Alcoholic beverage sales in the United States have increased in 10 of the last 11 years and are regularly nearing the $250 million mark these days. As those numbers continue to go ever higher, the importance of alcohol logistics becomes even greater. In addition to the concerns that come with logistics in all types of shipping, alcohol logistics must also manage other factors, such as temperature, proper packaging, and careful handling. But that’s not all. There are also laws specific to the shipping of alcohol, which vary from country to country, state to state, and even town to town.
All three parts of the alcohol industry — producers or importers, distributors, and retailers — must work well together for everything to go right. In this blog, we will look at the issues facing the alcohol logistics industry and the steps that can be taken to deal with supply chain management challenges.
Like all parts of the supply chain, alcohol logistics has had its fair share of obstacles to overcome in the past few years. Let’s take a look at some of the concerns:
With big box stores and e-commerce titans using so much of the available warehouse space, smaller businesses are left with few options. The rise of online shopping has meant more companies and businesses without brick-and-mortar locations need a place to store goods for distribution. Finding space for shipments that have special requirements — an expiration date, the need for refrigeration, delicate breakable items — can be even more difficult when the storage situation is tight. Also, there may be federal or state compliance issues that must be followed.
Along with the general increase in just about everything in our economy, shipping costs have gone up, making it more important to have all loose ends tied up when shipping a product, especially a product that has unique requirements that must be dealt with when handling alcohol. Any mistakes in the logistics of shipping alcohol products can be costly.
With an increase in products being shipped and worker shortages, U.S. ports have struggled to handle the number of trans-oceanic shipments that are arriving. At some ports, ships have had to anchor and line up well outside the port while waiting for a berth to open up. These delays mean longer transit times, which in turn can put perishable products like some alcohol under extreme pressure to be delivered on time.
Worker shortages, container scarcity, greater volume, and higher costs have created high demand. In a shipping trade that is ruled by a few major companies, that allows them the chance to join forces and collectively raise prices. While there seems to be a slight slowdown in these fees recently, they have not come close to returning to the prices prior to the pandemic.
A disruption during any part of the supply chain will almost always cause ripples through the rest of the chain. It’s likely that everyone will agree that we’ve had disruptions galore over the last three years. Some of those speedbumps linger and new ones are likely to pop up. These put even more pressure on shipments involving alcoholic beverages because of the regulations that go with them, the timeliness needed for their arrival, and the fragile nature of the packaging.
When shipments fall behind, there can be two areas of concern. One, they will be left sitting in the warehouse or elsewhere and expire or reach the retailer with little time to sell the product. Two, when things fall behind, there is a tendency to try to move faster to catch up. This can often translate into lost or damaged goods. The ability to walk that fine line between speeding up the process and not hurrying too much can be a difficult task.
Challenges to supply chain logistics for alcohol can come fast and furious. With the ability to adjust on the fly and the foresight to try to be prepared for those obstacles, you can help stay on top of the game. Here are some ways to reduce the impact of those challenges:
The time it takes from when a purchase order is generated to when the item is delivered is the lead time. Each part of the supply chain has its own lead time. A couple of examples are material lead time, which is the time it takes for raw materials to arrive to start manufacturing the product, and production lead time, which is the time from when a factory gets an order to produce to when it is finished. Every step in the supply chain logistics for alcohol should have an estimated lead time. Leaving wiggle room for delays in the lead time is an excellent way to help you be prepared if something unexpected arises.
Sometimes it’s hard to see why the more expensive option upfront might be the best overall. Air freight can fall into that category. It is the costliest mode of transporting freight, but it may be the only or most assured way to deliver a product on time. While it might eat into your profits, it prevents you from gaining a reputation for having late shipments that can make loyal customers move to your competitors.
Almost everyone likes to find a faster route, one that will save both time and money. The same holds true for alcohol logistics. Can the product be moved more efficiently? Is there a more convenient warehouse location? Maybe there is one particular route or facility that seems to be troublesome. Assessing data to see how altering the demand points and modalities can help you try and cut costs.
It’s better to be prepared for possible costly challenges in alcohol logistics than to reach the end of the year and see what added costs have eaten into your bottom line. When budgeting, you should assume costs will be higher, and that may mean raising the price of certain products while keeping your flagship products at their usual price. Having room to maneuver can make life a little easier if rising prices or unexpected expenses take a bite out of you.
One of the concerns you should always keep a watchful eye on is whether the prices that carriers offer are fair and speaking out when those prices have become too steep. With the high demand leading to increased costs over the last few years, it’s important to ensure that price gouging does not permeate the industry and cause harm. If enough people can be advocates for regulating carriers, they can make an impact.
As we have mentioned, several factors add risk to shipping alcohol and other products at this moment. That makes having the right insurance coverage even more important. It’s extremely important to have a more comprehensive plan that will cover the risks at play today. Running simulations for moving your product through supply chain logistics for alcohol is an excellent way to better understand your responsibilities and liabilities.
While insurance helps you be prepared for a financial pothole, having a product disposal strategy can prepare you for another unexpected hurdle — when the products in your care have expired. Rather than finding out at the last moment a shipment you have has gone beyond its expiration date and then scrambling to figure out how to deal with it, you want to have all the procedures and disposal sites already lined up to safely dispose of expired products in an environmentally friendly way.
The alcoholic beverage industry has been on an upward trajectory for more than a decade. The added volume means alcohol logistics management becomes more crucial all the time. With added demands specific to the alcoholic beverage industry — from temperature control concerns to packaging issues to federal, state, and local regulations — there is a mountain of things to stay on top of. But one way to navigate that is to bring in a partner with expertise. Zengistics has reached the top, becoming one of the leaders in the craft beer logistics market.
Combining unique solutions with cost-effectiveness, Zengistics can protect the integrity of the cold chain for brewers big and small. With the world’s first collaborative logistics platform, Zengistics is a technology company that can accelerate market expansion nationwide. Analyzing the data collected by our platforms, our experienced team can calculate the best ways to consolidate shipments, predict market trends, reduce waste, lower operational costs, and facilitate scalable growth. If you want to work with a company that has helped some clients save over $200,000 to $300,000 a year with load consolidation services, you can visit our website and schedule a free virtual demo test drive.