Vendor Management Tips for Breweries

I’d like to preface the following by stating by no means should you be constantly changing your vendors. There are three factors when considering whom you’re ordering from and I think it’s important to hold your vendors accountable for their quality of ingredients, quality of customer service, and costs.

Quality of Ingredients

Like anything else, there’s different tiers of ingredients and a lot of vendors carry these different tiers. If you’re a seasoned brewing professional you are probably familiar enough with the differences between maltsters, the quality of their ingredients, and a general idea of these costs. This isn’t implying you should be using a lower quality ingredient because it’s not “top shelf” grain, but the quality of the ingredients should meet your expectations.

There’s A Cost To Customer Service

Fantastic customer service should be the industry standard. This should be inclusive from the point of sale to the point of delivery for these materials. While it doesn’t happen as often as it should, post-delivery customer service should matter too.

You’re paying for customer service, one way or another. A story I always enjoy sharing is that one time Fedex had substituted their driver on their route which covered my former brewery and I had a pitch of yeast overnighted to me. Naturally, the driver ignored the “All deliveries in the rear” sign and fortunately the vendor made it very easy for me to coordinate redelivery. I feel like the first half of this story is probably more common than you’d think. I have also spent a couple hours on the phone and waiting in line trying to chase down packages before too. Sometimes you’re paying a lower dollar because you’re spending it in time.

Other factors to consider with vendor customer service is, how often they’re invoicing you, providing credit, and even the availability of their customer service or sales representatives are to answer questions for you.

Additional Costs to Uncover

You know how much a material costs but what does it cost to get that bag to you? There are a few different ways to manage these different costs that will directly affect your bottom line and they’re relatively easy to understand as well.

Does your region offer a manufacturer’s sales tax exemption? It’s a simple question to ask, but if you’re purchasing items and ingredients that are a component of the beer, they likely qualify for sales-tax exemption. You are likely not paying sales tax if you’re ordering from brewery-specific vendors, but a lot of the smaller online retailers and vendors should be able to honor a sales tax exemption.

Flat rate pallets for freight are a gift from vendors to manufacturers. It’s essentially an opportunity every time you order to drive your costs down. Any time I placed an order, I would pack that pallet as much as they would let. If I only needed 36 bags of grain for an order, I would fill the pallet with 4 additional bags of base malt to fill it up. I used to order quite a bit of Briess malt, which comes in fifty lb bags. Freight can easily and subtly impact your costs substantially if it’s not being managed properly.

Something that isn’t widely known, but did you know putting 44 fifty lb bags is the equivalent to 40 fifty-five lb bags? Pound for pound it works out to the same weight. Ask your vendor what’s the maximum weight you can put on a pallet and plan appropriately.

Absolutely.

Let’s do some simple math here. First, let’s make some assumptions:

• You pay $150 per pallet ordered.
• You order three pallets every 2 weeks.
• You’re shorting your pallets per the vendor maximum weight by 2 bags of grain for every pallet ordered.

$150/pallet x 3 pallets x ((52/2) 26 weeks) = An estimated $11700 in freight annually on 78 pallets.

That’s 156 bags of grain, which could cut nearly 4 pallets/year. That’s $600 in savings just in freight for just one vendor! That doesn’t include the added bonus of your cash flow benefitting because you’re ordering less frequently therefore keeping less materials on hand.

How can you easily track these processes and your relationships with your vendors?

A spreadsheet, while extremely tedious is a good place to start, but Ollie will show you a breakdown of every inventory lot code you’ve ever purchased from your vendors by each ingredient so you have an easy way to compare your costs purchase to purchase. It’s worth looking at your shortfalls if you’re not managing your vendors properly and reviewing options to improve in this area.

Taking the time to review and manage your vendors could be a little time consuming at first, but if you get into a regular cycle of asking the right questions and spending the time to manage them you will find it fruitful. There’s certainly money to be saved without changing a single ingredient in your product or supply chain.

Sometimes it’s just asking your vendor, “Please confirm this is a full pallet and I can’t add any more weight to it.”