Focus on the wine & spirits buyer's job: what are the challenges in a fast-changing world?

In the world of spirits, the purchasing & supply manager is rarely the subject of media articles, unlike marketing or distillation, for example. Yet his or her mission is essential , as margins are built up when materials are purchased, not when the product is sold.

So the supply problems and cost increases we experienced between 2020 and 2023 put the business in the spotlight at a time when business continuity was suddenly compromised.

This focus on an essentially female profession was made possible by the testimonials of half a dozen purchasing managers working in this position at distilleries, some of whom I have transcribed anonymously. The aim is to understand the challenges they face today.

Given the growing complexity of the purchasing profession, is it sufficiently valued? Is it not a key element in the resilience of companies in times of crisis?

The position of Purchasing & Supply Manager is at the crossroads of various departments with which you must interact: sales, quality, production, management & logistics. Hence the importance of knowing how to communicate and use diplomacy with all your contacts.

However, the buyer's role in production also depends on the company's vision and strategy. He or she may also take on certain tasks, such as quality control, regulatory monitoring and QHSE policy, or even packaging development. So, the workload depends both on the human resources available and on the company's organizational chart.

The buyer is therefore at the heart of the company's decision-making process, while at the same time acting as the privileged interface between the company and its suppliers.

"Being a buyer is very interesting because it's a daily challenge. Over the years, we've created partnerships with our suppliers".

In addition to maintaining stock levels to guarantee production, the purchasing manager selects the suppliers who will participate in the company's value chain. These supply-chain partners are part of the distillery's ecosystem, which is why it is so important to maintain close, privileged links in order to ensure the best prices, services and lead times.

Traditionally, the buyer's main missions are to optimize costs, increase profits, constantly evaluate the supply chain, manage inventories and negotiate contracts. All this requires constant monitoring to ensure that suppliers are offering the best options, and to anticipate changes in the supply chain.

But other prerogatives will be added to their workload over time.

The buyer's job has become even more complicated since globalization has made it necessary to be familiar with international trade regulations, exchange rates, price fluctuations and geopolitical events that affect the availability of materials and the security of supply. It also requires technical expertise in the manufacture of the materials we buy, and mastery of the IT tools increasingly used in purchasing management (to the detriment of human exchanges).

Similarly, social and environmental considerations are playing an increasingly important role in company policy. This additional pressure calls for changes in packaging, using new materials to reduce product weight and cut production costs.

Hence the need for companies to entrust the position of buyer to people with a wide range of expertise, like Swiss Army knives. At the same time, however, the job is becoming increasingly complex, requiring other qualities that are not imparted by any diploma, but rather are intrinsic to the individual and his or her experience.

How can you manage purchasing when economic and geopolitical fog prevents you from steering by sight?
 

It's important to remember the difference between complicated and complex:

In his formidable book "Les 10 Règles d'Or du Changement" (Editions Eyrolles, 2014) , Eric Delavallée compares a complicated object such as a Boeing with the complexity of a dish of spaghetti. On the one hand, we have a predictable, controllable world, because despite its hundreds of thousands of parts, an airplane can be reproduced identically. And on the other we have our pasta, which is poorly predictable, never completely controllable and not reproducible.

By accepting the idea that these two dimensions are involved in every project, and not just what can be reduced to analysis, we give up trying to control every molecule.

It's not that classic project management or purchasing management tools aren't important - they remain essential. But if we add a new string to our bow, which is the ability to accept change and take advantage of the unexpected, then we embody leadership.

Revealing the leardership of the purchasing manager - isn't that what's at stake here, behind the events that have brought this profession out into the open?

Among the qualities required - autonomy, rigor, organization, market knowledge and negotiating skills - it's resistance to stress that makes all the difference in times of crisis. Events are converging to form a storm that will severely test the nerves of our purchasing managers.

"Today, optimizing costs has become very complicated. The market is uncertain due to inflation, so it's difficult to make forecasts. We can no longer rationalize purchasing as we used to. We used to be able to buy in volume, negotiate prices and maintain a permanent stock. This is no longer possible. Supply tensions and price hikes have been a disaster for our business. The only way to adapt is either to cut our margins, or to pass on these increases to the consumer".

Events will converge to form a storm that will lead buyers to move to the frontline:

The management of the Covid sanitary crisis, whose successive confinements have led to the disorganization of the logistics chain (production, transport) and highlighted the weakness of our system, which is based on the absence of stocks and the concentration of materials production in a limited number of sites (paper, cardboard, etc.).

The creation of the European energy market, designed to create artificial competition to the detriment of EDF, which produces the cheapest electricity in the world. This leads to abusive billing of electricity by unscrupulous energy companies that don't even produce energy (generalized price hikes).

The European Union's "boomerang" sanctions against Russia interrupt the supply of cheap energy paid for in € (gas, oil), which has to be bought elsewhere at higher prices and in $. Yet the economy is all about transformed energy.

Inflation (increase in the money supply) caused by the abusive use of the printing press following the 'whatever it takes' policy, accentuates the devaluation of the euro (more expensive non-EU products).

These events between 2020 and 2023 are the fruit of political decisions that impact the entire economy, including the spirits sector. These sometimes absurd and often very costly decisions are not implemented democratically, but rather without consultation. As a result, it's becoming difficult to think about the future in the presence of an administration disconnected from economic reality and with no real long-term vision. This is what differentiates our era from the more predictable 'world before'.

Added to this are the various conflicts that testify to a major geopolitical shift currently underway, leading to a new multipolar world. We're talking here about changing alliances, deglobalization and the repatriation of means of production after 50 years of forced market relocation (if low-cost energy permits).

So, how do you pursue your purchasing mission in a world of uncertainty?
 

The men and women who make up the workforce of wine and spirits buyers have had to demonstrate their ability to adapt in order to avoid business interruption and maintain company profitability. The result has been a sharp increase in their workload.

Imagine, for a moment, orders placed with no announced lead times or fixed prices. Changes to bottle models made in a hurry, which in turn require changes to corks, label shapes, cases and boxes. So many suppliers to canvass, quotes to request and compare, tests to carry out for each affected product, and new references to register. And sometimes, suppliers' phones ring off the hook because they're no longer taking on new customers...

The destabilization of supplies has also led to a temporary drop in the quality of certain materials, due to the infernal pace of production to meet demand, or to production conditions disrupted by the war in Ukraine (glass, for example).

"Yes, I have the impression that we are encountering more quality problems with certain materials. Some of the problems are due, I think, to the quality of the basic materials, in an attempt to maintain or limit prices, but also to all the changes in materials that have to be in phase with the environment, which suppliers find difficult to master".

Communication and trust between distilleries and suppliers were the first casualties of supply tensions and energy price rises. This was followed by internal tensions between the purchasing departments and production, which despaired of receiving materials in time for the scheduled bottlings.

Is the balance of power shifting more towards suppliers?

"Personally, I don't think there's a power struggle between buyers and suppliers. I'd rather talk about collaboration. To buy well, you need a good relationship with the supplier, and if everything goes well, everyone benefits. Obviously, with some suppliers, this is more complicated to set up".

Buyers' reactions to this question vary according to their experience in recent years. Those who have established solid relationships with suppliers, despite the automation of processes, may have come through the crisis with fewer constraints. But of course, it also depends on whether your supplier is a monopoly or not, and on your company's weight in the balance of trade.

"Today, the buyer is dependent on the supplier. Gone are the days when the customer is king!"
 

Now that our Western economies have fallen into recession and cognac sales are slowing down, demand is slowing down, and this time suppliers are in turn phoning distilleries to take orders. Orders are also declining, due to the overstocking caused by supply tensions, which must now be disposed of...

New challenges are opening up for buyers, particularly in the field of responsible purchasing, which revolves around three guiding principles: improving processes, improving risk management and improving sustainability. The ecological transition in particular implies changing procurement habits by opting for materials that have less impact on the environment or use less energy (end of lamination, fossil materials, virtuous materials, etc.). Re-use (consignment) and the purchase of grouped materials are new possibilities.

The centrality of the buyer's position within the company and good purchasing management habits guarantee the brand's strategic deployment in times of crisis. But the ability to cope with stress is essential to avoid one burn-out after another. It is therefore in a company's best interest to offer the right working conditions and remuneration to enable it to fulfill its missions.

Finally, it was through my work with buyers as a project and packaging development manager that I specifically developed the bottle stock buy-sell ads to offer distilleries supply solutions in times of shortage and cash recovery in the event of overstocking, while at the same time coping with inflation.

Find ads and stock lists for more than 600,000 bottles & decanters immediately available here :
 

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JEROME SAVOYE

Thanks to the purchasing managers who helped me write this article.

Written without AI.