The Beer Distribution Game (Wholesaler Perspective)

THE WHOLESALER

As the manager of a wholesale distributing firm, beer is your life. You spend your days at a steel desk in a small warehouse stacked high with beer of every conceivable brand: Miller, Bud, Coors, Rolling Rock, a passel of imported beers—and, of course, regional beers such as Lover’s Beer. The region you serve includes one large city, several smaller satellite cities, a web of suburbs, and some outlying rural areas. You’re not the only beer wholesaler here, but you’re very well established. For several small brands, including Lover’s Beer, you are the only distributor in this area.

Mostly, you communicate with the brewery using the same method retailers use to reach you. You scribble numbers onto a form which you hand your driver each week. Four weeks later, on average, the beer arrives to fill that order. Instead of ordering by the case, however, you order by the gross. Each gross is about enough to fill a small truck, so you think of them as truckloads. Just as your typical retailer orders about four cases of Lover’s Beer from you, week after week after week, so you order four truckloads from the brewery, week after week after week. That’s enough to give you a typical accumulation of twelve truckloads’ worth in inventory at any given time.

By Week 8, you had become almost as frustrated and angry as your retailers. Lover’s Beer had always been a reliably steady brand. But a few weeks ago—in Week 4, actually—those orders had abruptly started rising sharply. The next week, orders from retailers had risen still further. By Week 8, most stores were ordering three or four times their regular amount of beer.

At first, you had easily filled the extra orders from your inventory in the warehouse. And you had been prescient; noting that there was a trend, you had immediately raised the amount of Lover’s Beer you ordered from the brewery. In Week 6, after seeing an article in Beer Distribution News about the rock video, you had raised your brewery order still further, to a dramatic twenty truckloads per week. That was five times as much beer as your regular order. But you had needed that much; the beer’s popularity was doubling, tripling, and even quadrupling, to judge from the stores’ demand.

By Week 6, you had shipped out all the beer you had in inventory and entered the hellishness of backlog. Each week you sent out what you could, and sent the stores paperwork equivalents of IOUs to cover the rest. A few of the larger chain stores called you and got what preferential treatment you could offer, but the Lover’s Beer in your inventory was gone. At least you knew it would be only a couple of weeks more before the extra beer you ordered would begin to arrive.

In Week 8, when you called the brewery to ask if there was any way to speed up their deliveries (and to let them know that you were upping your order to thirty truckloads), you were dismayed to find out that they had only just stepped up production two weeks before. They were just learning of the increase in demand. How could they be so slow?

(Image: Week 9 snapshot)

Week 9. You’re getting orders for twenty truckloads’ worth of Lover’s Beer per week, and you still don’t have it. By the end of last week, you had backlogged orders of another twenty-nine truckloads. Your staff is so used to fielding calls that they’ve asked you to install an answering machine devoted to an explanation about Lover’s Beer. But you’re confident that, this week, the twenty truckloads you ordered a month ago will finally arrive.

However, only six truckloads arrive. Apparently the brewery is still backlogged, and the larger production runs are only now starting to get shipped out. You call some of your larger chains and assure them that the beer they ordered will be coming shortly.

Week 10 is infuriating. The extra beer you were expecting—at least twenty truckloads’ worth—doesn’t show. The brewery simply couldn’t ramp up production that fast. Or so you guess. They only send you eight truckloads. It’s impossible to reach anybody on the phone down there—they’re apparently all on the factory floor, manning the brewery apparatus.

The stores, meanwhile, are apparently selling the beer wildly. You’re getting unprecedented orders—for twenty-six truckloads this week. Or maybe they’re ordering so much because they can’t get any of the beer from you. Either way, you have to keep up. What if you can’t get any of the beer and they go to one of your competitors?

You order forty truckloads from the brewery.

In Week 11, you find yourself tempted to take extra-long lunches at the bar around the corner from your warehouse. Only twelve truckloads of Lover’s Beer arrive. You still can’t reach anybody at the brewery. And you have over a hundred truckloads’ worth of orders to fill: seventy-seven truckloads in backlog, and another twenty-eight truckloads’ worth of orders from the stores which you receive this week. Some of those backlog costs come due, and you’re afraid to tell your accountant what you expect.

You’ve got to get that beer: you order another forty truckloads from the brewery.

By Week 12, it’s clear. This new demand for Lover’s Beer is a far more major change than you expected. You sigh with resignation when you think of how much money you could make if you only had enough in stock. How could the brewery have done this to you? Why did demand have to rise so quickly? How are you ever expected to keep up? All you know is that you’re never going to get caught in this situation again. You order sixty more truckloads.

For the next four weeks, the demand continues to outstrip your supply. In fact, you can’t reduce your backlog at all in Week 13.

(Image: Week 14 snapshot)

You finally start receiving larger shipments from the brewery in Weeks 14 and 15. At the same time, orders from your stores drop off a bit. Maybe in the previous weeks, you figure, they overordered a bit. At this point, anything that helps work off your backlog is a welcome reprieve.

And now, in Week 16, you finally get almost all the beer you asked for weeks ago: fifty-five truckloads. It arrives early in the week, and you stroll back to that section of the warehouse to take a look at it, stacked on pallets. It’s as much beer as you keep for any major brand. And it will be moving out soon.

Throughout the week, you wait expectantly for the stores’ orders to roll in. You even stop by the intake desk to see the individual forms. But on form after form, you see the same number written: zero. Zero. Zero. Zero. Zero. What’s wrong with these people? Four weeks ago, they were screaming at you for the beer, now, they don’t even want any.

Suddenly, you feel a chill. Just as your trucker leaves for the run that includes the brewery, you catch up with him. You initial the form, and cross out the twenty-four truckloads you had ordered, replacing it with a zero of your own.

Week 17: The next week, sixty more truckloads of Lover’s Beer arrive. The stores still ask for—zero. You still ask for—zero. One hundred and nine truckloads of the stuff sit in your warehouse. You could bathe in the stuff every day, and it wouldn’t make a dent.

(Image: Week 17 snapshot)

Surely the stores will want more this week. After all, that video is still running. In your brooding thoughts, you consign every retailer to the deepest corner of hell; the corner reserved for people who don’t keep their promises.

And, in fact, the retailers once again order zero cases of Lover’s Beer from you. You, in turn, order zero truckloads from the brewery. And yet, the brewery continues to deliver beer. Sixty more truckloads appear on your dock this week. Why does that brewery have it in for you? When will it ever end?