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Background
The craft brewery business is a $14.3 billion industry seeing 10.4% growth in the past
decade. In Oregon alone, during 2012 craft breweries produced 1,296,000 barrels of beer.
Many of these breweries struggle with the growth of their business and weigh the costs
and benefits of investing in equipment such as bottling and canning lines. Oftentimes it
makes business sense to outsource that activity. This is where companies like Craft
Canning and Bottling come into the picture. Craft provides the small craft brewers the
opportunity to can and bottle their beer efficiently without having to invest in expensive
canning equipment.
Owen Lingley started Craft Canning and Bottling in 2012 to capitalize on the his
knowledge of food and beverage packaging and the growing craft brew industry. He
identified a need for a mobile canning service focused on quality control. His business
uses a Wild Goose MC-250 canning line and 16 foot truck to service his customers with
mobile bottling and canning. The business operates within a three-hour radius of
Portland, and has nine employees. The business typically operates for 9 days
consecutively, then take one “spa day” off for equipment maintenance.
Craft brewers find it cost effective to work with mobile canning and bottling
operations because, “for a brewery to purchase a modest canning system, you’re looking
at around a $200,000 investment,” according to oregonbeergrowler.com. That expense is
for equipment only. Additional expenses include operator’s salaries and space to house
the machines, and warehouse space for the empty cans; then there are maintenance costs
over time. With this in mind, local companies hire Craft Canning to come to their facility
and can or bottle their beer.
The canning line is capable of producing 36 to 40 cans per minute. Craft Canning
estimates their line “has produced three million cans of beer and is now averaging 1200-
1500 barrels per month” (oregonbeergrowler.com). In fact, "Craft Canning Owner Owen
Lingley is optimistic that mobile canning will play an increasingly important role in the
transition to cans. ‘Breweries don’t have to buy equipment, invest time in training,
maintain equipment or have it sit idle,’ he explains." (centraloregonmagazine.com/a-can-
do-attitude/). Along these lines, the mobile canning industry is expected to grow 140% in
2013, and 100% in 2014. To that end, Craft Canning is planning to expand, with the
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purchase of a second canning line and development of a yeast lab – additionally, they
may perform more quality control services for their growing clientele.
Regulation
Bottlers like Craft Canning are not regulated in terms of food safety. However, individual
breweries are responsible for regulation. Pathogens are destroyed in two ways, when the
during the brewing process when beer is cooked and then dropped to a chilly 1 degree
Celsius just prior to bottling, and the alcohol and yeast in beer are an inhospitable place
for bacteria to grow. In terms of regulation of the beer industry, the FDA plays a minimal
role. In fact, recent regulations were made on the tracking of spent grain. The grain left
over from the brewing process has been recycled for centuries by using the material as
feed for cows. Recent regulations require breweries to track each batch of spent grain, the
containers used to transport the grain to the farmers, and make sure it does not come into
contact with chemicals or garbage during distribution to farms. Brewers are also
regulated by the Alcohol Tobacco Tax and Trade Bureau to make sure they are paying
tax for what is produced. In that way, every bottle or can that Craft Canning processes for
their clients are tracked and counted. At the end of each bottling run, the machine is
cleaned out chemically to destroy any pathogens.
Products and Forecasts
Since the business model of Craft Canning does not involve production, they are
not directly involved in product recall. Though, when they have been involved the
process was very informal. The brewer asked them to pour the questionable product
down the drain and credited them for the expenses. However, along those lines there was
a recent recall by Bend brewer, 10 Barrel Brewing Co. that presented an interesting case.
The bottles of beer produced in this recall had gone through a process of secondary
fermentation that increased the CO2 pressure in the bottles, creating a situation where the
bottles could explode. The brewer used media to ask consumers to dispose of the beer.
They pulled the product from the shelves of retailers and wholesalers, crediting them.
In terms of forecast, Craft Canning uses a Naïve forecast, essentially guessing that
they will do the same amount next year plus a growth factor. Because of the nature of this
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firm, the size of the market, and the expenses – this is probably sufficient. There is
typically a relatively stable demand, though growth is projected to be high. Moreover,
because of economies of scale, they tend to overstock inventory. Sourcing is done in with
a combination of local and international vendors. The firm purchases glass bottles from
Taiwan and aluminum cans and lids from Olympia Washington. Cleaning chemicals are
sourced from Sandy Oregon, and the Wild Goose machine is made in the US.
The Six Ts of Best Safety Practices
Food safety plays an important role for any enterprise that deals with food related
issues. As the food supply chain becomes longer from a global perspective, managers
must ensure that food safety standards are implemented in order to meet an increase in
demand for quality food. Roth, Tsay, Pullman, & Gray (2008) have developed a list of
six standardized qualitative measurements that food supply professionals can follow in
order to increase quality in the food supply chain: traceability, transparency, testability,
time, trust, and training.
Traceability
First, traceability is a company’s ability to track a product’s flow throughout the supply
chain, all the way to the original source. Traceability must be considered when
determining where the food that is consumed originates. For food itself, traceability plays
an important role food quality. In Craft’s case, packaging ingred ients should still be
traceable. Expected levels of quality are important when determining suppliers because
the consumed product is still packaged and transported in a vessel that is capable of being
contaminated. Owen demonstrated his knowledge of where his packaging components
come from. Owen was able to provide geographical glass suppliers (Taiwan), caps and
lids are sourced relatively closer from Olympia, Washington, and chemicals used in
cleaning and maintenance are sourced locally from Sandy.
Transparency
Next, transparency draws on the openness of a supply chain and the degree to which
the public is aware of internal business practices. Attempts to find a company that was
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willing to divulge internal information was quite the challenge. Several attempts to
contact select companies resulted in missed opportunities. Craft Canning and Bottling lies
on the other side of the transparency gradient. Not a single question went without
receiving an open answer. Owen’s operation was relatively small, so there was certainly a
lack of safeguards in place to protect information. Owen was satisfied with this level of
transparency because he seemed to be happy with an open and honest business which was
apparent with his relaxed demeanor, even as the business owner. Not only was he open to
questions, but he allowed the interviewers unsupervised access to the facility with the
allowance to take pictures. This level of transparency may also be related to the craft
brew industry ideals compared to large-scale beer conglomerates. Craft breweries are
popular because of their support of local communities.
Testability
Testability has to do with the ability to detect defective attributes within a product.
Testability plays an important role in the beer that is packaged, as well as the packaging
itself. Packaging components such as glass and caps can still be defective, which may
lead to loss of quality and food safety. On a customer level, Craft provides various
reports to its customers relating to the packaging process. These reports contain
information such as seam inspections, O2 levels, and ATP sterility. Miller and Galston
(1988) describe ATP bioluminescence detection as a process that requires knowledge of
microscopy, but provides quick and accurate information at a low cost in order to detect
possible spoilage. This level of testability ensures that defect detection is reinforced
throughout the supply chain. OLCC regulations ensure that this information is accurate
and honest for Craft’s customers.
Time
Next, time relates to the duration of processes that emphasizes the consideration of
time between discoveries of problems. Once a batch of beer has been completed, the
consumer may be able to drink the product within the same day depending on who the
customer is and what the customer’s needs are. If Owen bottles at the site of a brewery
that is open to the public, the product may be consumed immediately after bottling. Craft
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utilizes a Wild Goose MC-250 that has the capability to package 60 barrels of beer in 8-9
hours. Craft Canning and Bottling and the customers that they support are relatively small
companies so lead times from initial brewing to consumption generally is shorter than
national companies that may have long warehousing and transportation times. As soon as
a problem arises, there are few points along the supply chain, which allows the craft
brewery industry to recall products relatively quickly. Another aspect that benefits the
beer industry is the shelf life that beer has. Subjective to various factors, beer can last for
about a year if it is properly packaged. This is a long time compared to other drink
products.
Trust
Fifth, trust is an important aspect of the craft beer supply chain; Craft is an important
intermediary of trust within industry participants. Trust is the expectation that all parties
will stay to their commitments, conduct honesty and integrity in negotiations, and remain
fair toward suppliers and buyers. Craft has a high level of trust with brewery customers
because they provide on-site packaging capabilities. Breweries trust that Owen and his
employees will do a proper job during the packaging process while working within their
facilities, and will readily provide accurate information from the packaging process.
Owen specifically stated that he has a high level of trust from his suppliers that provide
packaging components. However, the majority of trust in the supply chain lies within the
relationship between the consumer and craft breweries. Consumers trust that the craft
beers that they consume come from honest breweries that conduct ethical business
practices. Consumers are still allowed the opportunity to build trust with Owen by being
given tours and free product to test. Owen gives consumers and brewery customers the
same ability to build trust in his company. Craft’s website invites anyone to meet for a
beer at the company.
Training
Consumers want to know that the products they consume are coming from people that
are properly trained to handle food safely. Systematically improving knowledge, skills,
and attitudes are becoming increasingly important as food supply chains become longer.
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As Craft continues to rapidly expand, employees are handling more customers. Their
knowledge and abilities should grow with their increase in production. Craft is relatively
small so every employee is cross-trained among many different jobs within the company.
For the most part, everyone works on a level playing field so knowledge is evenly
distributed. New employees are trained on safety and chemical handling; equipment set-
up and takedown; and proper equipment use. The entire training process takes between 3-
4 months depending on the competency displayed during training; new employees work
with a skilled operator until the owner deems them fit for work alone. Craft has a
simplified process that would only change once the company decides to scale operations
as potential customers increase; training has remained the same since the inception of the
company.
5 S of Lean Manufacturing
Lean manufacturing is the process of reducing wastes associated with manufacturing.
Bascle et al. (2010) claim that lean manufacturing in the food industry requires little
capital expenditure and increases employee engagement; product quality can increase
with little effort. Craft has implemented limited lean manufacturing techniques in its
canning and bottling process because of the scale of operations. Large-scale companies
stand to benefit more than craft breweries simply because there is more opportunities to
be create waste in the first place. As Craft grows and increases its production capabilities,
issues relating to lean manufacturing will become more important. Currently, there are
not enough opportunities to greatly impact Craft’s manufacturing capabilities. Craft is in
the first stage of lean manufacturing: a force for modest change (Bascle et al., 2010).
Manufacturing meets expected levels of productivity and lean functions are narrow and
limited. Owen does not have a clear picture of non-value added costs associated with
canning and bottling.
Sort
Sort relates to removing unnecessary items and materials from the production facility,
while eliminating obstacles. The warehouse was slightly messy and packaging materials
were not organized as well as they could be. There was little excess in needed items and
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materials. There were measures in place to sort various processes: there was a red and
blue container that was used to differentiate components during the canning process.
Straighten
Setting items in order relates to ensuring that workflow is smooth and easy and that
items are well organized. The facilities were sparse when we visited, but items that were
there only followed limited order. Boxes were laid out without any set location and the
equipment seemed to be randomly placed. The bottling and canning process itself is
conducted at other breweries. When employees set up the canning line, setting in order is
implemented to ensure a efficient canning line.
Shine
While facility floors were remarkably clean, the facility altogether could use
improvement. It obvious that employees clean after work is completed due to the fact that
maintenance is performed every tenth day, but the extent to which they maintain
cleanliness is unknown. In food production, a clean manufacturing space reinforces
increasing quality standards while marginally using resources.
Standardize
Standardize relates to standard procedures that everyone follows while operating
canning or bottling equipment. This is learned when employees first join the company
and work with experienced employees. Owen has developed standard operating
procedures (“SOPs”) that dictate exactly how equipment is operated, maintained, and set
up / broken down.
Sustain
The final aspect of the 5 S of lean manufacturing relates to sustaining optimal
operating conditions. Owen’s SOPs have standardized how work is completed, but there
must also be checks in place to ensure that they are followed. Owen’s solution is to fire
employees that are non-compliant with SOPs, but the definition of sustain calls for
regular audits to be performed to maintain standards and seek improvement. A key issue
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here is that firing employees can be regressive because replacements must be trained to
the levels of existing employees; there is more time involved with sustaining standards.
Recommendations
Craft Canning and Bottling is a relatively new and small company, but the company is
expected to grow very quickly, along with all industry participants. There are many
opportunities that Owen can take advantage of in order to implement low cost lean
manufacturing techniques to his packaging capabilities and to increase value-added
capabilities of current processes. Four problems that can be addressed: (1) products are
dumped down the drain when they are recalled or when packaging is defective (2) the
distance that glass is transported make it costly – including the high cost of glass itself (3)
easy improvements to the 5 S of lean manufacturing and (4) management issues relating
to firing employees for minor issues.
First, products are dumped down the drain when breweries recall products or when the
packaging process is defective and a batch must be disposed of. This does not pose a risk
to the environment, but Craft can created added value to a output waste that otherwise
would be lost. Craft should find alternatives to dumping product. Beer can be used as an
additive to composts. Beer contains nitrogen that can aid in decomposition. Fan et al.
(2006) have found that a large influx of beer can rapidly increase decomposition from
microbes absorbing protein and digest high carbon materials, producing biohydrogen gas.
Another popular use of beer is bait for various garden pests such as slugs. Compost
collection companies are numerous throughout the Portland area. Craft’s hardest part
would be to find a collector that handles liquid materials; products can be converted into
revenue once a plan is in place with a proper collector.
Next, Craft deals with canning and bottling for its customers, but the industry trend is
moving towards strictly canning for various reasons. Bottles are made from glass, which
is expensive to manufacture, and are heavy. The added weight increases transportation
costs, which is already one of Owen’s highest costs of sourcing materials. The problem is
that there are no glass bottle producers that are close enough to make bottling worthwhile
besides the perception of a bottle versus a can, which is changing. People enjoy bottles
because it gives their craft beer character, but the craft brew industry is slowly giving
9
cans the same consideration. Cans are superior for numerous reasons: (1) cans cost less
and are cheaper to ship (2) cans are easier to source because sheet aluminum is widely
used around the globe so can producers are easier to come by (3) inhibit light transfer to
beer (4) and is virtually 100% recycled.
Third, 5S lean manufacturing optimization can increase productivity without incurring
much cost or excess work. Owen said that lean manufacturing procedures are followed,
but our impression is that this is only conducted to a certain extent. Items can easily be
kept more orderly by simply training employees to organize equipment and components
and by showing the importance of an orderly workplace. Every tenth day the facility
undergoes maintenance and upkeep. If all employees made the facility more orderly at
the end of each business day, cleanliness would be easier to achieve by preventing
messes to accumulate.
Finally, the last issue that we noticed was how employees that do not comply with
SOPs are handled. When asked how employees are kept compliant with SOPs, Owen
replied with, “we fire them.” If a business did not require specialized skills and
knowledge, this would be more feasible (but not ethical). The solution to this is by
developing and implementing an employee improvement program that coaches
employees to improve. Employees take 3-4 months to train so disbanding someone who
might require a little help costs the company added training costs and the chance that
company secrets may move elsewhere. Instead, management can help employees to
improve which reduces costs and instill integrity in Craft.
Conclusion
Craft Canning and Bottling is a beer packaging company based out of Portland,
Oregon. The company started in 2012 and has seen tremendous growth since. If the
company considers our recommendations then they are certainly positioned well for
growth into the future.
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References
(2013, June 26). Retrieved November 22, 2014, from http://oregoncraftbeer.org/2012-
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Bascle, I., Derieux, P., Ducasse, P., Mangent, J., Babel, S., & Edquist, L. (2014, January
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