As the number of small breweries in America and the American population's taste for varying beer styles continues to grow, foreign breweries have become more and more involved in American beer commerce. Of course, giants like Guinness and Heineken have been a mainstay here for decades, but lately more and more small breweries from Belgium, Germany and even Japan have been introduced and well received in the American brewing scene.
The same cannot be said for the flip-side of the coin. My travels in Europe have proven to me that only the Budweisers and Millers have made it to the other side of the Atlantic. Here, in the storied, historical beer cultures of Europe, they are typically not well received. Many of my European counterparts have become forever jaded against American beer due to the bland taste demonstrated by its macro-breweries.
If only those Europeans could taste the recent explosion of flavors of American craft brew! In the true entrepreneurial spirit, America has become a melting pot of domestic and international flavors, and shrewd, experimental brewers have combined and added to these styles, creating truly American adaptations of old recipes. Could there be a market in Europe or elsewhere for exciting, American craft brew?
First, a few problems. Take Germany for example. This country clearly loves it's beer--events like Oktoberfest center around the delicious beverage and very high percentages of the population drinks in large quantities. Clearly a market, right? Perhaps not. An American micro-brew would have to travel a long distance to be exported to Germany, and many preservatives would be added, reducing flavor and potentially harming taste, and thus, overall business. Second, building a satellite brewery in Germany or selling it in German bars would be tough--until recently Germany beer purity law, the "Reinheitsgebot," prohibited selling or producing any beer in the country that was not made with a very strict bill of ingredients. Even though this law has been since abolished, many proud Germans still adhere to this practice.
Any entrepreneur interested in international commerce would have to be very careful to weigh the pros, cons, and expenses of such a venture. Personally, I believe that it is only a matter of time before delicious America brews peak the interest of international beer drinkers and suppliers. The creativity of brewers here has exceeded anything on the international scale and the question is simply thus; who will be the first to capture the international market--and how will they do it?
Sunday, March 8, 2009
Just in Time Inventory Management; Pros and Cons
JIT, or "Just in Time" inventory management is not for everyone. Consumer sales fluctuate and most customers don't like waiting for their product to be assembled after they have purchased it. Without reading into this strange type of inventory system, it would seem that no one would want to have to deal with a manufacturer operating under this system. But the practice is gaining efficiency, and the idea is becoming more and more widespread.
If a manufacturing company produces products that are then purchased by another manufacturing company, then JIT may be the right fit. If demand is predictable, than you can regulate supply and implement a JIT system.
JIT was developed to reduce inventory. No one likes to have residual inventory laying around that no one wants to buy (take the Carland's example of Chrysler before Iaccoca). With increased automation, companies are learning how to sync production scheduling with demand to eliminate unwanted, un-purchased parts and assemblies. The downside to the JIT system is perhaps a longer wait time, but the upsides are less inventory and increased profit margin.
In order to implement a JIT system, a manufacturer needs dependable source or supply (the firms from which the raw parts come from) and punctual lead times (shipping, transportation of supply sources). A manufacturer will aslo need a detailed bill of materials to streamline production schedules and lead times. For large manufacturers, these interlacing schedules can be extremely difficult to handle and a computer program (expensive) will have to be implemented. Small businesses may consider shying away from JIT due to the inherent cost of the system.
Another downside of the system is the fragility of it all. What if a truck full of supplies encounters a winter storm? Will the entire production line be slowed down or even halted? Time and money will have to be set aside for contracting with multiple redundant suppliers so that the line is not stalled by faulty source of supply and delayed lead times.
With any efficient, automated system, the return on investment is normally pretty high and costs can be lowered in the long run. But it is a complicated business and a great deal of planning must go into the JIT system to ensure that your purchasers are kept happy and employees are kept busy.
If a manufacturing company produces products that are then purchased by another manufacturing company, then JIT may be the right fit. If demand is predictable, than you can regulate supply and implement a JIT system.
JIT was developed to reduce inventory. No one likes to have residual inventory laying around that no one wants to buy (take the Carland's example of Chrysler before Iaccoca). With increased automation, companies are learning how to sync production scheduling with demand to eliminate unwanted, un-purchased parts and assemblies. The downside to the JIT system is perhaps a longer wait time, but the upsides are less inventory and increased profit margin.
In order to implement a JIT system, a manufacturer needs dependable source or supply (the firms from which the raw parts come from) and punctual lead times (shipping, transportation of supply sources). A manufacturer will aslo need a detailed bill of materials to streamline production schedules and lead times. For large manufacturers, these interlacing schedules can be extremely difficult to handle and a computer program (expensive) will have to be implemented. Small businesses may consider shying away from JIT due to the inherent cost of the system.
Another downside of the system is the fragility of it all. What if a truck full of supplies encounters a winter storm? Will the entire production line be slowed down or even halted? Time and money will have to be set aside for contracting with multiple redundant suppliers so that the line is not stalled by faulty source of supply and delayed lead times.
With any efficient, automated system, the return on investment is normally pretty high and costs can be lowered in the long run. But it is a complicated business and a great deal of planning must go into the JIT system to ensure that your purchasers are kept happy and employees are kept busy.
Types of Credit
Credit is always a risky business. Think about it--pay just a little bit, and you get the whole thing up front! Fortunately for business, most of us are honest, punctual people--and for those who are not, there are clearly consequences.
In business today, there are three types of credit which can be used in varying ways by varying types and sizes of businesses. For small businesses, an open account form of sales credit may be the best route for companies to take in the world of credit.
Open accounts are simple accounts based on individual purchases. Credit reviews are not necessary, though always recommended, and the terms of payment are largely customizable. In essence, the buyer will receive a discount for early payment (2% if paid within 10 days) and will be held to a final due date (30 days). These terms are typically worded like "2/10 net 30." Benefits of this credit form is the ease to which it can be monitored in a business, and its terms encourage customers to receive the discounts. Problems can occur if customers pay enough to receive discounts but do not pay the balance within the due date. Businesses must have a game plan to deal with latent customers and stand firm by it--whether punishment may be simply a stern warning or something more serious. Discounts can also be a serious drain on gross margins--and businesses must ensure that this potential loss of profit will become a problem in the future. However, if payment is received quicker thanks to the discounts, it very well may be worth it.
Whereas small businesses may be just fine with their open accounts, larger businesses may wish to increase sales by offering more extended forms of credit. Revolving accounts allow customers to pay percentages of the total sale or minimum payments (10% or $25.00, for example) for a period of time defined by the business (generally multiple months). This helps break up large sales, making it easier for customers to afford the item in question from paycheck to paycheck. Revolving accounts may work wonders for sales (especially if profit can be made from the interest on these accounts), but small businesses should shy away from the subsequent large investment of time and money in developing a formal credit policy and hiring a competent accounting/credit department. Contracts must be signed and enforced, interest must be charged for delinquents, and collections will have to be made one way or the other.
The last type of credit, the installment account, is generally used for large purchases and centers around the use of the signed contract. The contract (reviewed and approved by an attorney), spells our percentages for down payments, completion payments, security agreements (collateral), and even financing charges. These contracts can run from months to years, and contracts imply that court action can be taken should customers default on their contracts. Again, this credit form requires collection and credit departments and contracts should never be taken lightly--always use an attorney. Like revolving accounts, interest can make these accounts profitable given sufficient volume. Those who do not have the volume or sales large enough to warrant installment accounts should steer clear.
In business today, there are three types of credit which can be used in varying ways by varying types and sizes of businesses. For small businesses, an open account form of sales credit may be the best route for companies to take in the world of credit.
Open accounts are simple accounts based on individual purchases. Credit reviews are not necessary, though always recommended, and the terms of payment are largely customizable. In essence, the buyer will receive a discount for early payment (2% if paid within 10 days) and will be held to a final due date (30 days). These terms are typically worded like "2/10 net 30." Benefits of this credit form is the ease to which it can be monitored in a business, and its terms encourage customers to receive the discounts. Problems can occur if customers pay enough to receive discounts but do not pay the balance within the due date. Businesses must have a game plan to deal with latent customers and stand firm by it--whether punishment may be simply a stern warning or something more serious. Discounts can also be a serious drain on gross margins--and businesses must ensure that this potential loss of profit will become a problem in the future. However, if payment is received quicker thanks to the discounts, it very well may be worth it.
Whereas small businesses may be just fine with their open accounts, larger businesses may wish to increase sales by offering more extended forms of credit. Revolving accounts allow customers to pay percentages of the total sale or minimum payments (10% or $25.00, for example) for a period of time defined by the business (generally multiple months). This helps break up large sales, making it easier for customers to afford the item in question from paycheck to paycheck. Revolving accounts may work wonders for sales (especially if profit can be made from the interest on these accounts), but small businesses should shy away from the subsequent large investment of time and money in developing a formal credit policy and hiring a competent accounting/credit department. Contracts must be signed and enforced, interest must be charged for delinquents, and collections will have to be made one way or the other.
The last type of credit, the installment account, is generally used for large purchases and centers around the use of the signed contract. The contract (reviewed and approved by an attorney), spells our percentages for down payments, completion payments, security agreements (collateral), and even financing charges. These contracts can run from months to years, and contracts imply that court action can be taken should customers default on their contracts. Again, this credit form requires collection and credit departments and contracts should never be taken lightly--always use an attorney. Like revolving accounts, interest can make these accounts profitable given sufficient volume. Those who do not have the volume or sales large enough to warrant installment accounts should steer clear.
Tuesday, March 3, 2009
Fraud: A Bigger Problem than We Think?
If the Carlands' assertion that 40% of new venture failures may result from fraud is anywhere near correct, then we as entrepreneurs need to take a long, hard look at our business ethics, our internal controls, and our entire business plan before taking the plunge.
When I first glanced over the chapter on fraud, I compared it to the brewing business. I suppose that drinking a little straight off the tap can be construed as fraud, but what other problems could there be? I trust my business partner--we'll figure it out, right?
As I read on, I came to realize that the possibility for fraud may impact a small brewery much more often then the companies involved in the fraud cases seen on the news, like Enron, etc. What struck me and my business plan was the most common fraud case; an accounting clerk who handles everything related to finances. Neither I or my business partner understand accounting--someone would have to be hired, and the chance of the two of us simply trusting that person with finances would be great. In my opinion, what was just outlined here makes up the biggest reasons that fraud impacts the small business over the larger company by exponential amounts; too much trust, too little control.
Fraud can occur anywhere by anyone, and it is (unfortunately) very important to constantly monitor the jobs of your employees (and yourself) to make sure that the work environment does not begin to induce an environment of fraud. Entrepreneurs need to wear all the hats--ensuring that no one individual has all the keys to a potential fraud without having to collude with others. In a society where even the honest employee can fall down the "slippery slope of fraud," simply trusting others with important finances, solitary work shifts, purchasing decisions and others is naive and potentially damaging.
Technology is making tracking finances and theft easier by the day. Robust inventory/purchasing/sales systems can be purchased inexpensively and will transform a "fudgy" business environment into one of exact numbers and easily tracked processes. Besides helping a business function more efficiently, these are easy ways for owners to manage their employees' day to day habits. Controlling computer access through passwords and heirarchical levels not only secures the network, but establishes a perception in employees that their fraud may be tracked, cutting down on the possibility of ever committing fraud.
Perhaps most importantly, new hires and existing employees must know that the business owners do their jobs with integrity and care about the success of the company, not simply tax write-offs and beach houses on the company dime. A good ethical environment has a trickly down effect and will establish good morals throughout the company.
If businesses work hard to keep internal controls in place, to be wary of who they trust and how much power to give employees, and promote a healthy, ethical workplace, fraud will virtually disappear. Even in the beer business, where to taps are forever tempting, good habits will foster good businesses, and good businesses will create more success for all involved.
When I first glanced over the chapter on fraud, I compared it to the brewing business. I suppose that drinking a little straight off the tap can be construed as fraud, but what other problems could there be? I trust my business partner--we'll figure it out, right?
As I read on, I came to realize that the possibility for fraud may impact a small brewery much more often then the companies involved in the fraud cases seen on the news, like Enron, etc. What struck me and my business plan was the most common fraud case; an accounting clerk who handles everything related to finances. Neither I or my business partner understand accounting--someone would have to be hired, and the chance of the two of us simply trusting that person with finances would be great. In my opinion, what was just outlined here makes up the biggest reasons that fraud impacts the small business over the larger company by exponential amounts; too much trust, too little control.
Fraud can occur anywhere by anyone, and it is (unfortunately) very important to constantly monitor the jobs of your employees (and yourself) to make sure that the work environment does not begin to induce an environment of fraud. Entrepreneurs need to wear all the hats--ensuring that no one individual has all the keys to a potential fraud without having to collude with others. In a society where even the honest employee can fall down the "slippery slope of fraud," simply trusting others with important finances, solitary work shifts, purchasing decisions and others is naive and potentially damaging.
Technology is making tracking finances and theft easier by the day. Robust inventory/purchasing/sales systems can be purchased inexpensively and will transform a "fudgy" business environment into one of exact numbers and easily tracked processes. Besides helping a business function more efficiently, these are easy ways for owners to manage their employees' day to day habits. Controlling computer access through passwords and heirarchical levels not only secures the network, but establishes a perception in employees that their fraud may be tracked, cutting down on the possibility of ever committing fraud.
Perhaps most importantly, new hires and existing employees must know that the business owners do their jobs with integrity and care about the success of the company, not simply tax write-offs and beach houses on the company dime. A good ethical environment has a trickly down effect and will establish good morals throughout the company.
If businesses work hard to keep internal controls in place, to be wary of who they trust and how much power to give employees, and promote a healthy, ethical workplace, fraud will virtually disappear. Even in the beer business, where to taps are forever tempting, good habits will foster good businesses, and good businesses will create more success for all involved.
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