How to overcome challenges in the Wine Distribution Industry
Table of Contents
The last couple of years have caused many shifts in the way consumers shop and consume goods. New consumer behavior trends shifted online as closures of tasting rooms and deferred events such as travel and weddings occurred. The wine industry globally generates $29 billion in annual revenue, with the expectation of more growth as societal taste changes and new products and opportunities are coming into the industry. In addition, demand is bouncing back as deferred events are now taking place.
With demand beginning to increase again, there seems to be a global supply chain issue within the wine industry. This is caused by a recovery economy where consumers are spending again and imported wines are arriving too quickly for the supply chain to handle, while there are also higher costs involved at every logistical link such as wine producers, wine distributors, even materials needed for wine production such as labels, glass and, cardboard. This wave of returning demand is taking processes that would normally take about 30 days to now 3 months.
Now, this situation begs the question, how do those in the wine distribution industry overcome these challenges?
The wine market has a unique set of challenges to overcome the managing quality wine, retail sales, or handling domestic wines, fine wines, or classic wines. With the world consuming more wine than even the logistics of wine distributors is a critical aspect of the industry that needs a complete solution.
The common challenges that wine distributors must overcome
Tax & Duty Regulations
When it comes to the wine sector one of the main challenges is handling government taxation and regulations.
Since we’re dealing with alcohol, an obvious challenge includes government regulation and taxation. Wine distributors must be certain that they can correctly accrue alcohol duty levels while also leaving stock under bond (duty-free) until it is required by a consumer. Pricing mechanisms must also allow businesses to sell the same item duty paid to an end customer, but also quote an under-bond price for delivery to another bonded warehouse.
Distributors need to avoid fines and taxes on compliance issues therefore they require a specialized tracking system that will give specific insight into inventory. Information such as which items, vintage, and Lot to move from duty-free for a customer order.
Tracking Lot Rotations
Wine and alcohol distribution receive shipments that come with a lot or batch number, this is often referred to as a rotation. Rotations come with their own reference number and dates that include “use by”, “best by”, or “not before”. The challenge that the distributor needs to overcome is the need to ensure that the stock issued is in date order, based on the dates of each rotation, and that there is a record made of which customers received which rotation so that in the event of a product recall, wine wholesalers can identify which supplier the batch came from and more importantly which customers were issued with stock from specific batches.
Due to the fact that wine is perishable an inventory system that needs to track detailed information on batches to avoid a waste of goods.
Managing Demand and Inherit Demand
Of course due to the current landscape and how demand is rising once again managing demand is what is becoming one of the biggest challenges. Pent-up demand is the biggest concern with the possibility of shipments not arriving in time for the holidays thus putting a hold on dry January, which isn’t something to wine about.
When it comes to managing demand for fine wines, there is a different process. New vintage wines require new inventory item numbers that take place of the previous year’s vintage. Although this is a new product it is assumed to be purchased in similar quantities by the same customers. Inventory forecasting in a system must have insights that will know the past demand accurately in order to stock up for the new vintage products. An ideal system will link the previous year’s vintage so that the new year’s vintage will inherit some data insights of the demand history. This allows importers to make strategic decisions on how to go about purchase order quantity.
What does NetSuite offer to overcome these challenges?
Compliancy
Inventory Management (Traceability, Inventory Planning & more)
Inventory management offers many native tools that will elevate inventory planning for wine and alcohol distribution. Features such as tracking inventory in various locations, safety stock, re-order points, cycle counts, demand planning, supply planning, and distribution requirements planning. Ensuring preferred stocking levels, lead times, and reorder points can be automatically calculated in the system, with suggestions appearing instantly in the order items list. Multi-location distribution requirements planning has advanced parameters that help to balance demand and supply across the entire organization.
NetSuite inventory management also allows backward and forward trace inventory using lot and serial tracking. Lot numbered items track the quantity and specific cost for each lot as products are purchased and produced. When you serialize inventory it allows you to choose specific items when orders are fulfilled. The lot and serial numbers let you define fulfillment strategies such as expiring and first in first out. This method is best to ensure that there is minimal waste and that inventory is used efficiently.
- Replenishment, setting up minimum stock levels, and multi-location planning
- Cycle Counting
- WMS, Bin tracking
- Defining order quantities
- Planning for different Supply methods & more
Accounting & Financials
- General Ledger
- Accounts receivables
- Accounts Payables
- Tax management (national & global)
- Fixed Assets Management
- Cash Management
- Payment Management
