For coffee roasters, maintaining a steady, high-quality supply of green coffee is essential. Many roasters traditionally rely on importers or suppliers to track their contract drawdowns and inventory levels, trusting that these logistics are managed accurately.
While this method may seem convenient, leaving contract management in someone else’s hands can lead to unforeseen issues, often impacting both the roaster’s budget and their business operations.
In a time when market prices are more volatile than ever, with supply chain disruptions and the removal of traditional safety nets such as spot coffee stocks, it’s critical for roasters to start taking control of their green coffee contract management. Here’s why:
1. Avoid Unexpected Costs from Shortfalls or Overruns
When a contract isn’t meticulously managed, roasters risk running short or ending up with excess stock. Here’s how each scenario impacts the bottom line:
Shortfalls: If a contract runs short, the roaster often has to cover additional costs to source coffee at spot prices, which can be significantly higher. In an already competitive market, these unplanned expenses add up fast, especially when coffee prices rise suddenly. Or worse they are not able to access the same grade or quality of product in time and have to reduce the quality of what they are roasting and serving.
Overruns: On the other hand, if the inventory exceeds the contracted amount, the roaster may be stuck with coffee that doesn’t align with their forecasted demand. Holding onto excess coffee can impact cash flow, storage costs, and even having to pay additional carry fees for these extended periods.
By actively managing these contracts, roasters can avoid these costs, ensuring they only pay for what they need and always have a clear view of their stock levels.
2. Gain Transparency Over Your Forecasting and Budgeting
Accurate forecasting is essential for any roaster, especially given the dynamic coffee market. Having a clear view of your contract drawdowns allows roasters to better plan their coffee needs, adjust budgets, and respond to changes in demand.
Combined with a structured budgeting plan and pricing framework roasters ensure that as their green coffee costs vary it can seamless be transferred through to their wholesale and retail pricing.
3. Reduce Dependence on Importers’ Systems
Relying solely on importers’ systems means roasters must trust that every transaction and inventory update is flawlessly tracked on their behalf. Yet, even the most reliable supplier may not provide the granularity of information roasters need to optimise their operations. Without first-hand oversight, small errors, delays in updates, or mismatches in drawdown reporting can lead to costly discrepancies that land on the roasters side not the suppliers.
Bringing contract management in-house with a dedicated tool empowers roasters to reduce these risks. This way, they don’t need to depend on a third-party’s timeline or approach to tracking their stock, giving them an extra layer of accountability and confidence.
4. Adapt Quickly to Market Fluctuations
The coffee market is unpredictable, and price spikes can significantly affect roasters’ budgets. When a roaster knows exactly how much coffee remains on contract and when the next purchase is necessary, they’re in a better position to act strategically, locking in prices before further market changes.
As spot coffee prices rise, having real-time access to contract data means that roasters can avoid buying at inflated rates, which can impact product pricing and customer satisfaction. This agility isn’t achievable if a roaster relies on an importer’s lagging updates or inventory counts.
The Pitfalls of Not Taking Control
Failing to manage green coffee contracts independently can lead to several pitfalls:
Higher Costs: Unplanned expenses to cover inventory shortfalls and reliance on high-priced spot purchases.
Inefficiency: Missed opportunities to align green coffee purchasing with production forecasts.
Risk Exposure: Reduced agility in a volatile market, potentially harming the roaster’s margins, product quality and market position.
Two Solutions for Managing Green Coffee Contracts
There are two main approaches for roasters who want to take control of their green coffee contract management:
1. Manual Management: Costly and Time-Consuming
Some roasters choose to manage contracts manually. This involves meticulously tracking inventory and contracts with spreadsheets or other traditional methods. While possible, this approach is extremely time-intensive and prone to human error.
Manual management requires hours of labor, duplicated data entry, and ongoing reconciliation with importers’ records. Small mistakes can lead to big financial surprises, and it’s challenging to keep forecasts and budgets up to date when data is not automatically synced with real-time changes.
2. Using Technology to Streamline and Optimise
Alternatively, roasters can now use a tech-driven solution like Greensquare’s Position Manager to streamline contract management, reduce manual work, and improve accuracy. Greensquare offers real-time access to contract data, streamlining order placement and updating inventory in one centralised place.
By using technology to handle these logistics, roasters save time, avoid costly mistakes, and gain the agility to adapt to market fluctuations and forecast more accurately. With Greensquare, contract management becomes not only easier but also a source of strategic advantage, allowing roasters to respond proactively to market changes and stay within budget.
In today’s competitive coffee industry, the stakes are high.
Roasters who take control, can protect their margins, save time, and focus on what they do best: roasting, serving and selling exceptional coffee.
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