In a long hot Summer such as that which Europe has just ‘enjoyed’, the last thing you need is for your bar of choice to run out of beer. But it happens, and it’s very rarely the result of a global shortage of the amber nectar. Generally, it is because nobody knows at any given moment where any of the millions of kegs are in the supply chain.
It can seem as though beer kegs are as susceptible to alcohol as humans. If they are not being delivered to the wrong door, they are damaging themselves falling into cellars, being kidnapped by students, or left to sleep it off in a field after a late-night open-air function. At least human drunks don’t normally get melted down for their scrap value!
Of course the problem isn’t confined to beer. All forms of mobile asset, from bread trays to roll-cages, pallets to shipping containers, are liable to lead an exciting, unpredictable, expensive, and sometimes tragically short, life.
Managing such assets is rarely part of a manufacturer’s core competence – in many cases they are barely managed at all: providing enough containers available in fit condition to receive new production (which typically means continually buying replacements regardless of how many units are already nominally in the system) is as much as can be hoped for.
Previous solutions have not been entirely successful. Merely shunting the problem on to a 3PL to manage rarely offers an integrated solution that extends the life or much improves the utilisation of the asset. Indeed, the typical 3PL cost-plus fee structure could be said to encourage inefficiency. Similarly, although leasing, rather than owning, the assets (whether managed directly or through a 3PL) may have balance-sheet advantages, but does little to remedy supply-chain deficiencies.
But there is a better way, as demonstrated by companies like Trenstar.
It’s the business model that counts
Over the past year Trenstar has created a pooled keg system for the UK brewing industry which has attracted Carlsberg-Tetley, Scottish Courage, Belhaven and others. The system is based on RFID technology but it is the business model rather than the technology that is of particular interest (although, in passing, the RFID, using Philips passive tags, is pretty clever – most RFID systems don’t really like being attached to large lumps of metal).
Trenstar has taken ownership of the brewers’ keg stocks – some three million units in 25 variations – and responsibility for managing them through the supply chain and back again. A significant difference from the usual model is that the brewers aren’t paying the usual time-based hire or lease charge; Trenstar is paid on supply chain events (ie the timely delivery of a full keg to a bar, or an empty keg, in appropriate condition, to the washing plant). They don’t get paid for kegs that are sitting abandoned in the middle of a field.
The required close tracking of assets depends on the RFID but, although on a per-unit basis radio tags are now dirt-cheap, the total investment involved is still beyond all but the largest customers. A pooled system on the other hand reduces costs for everyone.
Here are the expected benefits
The advantages claimed by Trenstar are certainly not negligible. CEO Greg Cronin suggests that the European brewing industry could expect inventory and order fulfillment accuracy to improve to 98 per cent from a current average of 85-90 per cent; a 75 per cent improvement in spoilage and waste; a 25 per cent reduction in keg inventory; and a 25 per cent increase in the speed of product through the supply chain. Transport costs could be expected to fall significantly. Of equal attraction, a fixed (though unpredictable) cost, is replaced by a variable cost directly related to the volume of business.
And there are other potential advantages. Reducing the number of keg variants would be one. Brewers or their distributors would find supplying distant, unusual or experimental markets easier, without the worry of how to recover empty assets. Even crime prevention may benefit; a keg in a scrapyard is essentially anonymous but the chip will reveal to a Court where it should have been.
The intoxicated progress of a beer keg around the supply chain is an extreme example, and savings in other fields may not be so dramatic. But Trenstar has successfully applied this approach in sectors from apparel to automotive.
No-one now would countenance the situation that ruled until a few years ago; not knowing to within a few hundred miles where your truck was or what it was doing. Now, efficient asset use is becoming possible at the level of the individual pallet, rollcage – or beer keg.
- RFID technology is now available to allow detailed asset management at the level of the individual container.
- Traditional forms of outsourcing ownership and/or management of mobile assets do not necessarily incentivise efficient operation.
- Contracts based on payment per supply chain event, rather than per item, do provide the required incentive
- Industry-wide pooled systems offer a further level of supplychain simplification and improvement – provided they are open to all, and so are not anti-competitive.