Tuesday, February 11, 2014

Complications in the Wine Supply Chain

Stock on hand can be great for many wine makers: they want to hold onto the goods until it comes to full maturity, therefore fetching the best price on the market. Yet for low-price export, the wines are crafted to be sold very soon after production. These wines face huge hurdles when making their way to U.S. markets, and importers are trying new techniques to get around supply chain problems. I’ve highlighted some of the biggest hurdles they face.

Predicting Demand and Responding to Risk

One of the toughest jobs that wine importers have is predicting the demand that people will have of certain types of wine. In the last 10 years, South African, Chilean, Australian, New Zealand, and Argentinean wine have all had much larger demand in the states. These surges in demand have put importers into a scramble. There is no algorithm for consumer taste. Tastes are also ephemeral—flitting to alternatives on a whim.  Yet the importer has to wait upwards of 60 days to see their order arrive into port from newer markets. This lag creates a huge bullwhip effect in the market that sees importers bearing the burden of the cost. Once the product has made it to the US, it’s the importers problem to get it to market.

Getting the Wine to Ports

Many of those days of travel are spent trying to get wine to the port. There have been problems of late in Argentina where the ports have shut down due to labor strikes, and the wine has had to make its way across the Andes Mountains to leave by way of Chilean harbors. This has caused massive delays in the system. Some New Zealand wine makers have found ways to try and cut their delivery costs and times by trucking bulk wine in flexible plastic trailers. Vineyards tend to be extremely far from the main harbor of Auckland, and much of the bottling materials are imported into the country. The companies have partner organizations bottle and package their product closer to the harbor (and closer to the bottles in the first place).

Wine is also a finicky beast and responds poorly to heat. Shipping containers have been created especially for wine products to help them remain cool, and other packaging has been developed to bring goods across the long haul. 


Importing into the US

Much of this 60-day process is accrued when sea freight is tied up for security clearance at the port. Yet there are new systems in place that help the process along that the US Government has instituted such as the C-TPAT certification. Certain reputable companies have been given the opportunity to get through customs much quicker by categorizing, sorting, barcoding, and sharing shipping information with the U.S. Government. It’s a moving benchmark in that the government is still tweaking the process and asking for new information, and companies are still subject to inspections. Yet, these importers have a significantly faster customs processing time. Some have reported a savings of 4 days in their supply chain. The cost of the management software and labor to categorize however has not been clearly delineated.


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