All roasteries keep inventory; this includes raw materials, work-in-progress, supplies used in operations, and finished goods.

Inventory can be as simple as a bucket to keep your roasted beans or as complex as a mix of raw materials and subassemblies used as part of a more extensive manufacturing process.

But why do we need an inventory?

Just-in-time manufacturing environments consider inventory to be waste. However, inventory plays a crucial role in settings where we suffer from poor cash flow or don’t control lead times and the quality of materials received.

Some of the more important reasons for obtaining and holding inventory are:

Predictability

To plan your capacity and schedule your production, you need to control how much greens you process at a given time; inventory buffers what you need from what you process.

Fluctuations in demand

A supply of greens on hand is protection. You don’t always know how many greens you are likely to need at any given time, but you still need to satisfy customer or production demands on time. If you can monitor your customers’ buying habits, surprises in the fluctuations in the market are held to a minimum.

Unreliability of supply

Inventory protects you from unreliable suppliers (or when a green is scarce and a steady supply is hard to ensure). Whenever possible, unreliable suppliers should be rehabilitated through discussions or replaced.

Rehabilitation can be accomplished through master purchase orders with timed product releases, better verbal and electronic communication between the parties, and so on. This will lower your on-hand inventory needs.

Price protection

Buying quantities of greens at appropriate times helps avoid the impact of cost inflation.

Contracting to assure a price does not require delivery at the purchase time. Manny suppliers prefer to deliver periodically rather than to ship an entire year’s supply of a particular SKU at one time.

Quantity discounts

Often bulk discounts are available if you buy in large rather than small quantities.

Lower ordering costs

If you buy a larger quantity of greens less frequently, the ordering costs are less than buying smaller amounts over and over again (the holding cost of the greens, however, will be greater).

To hold down ordering costs and lock in favourable pricing, many larger roasters issue blanket purchase orders coupled with periodic release and receiving dates of the SKUs.

Types of stock

Inventory is divided into raw materials (greens), finished goods (that delicious coffee you sell), and work-in-progress (your roasting efforts).

Your finished product (coffee ready for customer sales) can be used to buffer manufacturing from predictable or unpredictable market demands.

Work-in-progress (WIP) should be kept to a minimum.

From a functional standpoint, you should consider other categories of inventory as well; consumables (things like lightbulbs, towels, paper, tape, etc.), “service, repair, replacement, and spare items” (you need to keep those roasters running after all), buffer (or safety inventory), anticipation stock (for special holiday seasons, etc.) and transit inventory.

Transit Inventory

Transit inventory highlights the need to understand that your inventory will not only move physically through your system but when and how it shows up in your records.

If, for example, 500kg of greens appeared in your system while they were still en route to you, your record would include them, but your shelf count would be 500kg of greens short.

How could stock show up as part of your inventory before it arrives? The answer depends on when your system of choice recorded the greens as being in your inventory. Did the system record it when the product was bought? When it left your suppliers’ docks? Or was it recorded when it appeared at your warehouse or roastery?

Follow a single item on its path through your roastery to understand the relationship between an item’s real life and system life. Please do this by tracking that particular item’s physical movement through your roastery while noting what is happening to its system life during that same period. You will be able to discover when one of these lives moves ahead of the other and when there are system errors, such as when an item is moved, but no paperwork exists authorising that action.

Recap

Inventory exists within your roastery as both physical items and as items in your records.

There are many reasons for obtaining and holding inventory; it can play various roles within your roastery’s life.

To control and manage the items coming into, through, and out of your roastery, it is essential to understand where an item is physically located at any given time and how that existence is being acknowledged within the system you are using.