The Impact of Hidden Costs on a Wine Business

12th February 2024

Have you ever worried about hidden costs within your wine business and how those may be impacting it? Errors that result from disconnected processes or inventory management blind spots will accumulate, and have an impact on your income and bottom line. If that applies to you, know that you’re not alone. It’s a practical reality that impacts a great many wine businesses. Here we propose a checklist that can improve top and bottom lines, as well as fortifying operations.

Quantifying the impact isn’t precise maths, but grab a pen and paper (or spreadsheet!) and let’s try to work through some common scenarios to give an idea of how to go about a review.

Hidden Costs

Manual Data Entry:

Manually copying over information across systems is time-consuming and error-prone. Data entry keying errors not only incur costs but also have significant indirect consequences on stock positions and operating margins. Inevitably, mistakes are common when your team is put under pressure by working this way, which can also cause indirect impacts on employee satisfaction.

Estimate the weekly hours spent on manual data entry. What’s the cost of this in terms of time and potential errors as a result of mis-picks, re-deliveries, overselling and gaps in stock availability?


Multi-Channel Selling:

If you are engaging with your customers and addressable markets via multiple sales channels (phone and email orders, eCommerce, marketplaces and bricks & mortar shops), you may wonder how effectively your inventory is being managed across channels. For omnichannel to work as it should, your data needs to be mastered within a single database. Is that how you operate or are you still relying on manual updates through CSV files or spreadsheets? 

For instance, you sell through marketplaces, except because your mastered inventory isn’t connected, they don’t automatically update from your adjusted stock position. Now, let’s say you sell a case through a marketplace, but the same case also sells seconds or minutes later through your own eCommerce. Maybe you can get off the hook or maybe it’s the sort of marketplace that doesn’t allow for mistakes. In which case you’re oversold. Most wine businesses have been there. It’s very easy to double sell if you’re not on a properly multichannel business management system with mastered inventory that gets updated and in turn updates all sales channels immediately.

What do out of sync inventory positions cost your business?


Wine Logistics:

The bottom line is directly impacted (in either direction) by the management of wine logistics

Shipping of multiple purchase orders – potentially comprising scores of order lines and hundreds of cases of wine – often demands partial picking of lines or part quantities from those purchase orders due to what’s ready to ship and what a wine importer needs to deliver into stock to entirely fulfil on and off premise demand.  

In this case, the attribution of shipping and logistics’ overheads, down to the bottle level, matters to stockholders looking to keep a firm grasp on realisable gross margin. Without this degree of granular attribution and control businesses can’t practise supply chain planning optimally, may experience lags in reporting, and have to make do with approximate cost of goods.

Quantify the costs associated with small variances vs actual cost of goods, and supply chain planning issues that could result in lost sales and stock discrepancies.


Client Storage:

For independent specialist merchants, managing client storage (reserves management) is a great way to cement relationships and lay the foundation for future brokerage/ consignment opportunities, leveraging the value of managed client stocks and making it a simple, satisfying process for clients. It’s a service that private clients value but without a proper application adapted to this service offering, it quickly becomes unprofitable and undermines client relationships. That’s why so many wine businesses have ceded this activity to third parties, yet in doing so, lose a degree of control.

Assess the financial impact of system workarounds, slow payment of invoices and inefficiently managed storage processes and related updating of client inventories.


The Cost of Maintaining the Status Quo

Business management software, also termed ERP, ought to make businesses more efficient, as well as being capable of supporting business development initiatives.  But so often ERPs actually hold back a business. Inflexibility, inadequate data management methods or sales channel blind spots mean that businesses can become saddled with software that prevents them from developing their proposition and go to market activities.

There’s not much that’s worse than inventory management and order processing software that staff have to fight against. Yet inaction is common. Persistence with inefficient operational software typically stems from factors such as a fear of, or resistance to, change; worries about the risk of a failed migration to a more adapted business operating platform; worries about organisational knock-on effects; or even a fear of technology itself. Understanding the drawbacks of maintaining inefficient software really matters. 

The cost of inaction can be significant. Lost opportunities for growth due to not being able to execute market development plans; poor process management that manifests itself in even poorer client service and inadequate relationship management post-sale (a widespread problem we researched here); an unnecessarily high cost base as a business plugs the overhead of using poorly adapted software with people; not to mention software that’s reaching an end of life phase with all the inherent business risks that poses (lack of support, hurriedly migrating when coping with the consequences a security lapse).

Business owners and leaders generally know deep down when it’s time for change. At the point of consensus around a need to change now, we strongly advocate selecting a software partner that understands your market. Go for purpose-built software as a service (SaaS) that reflects best sector practise; a fee structure that justifies itself based on the business improvements it’ll unlock; a platform that helps your staff to be more efficient and that could be a factor in team retention; one that is user-friendly and capable of supporting business improvements and expansion. These are not unrealistic demands, and don’t need to come with custom-level fee structures. 

To conclude, addressing hidden costs demands an appraisal of your business processes, detailed input from those staff using software as part of their daily routines, and according to the conclusions you reach, a process of evaluating market choices to software that will genuinely underpin operational and process improvements, consistently better post-transaction customer service, and that can open up paths to growth. 

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