Half Acre is one of the best breweries in the country (and happens to be located less than three miles from the Spend Matters office). As such, it’s become one of the beers of office choice. Half Acre’s Daisy Cutter ale is our favorite – low in alcohol compared to IPAs but with a wonderfully full-on hop aroma that is subtle and sweeping at the same time. It is a work of perfection. And you can still walk home straight (or write another blog post) after having a few. Yet unfortunately, the store shelves are running dry of it, owing to a fire at a single can supplier that provides the brewery with packaging for all non-keg sales.
Half Acre’s blog has the details: “Half Acre's entire can inventory was destroyed. As a result, we will have about a week with no Daisy cans being shipped to our distributors.” Be prepared for this starting Monday, the brewery warns!
Are there procurement and supply risk lessons in this? You bet. But first, some further background on the news.
The Chicago Tribune reports in a story that the company uses a “just-in-time” delivery model for cans given that it “does not have enough space to house the cans." But Half Acre hopes to be up and running soon with a new supplier facility, suggesting “the cans are now being made at a plant in Fort Worth, Texas … and, if all goes according to plan, will be delivered in one week, on June 6.”
As to lessons learned for other small manufacturers, it’s important to realize that just-in-time programs that minimize inventory (and working capital) can actual increase supply risk. Inventory, after all, is not necessarily a bad thing (or at least not as bad as Six Sigma bigots can make it out to be). Safety stock can be your friend.
A happy balance and a key with JIT programs is to work with a supplier that has its own contingency and risk management programs in place – multiple distribution facilities, different sources of supply, inventory close to consumption, etc. Don’t do JIT with a supplier who is not set up for it.
Second, procurement in a growth environment should be focused on maintaining continuity of supply – not just saving money. Consider dual sourcing strategies to reduce risk and provide greater flexibility when needed (and when you least expect it).
And third, monitor supply risk. Tools from LexisNexis, Resilinc, HICX, Sourcemap, SAP (Supplier InfoNet) and others can combine real-time news, alerts and even, in certain cases, geospatial visualizations of potential disruptive activity at supplier facilities (or in transit routes) as they’re happening based on local news feeds, as well as structured and unstructured information (e.g., Twitter) to provide a level of situation awareness that was previously impossible. This can allow you to take action (e.g., increase order sizes from alternative suppliers or identify entirely different vendors) before others do, buying up capacity.
Alas, Daisy Cutter will still be available on draft even if we can’t buy the cans during the expected supply shortage. And discussing the supply shortage – and what we can learn about it and do to help prevent them in the future – will be great fodder for discussion in between sips at our favorite local watering holes.