandemic-Era Stock Bottle Panic of 2020, the experience is still fresh in everyone’s mind. More and more distillers are purchasing larger, multi-year orders to secure their stock well ahead of bottling deadlines.
- Keeping your bottles in a dry, temperature-stable environment will be key to successfully storing a large quantity of bottles. If not kept dry, moisture on the bottle can cause “bloom”, a phenomenon created by the continual condensation and evaporation of water on the surface of the glass. The interaction leaves behind a not-so-savory salt substance and if kept uncheck can damage your supply of glass.
Managing Lead Times
How much to purchase is only a fraction the question – determining when to purchase is even more critical. Due to vendor workload, production timelines, and transport intervals, lead times can vary. Always check with your vendors for lead times specific to your product and quantities. Here are some general guidelines to reference. The key to buying in bulk is knowing your burn rate, managing your lead times, properly storing items, and knowing the lifespan of your various dry goods once stored.
1. Labels
With the advance of digital printing lead times for labels have been significantly shortened. Lead times can be as short as a couple of weeks with some suppliers if they have extra bandwidth, but as a safe rule of thumb allowing 5-6 weeks to get contracts in place, technical specifications locked down and production signoffs in place. Remember that most printers will not print labels prior to you securing your approval from the TTB, so it’s critical to work in that timing as well. Currently the TTB is turning around applications within a few short weeks, but that timing changes regularly. In addition, be sure to build in timing in your schedule to make remedies to any TTB rejections.
2. Closures
According to Talis, a leading closure company, production times are under 5 weeks for reorders and can be as little as 1-2 weeks if you take advantage of a safety stock commitment. Shipping times vary based on your location and whether you choose air or vessel freight. For air freight, you can estimate less than 1 week for the East Coast and 7-10 days for the West Coast. Vessel freight is about 4-6 weeks for the East Coast and 8-10 weeks for the West Coast. Keep in mind that for new orders, you will need to account for 1-4 additional weeks for tooling and that for more premium materials such as metal and glass, this timeline can be more like 4-8 weeks.
3. Bottles
- Bottle lead times run the gamut. If you are sourcing a stock mold and it is in stock lead times can be a matter of only a few weeks or less, but as a rule of thumb securing a steady supply of glass takes planning with your supplier and it’s recommended you work several months in advance or more to make sure glass arrives long before your bottling deadline.
- Many shapes of bottles that are very similar can be found from different suppliers, so allowing enough time to check stock levels and pricing ahead of purchase can really pay off.
- If you are developing a custom mold its recommended to allow for a couple of months of design and engineering development and depending on suppliers’ production and delivery timelines can run anywhere from 3-12 months depending on whether the glass will be produced domestically, in Europe or Asia.
Tips
Want the quick-fix solution to managing lead times? Keep items with longer lead times like closures and capsules consistent across SKUs – or at least across many SKUs. Not only does this mean that you are managing the lead time for less items – you are also purchasing in larger quantities and securing price breaks.
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- If you are working with a Chinese vendor, they are going to have shutdowns for Chinese New Year. The exact dates vary every year but expect your vendors to be unavailable late January-late February.
- If you are working with a European vendor, be aware that many companies close for summer vacation the entire month of August.
- In the United States and in many other countries, you can expect various closures starting around Thanksgiving all the way through to the new year with many factories completely shutting down the week between Christmas and New Year’s Day.
Component purchasing vs. use-up rates is always a delicate dance that becomes even more complicated during years when your production and cash flow is less predictable. Keeping these tips in mind can hopefully help you spend more efficiently by taking advantage of purchasing efficiencies and take some of the headache out of managing lead times.
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