Whether your distillery operation manages inventory based on FIFO or LIFO, it’s important to set an inventory management alert system for managing your critical stock levels.
These help distilleries manage the amount of finished goods to meet demand, allocate finances for purchase orders, and manage production schedules of various products. There’s several types of inventory management and stock level management systems based on a variety of factors.
Types of Stock Level Alert Systems
One way is to set your alert level at the bare minimum stock before being unable to meet production needs. This is sometimes referred to as a Danger Level type. If you’re running on a tight budget or perhaps need to cut costs for a week or two, this is an inventory solution that can help you spread out cash flow but be careful with this stock level type. This doesn’t allow for a surge in demand.
To figure your danger level, take your average consumption rate and multiply it by your maximum reorder period for emergency purchases.
Critical Inventory Level
Another alert level is at the critical inventory level. This management type includes a cushion of safety stock without having a huge surplus of raw materials. It allows you to manage an influx of product demand but sets your reorder dates so you don’t have a ton of botanicals or other raw goods that will go bad. This is an ideal inventory management level for small DSP’s that don’t have the warehouse space to keep excess inventory of either finished goods or raw materials.
To figure your critical inventory level, calculate your order quantity plus your safety stock amounts and divide by 2.
Reorder Stock Level
For businesses that have more warehouse space and a larger monthly budget, this is the ideal inventory management system. When running your warehouse off a reorder stock level, you would set your alerts to notify you to reorder inventory at a comfortable level between your minimum stock level and your maximum stock level. This will vary based on product demand and your lead times.
To figure your reorder stock level, calculate your maximum consumption rate and multiply by your maximum reorder period.
More Stock Alert Tips
Make sure the alert system you choose accounts for lead times. This includes the time it takes your vendors to process your order, execute the order, and deliver the stock to you. To measure this calculate the average amount of time it takes to get your raw materials. Note how long it takes from the time you submit a purchase order to delivery over a period of time, then take an average of that time frame. Make sure you have enough stock to fill the time between order and delivery.
In addition to factoring in lead times from your vendors, also take into account the length of production time of your product. That includes all the steps of your processes, such as fermenting, distilling, and barrel aging. Allow for ample time from start to finish so you can always meet the demand of your customers and distributors.
Check the type of materials
If a certain raw material is required only for special blends or small batch stock, you may not need to set a critical stock level for that item. Of course you can if it’s a special batch you create at regular intervals.
Some manufacturers use the ABC inventory control method to manage their stock levels. Divide your inventory into three baskets or types based on demand or usage. Then set varied alerts for bucket A, bucket B, and bucket C.
* * * * *
With OnBatch you can set stock alerts to remind you when to order raw materials. This helps you stay organized and meet all of your production deadlines. This is just one of the features that OnBatch provides to help distillers meet demand and achieve their growth goals. Interested in learning more about how OnBatch can help you manage your inventory? Send a message to a member of our team.