Supply Management for Candle Making

Building a raw supply management system is critical for growth of a candle business. The system helps identify a few things.

• Where will you source raw supplies for your finished products?
• How many materials are required to fulfill your orders in a given time period?
• When do you need to re-order to allow for delivery without dropping below an emergency stock level?
• What quantity do you need to re-order to maintain your flow without overwhelming your storage or requiring constant re-ordering?

Good supply management systems make sure there is always plenty of stock available for demand. Great systems map the entire flow of raw supplies through the pipeline and optimize storage capacity and customer demand.

Raw supplies are materials that create a finished product, which usually includes:

• Wax
• Wick
• Dye
• Fragrance oils
• Containers
• Non-shipping packaging

Workshops that don’t build a raw supply management system risk creating bottlenecks in their pipeline. Too many supplies requires storage which costs money, whereas too few supplies means there may not be enough material to meet demand. You can lose the confidence of your customers if you don’t have their favorite candle in stock because you ran out of wicks.

Here is an extremely simplified version of how supplies flow through your workshop (non-wholesale):

Let’s talk about the basic components of a supply management system.

Everything has an identification number

Organizing your supplies should be a top priority, and the easiest way to start is to assign an identification number or tag to every unique item.

What makes an item unique? Any variations in the product, including the supplier, color, length, or any other attribute. A 3″ C7 wick should have a different ID than a 6″ C7 wick, even if they’re from the same supplier. Using a Stock Keeping Unit (SKU) number is a common industry practice for assigning id numbers to different inventory items.

Designing a SKU is entirely up to you If you wish to include practical information in the SKU, such as the supplier, category, and size, that’s up to you. Conversely, the SKU can be a unique identification number with no correlation to what it represents. Consider the following example:

Your workshop receives an order of 50 lb case NatureWax C-3 Soy Wax from Northstar Country Candle Co. You could design your SKU to fit the product:

NOR-WAX-C3-50

• NOR– (short name for the vendor)
• WAX– (the product category)
• C3- (sub-category of the product)
• 50 (indication this is a 50 unit size of the product)

…or you could just assign it the next available number in your system.

100-101

There are best practices and recommendations for SKU design across many industries, but find a system that works for you. The purpose of a SKU is to organize your supplies (and finished inventory) so that it is understood, tracked, and accountable throughout your pipeline.

• Use a SKU unique to your business. Don’t use the manufacturer identification number for the supplies because it is prone to change.
• Consider how well your SKU design can be sorted in a spreadsheet or other software. It’s helpful to lead with letters that represent the supplier or product type.
• SKUs can be a great tool when designed well. Too little information removes all meaning from it whereas too much information creates unnecessary overhead and noise in the system.

All types of inventory are tracked

The three main types of inventory are

• Raw supplies. Anything you consume in the product-creation process.
• Work-in-progress inventory (WIP). Products being made but not ready for purchase.
• Finished goods. Products ready to be purchased and sold.

Your business should be tracking as much of the pipeline as possible – everything from how many finished goods are available for purchase as well as the volume of raw supplies available.

There are a lot of solutions on the market for inventory management – find one appropriate for the season of your business. Solutions like QuickBooks integrates into many platforms, like Etsy, to make tracking sales and inventory count very simple.

If you’re just getting started and don’t have a complex network of sales yet, or aren’t ready to invest in more software, consider using a simple spreadsheet to track inventory. There’s overhead in any tool you use, but a well put-together system will actually save you time and optimize the flow of goods through your business.

However you choose to track sales and finished goods, don’t forget to tag and track your supplies. This means literally counting the wicks, measuring the oils, and validating the orders you receive from suppliers to make sure everything arrives as expected. It’ll help you avoid surprises if there are missing supplies, but also to keep your suppliers accountable to your business.

Maintain a count of all raw supplies in the workshop and update it in your tracking system regularly. A very simple example might look like:

SKU	Description	Count
NOR-WICK-C7-6	6″ C7 wick from NorthStar Country Candle Co	58

It’s better to update the “Count” by counting what’s left and updating the total rather than subtracting what you use to create WIP inventory. On the other end of the pipeline, keep an accurate count of your available products. If you’re selling online make sure to update the inventory on every platform.

Product line development can be treated differently

Candle making can be purely retail, but most workshops are actively developing new candle designs. How then do you track inventory that goes directly into development and won’t be sold?

It’s time to treat your operation like the business it’s becoming.

Your research and development is now a department of your company, separate from the production and fulfillment. The “count” of the unique supply should only include anything that will be used to create a finished product to be sold. If you intend on using a portion of the supplies for research and development, track these supplies in a separate bucket.

Your ability to measure throughput of supplies depends on a constant stream of sales. The supplies required for customer orders are usually easier to estimate than the supplies required to create a new product line.

It’s not impossible to keep these records combined – if your product line development only needs a small fraction of supplies there might not be any impact. Candle shops with minimal development don’t have to worry about excessive consumption of supplies that don’t become a final product.

However, if you spend a lot of time and supplies developing new candle products, it’s recommended to treat these as “separate” supplies altogether. This can be done in your SKU with a suffix, such as “-D” for development.

Create a system that works for you

Successful businesses build systems and processes that help scale, grow, identify, and improve every aspect of work. Supply management is one of these systems, just like the workmanship of pouring a candle is.

Ideally, every raw supply in your warehouse (which might be a spare bedroom for smaller shops) exists to serve a specific purpose in one of your products. Anything not stored for development should have a destination in the product line.

Every candle maker should consider the following factors when designing or reviewing their current supply management plan.

Consumption Rate

Every supply is destined to end up in a candle sooner or later. The consumption rate of a supply measures how fast they fly off your shelves and into your products.

Start with mapping every product that consumes a specific supply, how much of that supply it requires, and then estimate the rate of sale of that particular product.

For example, if you use CD 4 wicks in three different products, Product A, Product B, and Product C, it’s possible to estimate how fast you use up the CD 4 wicks in a given time period. To simplify it in a table:

Product	CD 4 Wicks Required	Estimated Monthly Sales	Consumption Rate (wicks/month)
Product A	1	30	30
Product B	3	49	147
Product C	1	10	10
		Total	187

You can calculate the consumption rate per item by multiplying the estimated sales of that item by the required amount of wicks to make that product.

Product A

(1 CD 4 wick required) x (30 sales per month) = 30 CD 4 wicks per month

Therefore, the consumption rate of CD 4 wicks for your product line is 187 wicks per month based on the above estimated monthly sales (which is a sum of all the individual product consumption rates).

If you run your workshop extremely lean with just the amount of materials required, you’d need to provide 187 wicks every month to keep up with sales.

Note: this does not account for growth, emergency (buffer) stock, or lead time to place an order.

Shelf Life

Your supply shelf life is a measure of how long raw supplies last in your possession before they are integrated into a candle. Most candle making supplies can last a long time, but you can only hold so much material at any given time.

Your shelf life determines how much of a particular supply you have before you need to order again. In the example above, 187 CD 4 wicks are required each month. If you purchase 374 CD 4 wicks, you can expect to last two months before running out.

Consider another example. Say you require 1,500 pounds of GB 464 soy wax every month but you can only store 1,000 pounds at a time. Your daily consumption rate is roughly 48 pounds (which is just 1,500 ÷ 31).

This means your storage area can handle about 21 days (1,000 ÷ 48) before being exhausted, and you would have to place an order to refill your supply before the end of 21 days. Make sense?

Shelf life becomes more important as your storage and capacity needs require more elaborate solutions (which usually cost a lot more money).

Lead Time

It takes time to place and ship orders to you. Lead time is how long it takes to replenish your supplies after submitting an order to a supplier.

Each supplier is different and varied in their approach. In your supply management plan, you should account for your expected lead time to avoid running out of supplies.

For example, say your shelf life is 21 days (like the previous example) and your expected lead time is 10 days. At the 11-day mark you should be placing an order to that supplier so the supplies arrive before the 21 days pass otherwise you’ll run out of supplies and be waiting.

Placing back orders is a common strategy for taking customer orders even if you can’t fulfill it right away (think Apple iPhones), but that can be a marketing tactic or sales strategy. Poor planning could force you into a back order situation.

Buffer Supplies

If your plan is to exhaust all of your supplies every month you’re doing something wrong. First, that indicates you aren’t growing because you can afford to match the demand perfectly. Second, it doesn’t account for production or fulfillment issues.

There’s always a need to have additional supplies on hand (besides your research and development requirements). These additional inventory supplies are buffer supplies. Also known as emergency supplies, they grant your business padding to grow if your “monthly sales” are based entirely on the past.

Don’t be too optimistic, but make sure to account for a minimum supply amount when calculating your shelf life and consumption rates.

Conclusion

Supply management is a pillar of your product success. Running out of supplies costs customers, holding too many costs money. The ideal position is a system that optimizes the flow of raw supplies through the finished product and eventually into a cozy living room setting with a customer.

Ultimately, building a robust supply management plan and executing it well allows you to be completely available to customers when they are ready to buy your product. Inconsistent product availability hurts customer’s confidence in your business and never looks good.

A lot of businesses are just sprouting into their niche and don’t have a solid or consistent grasp of monthly product sales. If you’re too small to build around regular sales consider using the 100 candle strategy.

For a given product line, pour a limited amount of candles to sell. As your rise (making sure to price your candles appropriately), watch the numbers. Over time you’ll build consistent numbers that you can model accurate sales projections with.

Candles are a game of momentum, so don’t worry if you haven’t built a cadence to calculate your consumption rate. Just bookmark this article and come back to it when your growth has found a new height and you find a need to manage your supplies with a better system!