The fundamentals of green coffee buying
Green coffee bags. Image: Vanessa Facenda
Despite attending previous World of Coffee shows, this year was my first Specialty Coffee Expo, and it offered a treasure trove of coffee tastings, innovations, networking and lectures.
One of the lectures I attended was particularly informative. Jay Kling, independent consultant for Efficiency Coffee, was among the speakers who opened the lecture programme on the first day (12 April) of this year’s SCA Expo, with his talk on ‘Inventory Management Fundamentals for Green Coffee Buyers.’ Kling spoke about the ways in which buyers, particularly roasters, can mitigate issues surrounding product flow and inventory. Using demand protections ensures buyers can accurately purchase green coffee, knowing exactly what and how much of certain beans they need, as well as when to move stock from the warehouse to their own storage ready for roasting. Seasonality needs to be addressed to achieve this, said Kling, as “demand will be stronger in certain times of year,” such as the autumn ‘coffee season’, November-December holiday season, and cold brew season. Data helps forecast seasonality and should be accounted for in demand forecasts, however some discrepancies have to allowed for here as it is dependent on weather and that can often be unseasonal.
Kling’s next stratagem was Safety Stock. He advised that companies should keep extra green coffee stock inventory to decrease chances of running out due to unexpected demand or a supply chain issue. The precise amount kept in surplus will depend per business, Kling explained, and this can be estimated with the following equation: lead time from importer (weeks) x average weekly demand. This also means these figures should be customised per product as they are likely to have different lead times or demand. Kling also added that the following questions should be asked and considered: “How important is the product for your operation? Can I replace a product with another if I run out? And what is the max lead time for receiving the product?”
Inventory reconciliation was the next of the fundamentals, which is essentially manually counting the coffee that you have in store. This is to offset common inventory mistakes such as incorrect data entry eg, bag size, using the wrong coffee, or the wrong coffee sent from the warehouse. Inventory reconciliation keeps on top of this.
It is also essential to be aware of your green coffee storage capacity, said Kling. This constitutes the max amount of coffee that can be stored in a facility while allowing for normal and safe operations. This also has to take into account for shipments and storage of non-coffee products. Having this knowledge optimises movements from the importers warehouse and informs decisions about offering new products.
Kling’s final stratagem was calculating roasting capacity. This can be done using the formula: batch size x number of roasts per hour x hours of roasting per week. Utilising roasting capacity allows you to evaluate how much you are roasting vs how much you could be roasting; it needs to be manageable but profitable, and if capacity is not being met, that is when options like private label roasting can be implemented.
Kling concluded the talk with the take away that we should be looking at the “Coffee industry through the eyes of agroforestry,” as “the coffee industry is not a mono-culture,” and has many diverse moving parts that need to work together to ensure its success.
- Kathryn Brand, associate editor, Tea & Coffee Trade Journal.
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