Running out of ingredients when you need them can ruin you day, or even you whole production plan. Inventory management is critical for the effective running of a brewery. With the right inventory management system, you can be more efficient with your production. Effective inventory management also reduces costs, through less wastage. Optimisation and production planning are effective tools to help with inventory management.
Why is inventory management important?
You probably already know this, but I just want to put some points down about why you should care about inventory management.
- Having too little of critical ingredients will mean that you can produce the beers as planned. This could delay your production by days or weeks.
- Having too much raw materials can lead to spoilage. You should aim to maintain very limited stocks of raw materials, so that the quality doesn’t degrade before you use them. In the worst case, you will need to dispose of ingredients because they have been spoiled.
- Without proper management, inventory is just another thing that you need to constantly worry about. With an inventory management system (either software or manual), you take away some mental load.
- Having the right ingredients at the right time means that you are always able to produce the beer you want to the quality you desire.
There are many more reasons as to why you should care about inventory management. The bottom line is that keeping on top of your inventory is important for delivering high quality beer.
Using production plan for inventory management
If you have read previous blogs at Efficient Brewing, then you will know that we believe the production planning or scheduling is important. Whether you are developing your production plan by hand or using automated tools, such as those available from Efficient Brewing, your production plan can be a valuable tool for inventory management. The existence of a production plan means that you know what beer you want to brew and when. From this, you can work out what ingredients that are needed at each point of your production plan.
Having a production plan is the first step to effective inventory management. The next step is having a system in place for tracking your inventory levels. This could be performed by hand using spreadsheets. Alternatively, brewery management systems are quite valuable for this too. The aim is to keep a track of all ingredient levels at each point in your production plan. By doing this, you can identify points in time to place orders to ensure that you always have sufficient supply of ingredients.
In the end, the main goal is to have just the right amount of ingredients at the right time.
Optimisation of inventory management
There are many levels at which you can bring optimisation into inventory management. This ranges from using inventory as information only to designing your production plans with inventory as a decision variable.
Information only
In this setting, the production plan is computed as usual, see Optimise your brewery production planning for some more details. The only difference here is that the production plan will include details about inventory levels. Order points will be provided to ensure the right inventory levels are available. As such, the inventory is used and provided as information only to the optimisation process.
Minimising costs
Spoilage of raw ingredients is a cost to you business. As such, you may want to minimise this cost in you production planning. The way to achieve this is to include inventory as a decision to the production planning optimisation. This requires your production planning to also consider the ingredients and inputs to each beer. The additional considerations in the optimisation are as follows:
- There can be a hard constraint to ensure that all ingredients are used before they best before end date. Doing this will change the order that beers are brewed, to ensure that the available ingredients are used before new ingredients are ordered. This constraint could also be soft, which means ingredient spoilage is allowed, but there is a penalty for that.
- The cost of the ingredients need to be taken into account. This will ensure that you only order the amount that is required for your beers. Any over ordering will result in extra ingredient costs.
- Order lead times need to be considered. Since your production plan is being optimised, you need to ensure that the ingredients are arriving at the right time. This makes the order lead time critical.
- You can optimise to use available ingredients. This will aim to reduce your overall inventory stock and will use what is available first.
By considering inventory in your production planning can help in reducing overall costs for your brewery.
Use inventory to select beers for brewing
Leaving production planning aside, you could use the inventory as an input into a beer selection tool. Such a tool would select the beer(s) that use the available ingredients (without any further ordering or minimal ordering). In the home brewing context, I wrote about this in a previous blog. The main idea is to reduce the amount of wastage from ordering. In the end, this feeds back into minimising costs.
Better planning, better brewing
Through better planning, you can be more efficient with your equipment and you can reduce your costs. Further, reducing the amount of wastage is not only good for your brewery, but good for the environment too. If we only use what we need, then we are putting less strain of global resources.