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Part Three
Planning and control
Short case
Croft Port
Not all inventory is purely a source of cost. Some
industries rely on it to add value. Oporto, a Portuguese
city famous for port wine is awash with inventory. While
wines in the style of port are produced around the world
in several countries, including Australia and South Africa,
only the product from Portugal may be labelled as port.
One of the famous port brands is Croft Port which was
founded in 1678. It owns one of the best wine-growing
estates in the Douro valley, Quinta da Roêda. When
the grapes have been picked they are crushed at the
wineries (in the Douro valley). They used to be crushed
by treading by foot with a row of people holding on to
each other and walking back and forth across the granite
‘baths’ filled with the grapes. Now mechanical methods
are used. As the grapes are squashed fermentation
begins as the natural sugars in the juice are converted
into alcohol by micro-organisms (yeast) in the grapes.
The grape skins are retained during crushing to ensure
their colour and tannins are released into the wine. After
a while the skins are allowed to float to the surface and
the fermenting juice is drawn from underneath. It is then
mixed with a neutral grape spirit (fortification) to raise
the strength of the wine and also stop fermentation in
order to preserve some of the natural grape sugars in
the finished product. The wine is then stored and aged
in barrels in the cool dark caves (cellars) in Vila Nova de
Gaia to allow the wine to mellow and develop its flavours
before being bottled. There are essentially two styles of
port, wood-aged and bottle-aged. Most port wines are
wood-aged in oak vats or casks for five or six years for
full-bodied wines or for 10–20 years for tawny ports.
They are then bottled and ready to drink. The main type
of bottle-aged port is vintage port, the best and rarest of
all ports. This is made up of a selection of the very best
grapes from the harvest of exceptional years. Although
this port is only stored in the oak barrels for two years
it is then allowed to mature and age in the bottles for
many years, often decades.
Inventory profiles
An inventory profile is a visual representation of the inventory level over time. Figure 12.5
shows a simplified inventory profile for one particular stock item in a retail operation. Every
time an order is placed, Q items are ordered. The replenishment order arrives in one batch
instantaneously. Demand for the item is then steady and perfectly predictable at a rate of
D units per month. When demand has depleted the stock of the items entirely, another order
of Q items instantaneously arrives, and so on. Under these circumstances:
The average inventory =
Q
2
The time interval between deliveries =
(because the two shaded areas in Fig. 12.5 are equal)
Q
D
The frequency of deliveries = the reciprocal of the time interval = D Q
Figure 12.5 Inventory profiles chart the variation in inventory level