The inventory issue always has and continues to be a complex and costly subject for beverage producers and distributors. Today, there are more brands, categories, packages and economic factors that must be considered in the inventory level setting process. 

The following are important questions that traditionally are asked: 

  • How much inventory to carry, over what period of time should it be maintained? 
  • What is the related cost during that time cycle? 
  • Why carry an inventory at all? 

All are common challenges to each inventory location in the supply chain with a myriad of variable operating conditions.

Because the logistics of production to distribution is an exception rather than the rule, the focus here will follow the premise that an inventory is necessary in most beverage production and distribution facilities with variable operating constraints.  

To evaluate the process of setting inventory levels the significant challenges to producers and distributors are simply because operating conditions and geographic locations usually have an impact on setting retention levels. That is why inventory levels at each supply chain location present challenges specific to that area. Inventory locations are the key as each is obligated to set merchandise retention levels that represent conditions for markets being serviced.

At the supply chain origin (the producer’s warehouse), the basic challenges can be the volume, package mix, cost and seasonality at each subsequent inventory location being serviced. Major factors include avoiding out of stock situations, obsolescence caused by promotions, storage losses and cost of warehouse space. 

At the distribution or sales centers, challenges can be avoiding out of stock, available space, volume and package mix. Geographic area or size serviced, number of accounts or routes and demographics also can be major factors at this location.

At the retail outlets, some challenges are common (out of stock, space) but also include type of outlet, promotions, policies, store brands and competition. This inventory location ― normal supply chain end — can present a constant difficult challenge with local managements.

At the commissaries, challenges take on a different posture. The inventory issue depends on number of franchises, type of packaging involved, dispensing capabilities, volume and frequency of service are all challenges at the end of this supply chain location.

Using the inventory location in the supply chain serves to emphasize the importance of the subject and to recognize and respect the challenges realistically involved in the process.

Throughout the supply chain setting, the inventory levels will become more challenging because, at each inventory location, the formula developed will vary based on restrictions and operating philosophies or policies. Whatever the conditions, inventories at all locations are inter-related because each is affected by the time-oriented supply chain flow.

A thorough analysis of the challenges at each location is recommended as an initial step before developing a formula that sets the inventory levels. Such an analysis will reveal the impact each location has on the other. 

Basic items to consider when setting inventory levels are physical space needed and available, cost of the space, the time space will be used for inventory, the handling of high/low frequency items, the protection against damage and the method for storing and retrieval. 

Evaluation is essential for good inventories.