Coffee remains one of the largest commodities that have a large consumer base, several variants, is distributed in both organized & unorganized segments, and is still witnessing considerable growth. This is because of the increasing consumption of coffee and its role in the modern-day perception of being a functional drink for productivity and a leisurely beverage for social events.
The overall coffee market will produce revenues north of $436 billion across the globe in 2021, growing at a CAGR of over 8% compared to previous years. The USA is the largest consumer market. While the market growth benchmarks indeed show promise for industry incumbents, not every member of the supply chain will get to witness growth in equal proportions.
Whether you are a producer, roaster, exporter, distributor, branded-retailer, B2B eCommerce seller, or a boutique café – order management is central to running a profitable venture in this competitive but growing market. Getting started with the best practices would help to have some grip on the potential challenges that have to be both addressed and resolved.
Challenges in the Coffee Supply Chain
- The threat of weather inconsistencies: Irrespective of who is your supplier, it is necessary for you to understand the weather inconsistencies in the originating region which is producing coffee beans for you. Even with minute deviations in the weather, the quality of beans can change. For a more outlying year, the entire supply chain can face a supply shortage, leading to inflated prices and pressure on your margins.
- Need to quickly move brown beans inventory: Green coffee beans have a longer shelf-life than their brown counterparts. Most coffee reaching the cafes and the retail consumers is brown since it is easier to consume. Hence, as a wholesale buyer or seller, you have to ensure you have an intelligent mix of brown and green beans to ensure your inventory does not go stale. Neither does it sit for getting ready to be shipped.
- Forecasting demand and matching it with inventory levels: Forecasting demand can seem to be a daunting task. In reality, several banks publish the growth rates for the industry’s largest companies, the economy’s growth rate, and significant risks you should be aware of in the global coffee beans supply chain. Along with this external data, you can plug in your historical inventory levels along with the surplus or deficit you faced in previous years. Based on the coffee demand growth and the surplus or deficit you met in each particular year, along with the guidance released by the banks’ research, you can have a reasonable idea of the required inventory levels for the coming period. You can explore the OrderCircle Inventory Management Software, which can help you forecast stock requirements over both short term and long term.
Best Practices for Order Management
- Match your customer’s journey with your SKUs: Stock Keeping Units are the critical identification you give to each packaging unit. Some coffee sellers do not put in a lot of time to generate SKUs or use a singular SKU for the entire cohort of products. SKUs should serve two essential purposes – give a clue about the product’s details and be unique for each product.Remember the fact that there are no industry standards for SKUs. Hence, there is no need for you to match your suppliers’ SKU trends. Try to emulate your customer’s journey in the SKU. For instance, if your customer is buying a bag of green Moroccan coffee beans from your B2B eCommerce platform, you can use an SKU like GMRC-WEB-123X.
- Have a tiered-pricing structure: While SKU-level pricing is the preferred method for most sellers, doing so leaves a lot of potential revenue on the table. As your inventory starts moving, you should use a tiered pricing structure to provide economies of scale to the more significant buyers and nudge the smaller buyers to increase their order size.Generally, the underlying logic is to provide wholesale discounts to significant buyers and provide a steeper price to the smaller buyers. But, since coffee is a commodity traded in the futures & options market, you can have a reasonable idea of the upcoming price falls or surges in the price. Based on this, you can revise the costs for the last coffee units available to you as the year progresses.
- Use barcodes for order and inventory tracking: SKUs are great for your internal control systems, but you will need barcodes in the process. Barcodes remove the need for manual inputs and the pertinent errors prone to that system of tracking. If you can use a uniform barcode in your supply chain process – from ordering to storing to shipping, your customers will have an easier time tracking the order. Unlike SKUs, barcodes are industry standards and used uniformly throughout the supply chain.
- Integrate your multi-channel inventories: If you are part of the supply chain focusing on B2B eCommerce along with physical ordering, you might be keeping distinct units of inventory for each channel. This adds to the supervision costs and even results in pricing asymmetries in different media. Instead, you should run a singular inventory unit and update it for both eCommerce and physical ordering channels. If you are running a B2B eCommerce website, you will have to ensure that out-of-stock variants are immediately reflected on the ordering page to avoid lateral order cancellation. We would recommend you to explore the OrderCircle Order Management software, which can integrate your multi-channel inventory and optimize your business operations.
- Create a reverse logistics process: Most coffee sellers do not prefer reverse logistics or returned orders since it results in an assured loss on order. Costs are already incurred for the to & fro movement, and no profits are realized. However, with a well-engineered reverse logistics process, you can build a good relationship with the buyer and later get more oversized orders. Reverse logistics are a common element of all supply chains. And instead of avoiding them, you can keep your team and processes prepared for it. For instance – you can have a limited-time return policy, negotiate the returning window with your supplier, and use the unique SKUs to track the returned units.
- Invest in a central inventory management system: As you might have noticed by now, running a coffee chain inventory can be a demanding task if you do not possess the right tools and do not have access to the right platforms. Ideally, you should have an enterprise-grade inventory management system that syncs with your B2B eCommerce platform and provides visibility, analytics, intelligence, and seamless integration at scale.
More than anything else, ensure that your cloud-based inventory management system has near-100% uptime since downtime can result in erroneous orders and inventory data inaccuracies. To save time, you can explore the OrderCircle Enterprise Inventory Management system. It comes with custom features & integrations, backed by 99.99% uptime and comprehensive support.
While the coffee supply chain is tumultuous, you can tame it with this set of best practices – have a well-structured plan for SKUs, user tiered-pricing, use barcodes, create a reverse logistics process, and have a central inventory management system. For more information on how you can better optimize your wholesale order management process with a dedicated inventory management system, get in touch with the OrderCircle team today.