I came across a fascinating article on cfo.com entitled “How To Get Beer Across The Border.” This article features an interview with Dan Sullivan, the CFO/COO of Heineken USA. The interview probes a recent “crisis” in Heineken’s beer supply chain.
This crisis came about due to the ever increasing popularity of the Mexican Cinco de Mayo holiday in the USA. More and more Americans are using that holiday as an excuse to partake in alcohol consumption, which apparently poses challenges for beer companies.
Heineken recently acquired the maker of the Mexican beer, Dos Equis, which has grown in popularity thanks to the “Most Interesting Man in the World” commercials. Heineken knew that Dos Equis would be in higher than usual demand on May 5, but simply getting more of that beer from Mexico to the USA in time apparently wasn’t as easy as it sounded.
Explaining the challenge further, Sullivan said “In the month of April, as we’re getting ready for Cinco de Mayo in the United States, it’s produce season in Mexico. When truck drivers picking up beer in Mexico get to the border, they realize they can make twice as much if they take the produce because it goes bad quickly. So they’ll drop the beer and pick up the produce. The beer just sits there until we can get someone else in to pick it up. We were experiencing as much as 70% order drops, meaning they get to the border and drop it.”
Though the decision to outsource in an industry where supplier allegience is so fleeting is worth questioning, Sullivan defended the practice by noting the high cost of using dedicated drivers despite acknowledging the supply risk of depending on “human nature, that individual truck driver.” The three-prong mitigation to this supply risk involved matching produce trucking costs and getting the Heineken team to understand that “the most important thing right now for the next six days is [getting an adequate supply of beer imported], and we’ll figure out the collateral damage later. This isn’t the time to pinch pennies.” These words and actions are clearly an indication that there was a strategic decision that continuity of supply was more important than cost (read that again, new buyers).
Now, if you’ll excuse me, I’m feeling a little thirsty after all this typing on a Friday…
To Your Career,
Charles Dominick, SPSM
President & Chief Procurement Officer
Next Level Purchasing, Inc.
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