Can you innovate in the supply chain for beer? Hop aboard …

By James Janega

Can you innovate in the beer supply chain, asked a client in the brewing industry? They already have made strides on the sexy, customer-facing side of product innovation and category management. Can costs, collaboration, and change mitigation offer more options?

In the age of technology, the supply chain is ripe for innovation as brewers discover their opportunities to live digital.

Beer floats on a sea of uncertainties. Increasingly, data is the boat that carries it to market.

In the age of technology, the supply chain is ripe for innovation as brewers discover their opportunities to live digital.

At Slalom, we see the following trends for supply chain innovation. Each of them is a way to remove uncertainty on the way to someone’s happy hour.

The supply chain for beer is complex and lengthy. From growers to shippers, grain storage to production and outbound logistics, it crosses wide geography and incorporates a host of risks, vulnerability to market changes, cost pressures, and demands for end-to-end product integrity.

When the rest of us drink beer to escape anxieties, this client question made me realize that brewers were swimming in them.

Beer floats on a sea of uncertainties. Increasingly, data is the boat that carries it to market. Data visualization can provide the dashboard, and advanced analytics offer instruments needed to steer.

Digital’s never done. It’s a way of life.

Innovation works best in the service of a defined goal. A good one might be: “How can we use our supply chain to generate new revenue, new capabilities, and new efficiencies?” Or, “What can we add to our supply chain to help us double our profit margins?”

Those are useful boundaries for approaching the problem. The next step is probably: “What jobs to I have to do to get hops from field to glass?” And then, at each stop along the way: “How can I remove enough uncertainty about that to pay for the cost?”

Innovation is process, not a project.

At Slalom, we see the following trends for supply chain innovation. Each of them is a way to remove uncertainty on the way to someone’s happy hour:

  • Automated demand forecasting – How can I orient my suppliers by reducing uncertainty about how much customers will buy of some new variety of beer?
  • Data integrity and visualization – How can I see what’s happening in my supply chain, so I can orient to problems faster?
  • IoT experimentation – How can I get the most from my equipment? How can I predict the cost of grain based on climate conditions? (How can I dip my toes in this, without taking a bath?)
  • KPI improvements to drive process and progress – How can I create levers to pull that result in more revenue, more efficiency, or less cost?
  • Machine learning and price optimization – How can I match supply to demand? How can I predict supply? How can I determine the (highest) price a customer really will pay and still come back?
  • Supply chain collaboration – How can my suppliers and I save money, from excess inventory or lost opportunity from stock-out?
  • Supply chain traceability and shared data visibility – How can I reduce the 5% of product shrink between field and keg?

Here are some interesting examples of those trends in action.

Case Study 1: AB InBev has invested in its SmartBarley program to intake, collect, visualize, and analyze farm-level data. Data on soil nitrogen levels, seed rates and total yields have fed University of Illinois statistical models that define and predict changes to optimal growing conditions. The key investments here are in sensor data, data aggregation, analytics and visualization. The goal is greener business practices that appeal to increasing demands for corporate social responsibility. But another result is uniform, high-quality ingredients.

Case Study 2: In many places in the beer industry (and elsewhere, really), data visualization is being used to optimize price controls and increase revenue. What goes on the dashboard is important. One metric to consider might be the ratio of percentage of items in market to percentage of items sold-through. A low number can indicate a price that’s too high, a high number suggests the price might be too low.

The insights allow pricing experiments with some immediate returns — and optimized returns if the experiments are automated through data algorithms and machine learning. A good number of capabilities could be required to manage data, establish correlation algorithms, and to move data to the cloud  — which enhances sharability, security, and enables future innovation at the right scale.

Given the uncertainties and pressures facing the brewing industry, my Slalom colleagues in technology, supply chain and I see a few clear opportunities that seem worth investigating:

Reduce risks:

Companies should enhance their investments in supply chain traceability and visibility. This allows better decision-making before surprises occur, and that increases product integrity while preventing excess inventory and stock-outs. One good way might be to think about enhancing your visibility into your supply chain through data visualization capabilities.

Companies should consider experimentation in IoT. By understanding and amassing data on day-to-day changes from field to factory to freeway, brewers can use dashboards to spot spoilage, supply problems, and theft, which all together account for up to 5% of shrink. Look for early, limited experiments that drive quick value, and slowly build the capability to expand and scale your insights into a lasting competitive advantage. (IoT is a marathon, not a spring.)

Companies should consider new ways to collaborate with their supply chain partners. Data visibility can be a relatively inexpensive and safe cornerstone. By sharing data — and/or data visibility — companies can understand the weak links in their supply chains, model the impacts of a disruption, and take preventive measures before being surprised. That can lead to more accurate planning, faster conflict resolutions, and develop shared commitment to taking mutually beneficial actions.

Companies should leverage their insights into the supply chain. They can be used as both a potential source of differentiation on corporate social responsibility, and as a driver for cost optimization. Experiments in IoT and data visualization can yield surprising insights that lead to higher-integrity products.

Increase revenue and optimize inventory:

Companies should invest in business process improvements and drive the development of more strategically relevant KPIs. Those that do are driving growth and reducing costs. Look for improvement opportunities, define desired goals, set relevant KPIs and drive toward process improvement and growth.

Companies should move beyond investments in data integrity and put data to work. Invest in tools, yes, but also invest time to look for questions you want your data to answer, and consider new business processes that put your answers to work.

Those are some basic opportunities. But they’re a good reason to sit down over a beer and start talking.

Cheers.

James Janega leads the Innovation & Insights group at Slalom Chicago. He is an Entrepreneur-in-Residence at the University of Illinois’ EnterpriseWorks accelerator, a member of the Chicago Ideas Co-Op, and helps enterprise companies and startups improve the way they think about innovation strategy, customer validation, building more robust innovation capabilities and processes. You can reach him at @JamesJanega on Twitter.

Photo credit: Washington Beer Blog

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