“Imagine if HP guessed at what Best Buy needed to fill its shelves on any given month without talking to the company or looking at any hard data,”
-Steve Hershberger, Chairman & CEO of SteadyServ Technologies.
While we are all well acquainted with the TOM Beer Challenge and the famous Bullwhip Effect, I bet that most of you did not know that this game was developed at MIT back in the early 1960’s – shocking! Similarly, I also bet that most of you aren’t aware of SteadyServ Technologies, the latest Internet of Things (IoT) startup attempting to solve this real-life problem.
Inefficiencies in the Beer Industry
“Our inventory management systems are very lacking. In many instances, we don’t know what we have, we don’t know how much we sell, and we don’t know when we sell it. We lose sales because our customers want what we don’t have.”
15 percent to 20 percent of every typical keg delivered to retailers ends up as waste. Considering that draft beer is by far the largest contributor to a bar’s margins and that a total of $23 billion worth of draft beer is sold each year at 340,000 locations in the U.S., a significant incentive exists to improve operational efficiencies.
Studies have also demonstrated the importance of maintaining beer inventory in bars level – when a patron’s beer choice is not available, they tend to drink 1/3 less beer.
If you were a bar manager, how would you know how much beer to order from your distributor? The current practice requires the bar manager to head to the refrigerator to count kegs. Since he is unable to see how much beer is left in each keg, he must lift each keg to see how full it is—essentially making the ordering process a guessing game. In some instances, this back-breaking task of assessing inventory in order to place their orders takes a minimum of two and a half to two hours a week, per location. In practice, if the beer rep doesn’t get the order in time, the rep will place it for them by guessing.
Introducing the SteadyServ iKeg
How does this IoT technology work?
Kegs are first tagged with a radio-frequency identification tag that has information on the keg’s contents (brewery, type of beer, volume, age). Once the keg is delivered to a bar, it is placed on a special sensor which measures the keg’s weight. As the beer gets depleted, real-time data is automatically aggregated and sent to the cloud where it is accessible to bar managers and distributors via the iKeg app interface. This technology takes the effort and guesswork out of assessing inventory, and by knowing exactly when a keg is going to run out, this eliminates the dual problem of unhappy customers and scrambling bartenders when a keg “kicks”. Customers pay $30 a month and up per location for access, plus about $4 a keg for the hardware.
Click here for a promotional video featuring the SteadyServ iKeg.
In addition, when combined with sales data, anonymized competitor data, and consumer demographic data, this technology provides powerful analytics capabilities:
- Enhanced order accuracy by forecasting beer demand based on current consumption levels
- Understanding timing around beer consumption (different styles popular at different times and days) and when to launch new products and promotions
- How beers are selling compared to competitors
- Predicting combinations of beers that appeal to a target demographic
From the discussion above, it is clear that retailers (bars and restaurants) are the big winners here, with the patrons benefitting as well but to a lesser extent. The SteadyServ website claims that breweries and distributors are big beneficiaries as well but I remain somewhat skeptical. If a real-life supply chain resembled that of the TOM exercise, with just one entity in each part of the supply chain, this would indeed solve the problem since all upstream entities have complete information on total retail demand. However, since retailers vastly outnumber breweries and distributors, and given the limited penetration of the iKeg technology, distributors and breweries are unable to plan accordingly given the small, non-representative glimpse into true retail demand.
In order for the whole supply chain to benefit from this technology, penetration must be increased to capture a significant proportion of retailers. Encouraging uptake at any scale is challenging and early successes must be demonstrated ASAP. One important first step, in my opinion, is to experiment on a small US region with a local ecosystem of breweries, distributors, and retailers (possibly Vermont, Oregon, or Colorado), encouraging uptake through subsidies. Armed with some success stories, SteadyServ can pitch the iKeg to larger distributors and breweries, players with deep pockets who stand to gain most by supply chain optimization.