Better Warehouse Inventory Management
February 1, 2008
Better Warehouse Inventory Management
By Molly V. Strzelecki
Storage systems provide solutions for handling a proliferation of SKUs
Companies in the beverage industry are consolidating left and right. Big players are gobbling up smaller ones, incorporating new brands into a growing cache of products. Smaller players who remain independent continue to pump out new items for consumers in an attempt to keep up with larger competitors. All of this has resulted in an influx of products hitting the beverage aisles.
But before these products even hit the store shelves, the increase in SKUs has made storage systems more important to beverage producers and distributors than ever before. Most experts estimate that those beverage companies that have consolidated have gone from SKUs in the low hundreds to approaching the 600 to 700 SKU mark in their warehouses.
“The beverage business in whole — from soft drinks to the beer and liquor and wine market — is changing drastically, and they’re doing so in order to survive, especially the individual owners of distributors,” says John Chauncey, director of Boston Rack Inc., North Easton, Mass. “They’ve now got these additional SKUs, which means they’ve got to find better ways to store them, and they’ve also got to find a better way to keep track of the inventory they have.”
But it’s not just the big players who are rethinking how they store their products. While smaller players may not be handling 600 SKUs, they are still handling more products than ever, and efficient and well-managed storage systems are key to their success as well.
“Consolidation in the industry is forcing a paradigm shift in distribution from small operations with a relatively few number of routes to massive operations with hundreds of routes,” says Stephen E. Hoffman, technology specialist, software engineering for Grand Rapids, Mich.-based Dematic Corp. “It is becoming increasingly difficult to run an operation with pallets of floor-stacked products, shoe-string warehouse management software and paper pick lists. To that end, more and more storage racks are being introduced to the warehouse. Warehouse management software is becoming more and more prevalent.”
Hoffman, as well as others in the storage systems industry, points out that technology such as voice-picking and automated storage retrieval systems (AS/RS) are the touchstones for helping production centers and warehouse distributors better manage the continuing growth of SKUs.
New storage scene
An increase in SKUs can mean more business for beverage companies, but it can also mean more errors.
“Some companies have grown 50 to 75 percent in their SKUs in the last year, and that can hurt picking rates,” explains Jeff Stingle, vice president of Vertique, Arden, N.C. “It makes it more difficult and increases errors, and therefore starts to push the need even more for automation in the case picking end of the business.”
Stingle adds that the automation systems lend themselves to helping reduce errors. Different systems have different capabilities, but whether they are fully automated voice-picking systems with robotics or just have the simplest automation for building pallets, they all aid in counting, managing and picking accurately in the warehouse.
The number of SKUs being stored may be expanding, but that doesn’t mean that all facilities are. Increasing product numbers in non-increasing square-footage means that warehouse managers have to get a little creative in their construction. Many storage system providers have introduced high-density storage systems to combat the lack of floor space.
“To create more space within the warehouse, we’ve done more high-density storage, such as the dual-wide drive in system,” explains Doug Hayden, vice president of beverage sales for South Bend, Ind.-based Twinlode. “Companies can put their core brands and reserve storage in, taking that product three- and four-high, whereas traditionally they’ve just been two-high pallets stacked on the floor. It doubles the capacity in the same cube.”
Using space better, Hayden notes, frees up more floor area, and gives companies better case flow to the pick area.
York, Pa.-based Westfalia Technologies Inc. also has come up with an innovative concept to handle storage. Instead of a forklift truck running in the aisle storing pallets on the right and left, a crane picks up pallets and stores them in a rack system. With a dedicated crane per aisle, the complete operation is in a safe and locked environment, while also reducing the amount of stretchwrapping needed to keep the product on the pallet.
“With these fully automated systems, including a long conveyor line to queue the pallets up to store automatically in the warehouse, it’s a smooth transaction, and eliminates a lot of damages, and dramatically reduces the packaging material and shrinkwrapping,” says Juergen Conrad, director of sales for Westfalia.
While advances in storage systems are helping beverage producers and distributors better handle their rapidly multiplying SKUs, some outside factors are influencing how these systems fit in the overall picture.
“Environmental factors have impacted dramatically,” Conrad says. “It is one of the most important factors, and these systems, particularly our system, can be built for smaller footprints. We can go multiple deep with the technology of having two cranes in the aisle. The whole construction of our system can be in a small, condensed and efficient warehouse.” Conrad also notes that Westfalia’s high-density AS/RS allows less dirt in warehouses by eliminating fleets of forklift trucks that track in dirt through rubber tires, gas engines and other components.
Besides impacting the environment, manufacturers and distributors also are taking into account other rising factors that impact how they do business.
“The way products go to market [is a factor], as labor continues to go up, insurance continues to go up and maintaining your employees has gone up,” Vertique’s Stingle points out. “Because of the cost of fuel, anything you can do to deliver better and be more efficient on the road is going to impact across the bottom line.”
“Steel prices are always a concern,” Hayden notes. “They’ve been rising for the past few years. However, we have not seen that diminish or cut back on sales. If anything, it’s something that our clients are having to plan for and deal with the increase in steel cost and availability of steel, because there is still a need for them to add pallet racking or add storage methods to accommodate the trends that are happening.”
Storing for the future
For those providing storage solutions, continued consolidation in the industry means that while business will continue to increase steadily, it is imperative that innovation and new technologies increase as well. Voice-picking and continued solutions for high-density storage are leading the charge.
“If the model is correct, you’re going to see an increase in SKUs from the larger beverage companies so that they’re better able to present more options to their customers at the storefront,” Hayden says. “The trend seems to be at some point perhaps automating the pick areas, which we’ve certainly seen on the production side, with very cutting-edge technology.”
Efficiency is one buzzword for the future of storage systems, as the proliferation of SKUs grows and managing them gets trickier. Conrad notes that technology in Europe is starting to show itself here in the United States.
“I see the same kind of efficiency and productivity from companies [in the United States] because in our world today everything has to be delivered the next day,” Conrad says. “What you purchase today by a mouse click, you want to see in the store the next day.” He adds that warehouse management software is also a key factor in the efficiency game.
“You can’t handle the amount of products and pallets without having a completely organized and automated warehouse,” he says.
Software that interfaces with any host system, can completely organize the warehouse and, in Westfalia’s case, control the cranes doing the picking, is essential for a good storage system.
As beverage companies big and small continue to increase their SKUs, new technology and innovations in storage systems aren’t just good inventory management practices, they’re essential for running a smooth operation.