Mitigating the logistics challenges of the drinks industry – what we can do

In the last 18 months, the industry has been hit with everything from the cost of fuel in the tank to driver shortages, wage demands and availability of vehicles. All causing a step-change in costs.

The challenges faced by the drinks industry of rising costs and logistics are, unfortunately, well-documented. In the last 18 months, the industry has been hit with everything from the cost of fuel in the tank to driver shortages, wage demands and availability of vehicles. All causing a step-change in costs.

That step-change is now baked in. We need to be clear - this isn’t a temporary blip; some of these changes are here for the long-term and, as independent businesses, we are at the will of the macro-forces at play. So, what can we do to mitigate the challenges and keep in profit?

Facing the fact – you’ll need to increase costs     

First things first; it needs to be faced, there really is no alternative but to reflect the cost increases in your own cost model.

It’s a tough playing field. If you’re an individual operator, there’s little you can do to influence, say fuel prices. And you can’t absorb every increase. One way or another, your prices are going up.

Look for marginal options to ease the pressure

Every element of the supply chain is squeezed. And there’s a fine balance between surviving and pricing yourself out of the market. Look for marginal options to take the heat off. There is no ‘big fix’ so it’s looking at the incremental, tiny elements, for adjustments, that can make the difference.

Optimising the supply chain

Use a Tortuga-like, specialist logistics model; a huge help for independent brands to optimise their supply chain. Small, niche producers massively benefit from being part of bigger consignments.

For example, if a small brand is considering doubling their MOQ (Minimum Order Quantity) to survive, can the costs be borne out? Will you lose customers?

Very few wholesalers are buying in large quantities so they may well turn down a brand pressurising them to buy more. The decision could be very unforgiving.

Small brands piggy-back on consignments

Group orders, through a logistics supplier, mean small brands can benefit. No MOQ necessary! Keeping brands in with suppliers.

And remember, if you’re a niche brand, your liquid is expensive! Removing the necessity from a buying customer to move away from you is a lifesaver.

Overstocking - moving from ‘just in time’ to ‘just in case’

The last 20 years have been reasonably stable in terms of macro economics. The perfect climate for producers to employ the ‘just in time’ model of holding minimal stock, rapidly restocking to react to increase in demand.

That climate has changed. The time couldn’t be more right to start talking about, a different model: holding stock – the oppositive to the ‘just in time’ model, where you hold stock ‘just in case’.

Let’s talk about the risks of holding stock, and benefits

There’s a decision to be made - do you invest working capital in stock to maintain availability of your liquid? Or do you pass the increased costs onto wholesale or the end customer?

None of the solutions come without risk. And don’t forget, there is a laser focus on consumer spending at the moment.

We can help brands ascertain the elements of risk in their options by looking at the market, we have the ‘whole view’ on what’s happening.

Small brands share platform and costs through a logistics model

It comes back to the benefits of outsourcing.

A model like Tortuga allows small independent brands to come together and benefit from a shared platform. Rather than paying for storage, landing, transport all on your own, and employ people to do it – we do it for you and the costs are shared.

Real-time visibility and tracking

On our portal, brand owners can see exactly where stock is and levels. Being on top of stock is a big deal. Too much and brand owners are carrying costs (depending on their supply model), too little and buyers could walk, which is a disaster.

Brands work hard to secure every customer, but tipping cost too far could totally undermine this.

Managing the double-edged sword

There are no easy answers. It’s incredibly tough out there.

Whether it’s altering the stock management model, increasing costs to suppliers, or making alterations to packaging, we can help with scenario planning and risk assessments to decide the right course to take over the short and long terms.

Identifying the window of opportunity

From our position we often know more than brand owners about how and why costs are rising. Regulations, global developments, supply issues, trends and emerging markets – we have all that in our day-to-day.

We know the direction of travel and can help identify where the window of opportunity is - the moment where a brand can act to stay ahead.

One percent of something…

We always say: one percent of something is better than ten percent of nothing. And if we can share our knowledge, provide cost-effective logistics, optimise supply chains, or help with risk management, it might just help fatten those slim margins for keeping in the game.