Handling Production Demands
By Elizabeth Fuhrman
Swire’s production centers ramp up for more skus
Beverage Industry’s Bottler of the Year, Swire Coca-Cola USA, Draper, Utah, operates on one resounding foundation: organization. Swire’s headquarters, largest warehouse, largest sales center and vending services are located in Draper. The bottler’s largest bottling plant is a little less than 20 miles away in West Valley City, Utah, just outside of Salt Lake City. The Coca-Cola Co.’s fourth-largest bottler operates a second production facility in Fruitland, Idaho. Between the two facilities, Swire distributes to 27 sales centers that cover portions of 11 western states.
Successfully handling volume in addition to an ever-growing number of SKUs, Swire’s bottling facilities produce 38 million cases a year. The bottling centers plan their production schedules around sales centers’ needs, and ship products directly to the centers. The production centers operate using a forced distribution resource planning system to determine what products each sales center is using and their required inventory levels, says Kurt Fiedler, vice president of manufacturing.
“We schedule off of the resource plan to come up with our product schedule,” he says. “We determine for each sales center what level of product they are going to receive. We try to maintain consistent inventories throughout the system.”
The Draper warehouse is the largest sales center to which the West Valley City (WVC) production center ships. The 165,000-square-foot WVC facility holds two PET lines and one can line. With 115 employees, the facility runs two 10-hour shifts, five days a week, and produced just more than 26 million cases in 2007. From Coca-Cola and Dr Pepper sparkling products to Dasani and Nestea, the WVC production center sustains five to six variety changes a day to produce 60,000 cases daily.
The facility houses two syrup rooms that contain 16 tanks, which range in size from 1,000 gallons to 5,000 gallons, and are adjoined to a water treatment room. The three filling lines begin in the next attached room. Each bottling line features a blending system. One of the PET bottle lines fills 12-ounce, 20-ounce and half-liter bottles at speeds up to 580 bottles per minute. For larger sizes, the second PET line fills 20-ounce, 1-liter and 2-liter bottles, and runs at speeds up to 220 bottles a minute for 2-liter bottles. After the bottles are filled and capped, the lines then split to run two labelers on each line.
The WVC production center’s 12-ounce can line fills at 1,400 cans per minute. After the cans are filled, lids are placed and sealed.
Cans are packaged on a paperboard wrap machine that normally runs at 130 packages per minute, but can pack up to 160 per minute. A spiral conveyor takes the packages up to a palletizer, with each bottling line running its own palletizer. The products are palletized, shrink-wrapped and then moved to the warehouse in full pallets.
Swire recently added a packaging machine to the WVC production center that will place a 12-pack paperboard carton around PET bottles. And at the end of last year, Swire installed another packaging machine to shrinkwrap trays of PET bottles.
Swire’s Fruitland production center provides an additional can line and PET line, and produced 12.5 million cases in 2007. The Fruitland facility bottles the majority of the energy drinks Swire sells, thanks to its 16-ounce can filling capability. The production center also recently added a packaging machine capable of producing four-packs.
Additionally, Swire added a tray shrinkwrapper, which is the same machine that was inserted on the PET line at the WVC production center. In Fruitland, the shrinkwrapper is linked to the can line.
Swire usually spends about $1.3 million annually on production machine upgrades, Fielder says. “We’re usually upgrading things like coders, fillers and support equipment on our labeling machines,” he says.
The good news is that product demand is booming, which will mean some production changes for the company since the WVC production center is nearing capacity. “We are actually looking at a project that would move this facility to our Draper location,” Fiedler says. “We’re hoping that this will take place in 2010. We would have to greatly expand our existing Draper facility to accommodate this change.”
Because of the production crunch, the WVC production center currently shifts some of its volume during the winter to Fruitland to prepare for the upcoming busy season. “We start building some of our inventories the first part of March,” Fiedler says.
The WVC production center’s warehouse is 100,000 square feet. On any given day, with materials coming in and trucks going out, the WVC location can see 75 to 100 trucks in outside carriers. Products do not stay long at the bottling facilities though, Fiedler says. “Products usually move out within three days,” he says.
GETTING THE PRODUCT OUT
Swire Coca-Cola USA’s Draper sales center, part of its Utah division, sells approximately 13 million cases a year. The team that handles the sales and marketing of products in Draper’s territory is housed inside Swire’s headquarters that has the Draper warehouse attached. The 180,000-square-foot Draper warehouse distributes within a three-hour radius around its location, including Salt Lake City.
The majority of Draper’s inventory goes directly to customers in its sales territory, but occasional shipments are made to other sales centers to fill gaps in supply. Additionally, if the WVC production center experiences an over supply of products, these cases are moved to Draper.
The products for Swire’s customer deliveries are picked at night, says Chad Saddler, Draper warehouse manager. When drivers arrive for their routes in the morning, loads are ready to go. Large tractor/trailers with bulk loads for stores like Wal-Mart are the earliest to leave the warehouse and start at 2 a.m. The Draper warehouse handles 13 regular bulk routes, including all reloads (additional products going to the customer) that occur regularly. Bulk reloads are stacked on the warehouse floor between the dock doors ready for the trucks to return and be loaded again. When sales volume is high, a bulk driver can run five or six loads in a day. Typically, a bulk driver averages two or three loads daily.
The remaining 55 “side-load” route drivers leave the warehouse between 6:30 a.m. and 7:30 a.m. The driver supervisor maps out the distribution routes by area. To maintain route efficiencies, two drivers typically are never in the same area. If a route is too big for one driver to handle, Swire will break out a route, which means assigning a utility driver to a route for a day.
The warehouse is essentially a 24-hour-a-day operation, with 56 employees that cover the day and night shifts. Product is organized by package size, and each package is assigned to a specific area in the warehouse. Loaders pick orders at night by using electric walker/rider pallet jacks. A centralized picking area brings efficiency to this work and keeps the loaders from traveling the entire warehouse. When the picking area needs to be resupplied, warehouse employees bring full pallets from the warehouse back stock area.
The Draper warehouse drive-through features large doors with assigned lanes for the various types of delivery trucks as they are checked out and depart each day. On the other side of the drive-through is a receiving area for any product returns.
The drive-through also accommodates trucks when they return to the warehouse to be checked in after deliveries are complete. Bulk drivers usually are finished between 10 a.m. and 2 p.m., depending on daily volume. Route drivers arrive back between 3 p.m. and 6 p.m. The check-in procedure is the same for bulk and route drivers, and includes an accounting of shells, pallets and any returned product from the customer outlets. Bulk and route drivers use hand-held computers for inventory control, delivery invoicing and route accounting. This tool helps to keep discrepancies to a minimum.
When the check-in process is complete, the trucks are unloaded and moved to a different area to be staged for the next day’s delivery loads. When the night crew arrives, employees know where each truck is located and what product needs to be loaded on it.
Managing its stock
The improvements the Draper warehouse has made in the past couple of years have revolved around taking on the additional SKUs Swire is selling. With Swire growing rapidly, more racking was added to handle the demand for storage locations.
“We’re getting close to breaking at the seams,” Saddler says. “Right now, we’re trying to solve space issues by adding more racking. Down the road, something is going to have to be done, but as of right now racking is the solution.”
Improvements to all Swire warehouses are a work in progress. “We are looking at different racking systems,” says Jack Pelo, Swire Coca-Cola USA’s president and chief executive officer. “We are looking at the possibility of adding more automation, especially in our larger warehouses. We are also experimenting with different delivery systems, including the use of smaller pallets for convenience stores that are no longer delivered using side-load trailers.”
Swire’s entire delivery fleet consists of 400 trucks, and distribution in its sizable 11-state territory is a real balancing act, Saddler says. Because the production centers schedule product runs around sales centers’ needs, the sales centers might have to wait if a particular product isn’t due to be produced for a while. The Draper warehouse bridges the gap in these situations by sharing its inventory.
Additionally, because most sales centers cover large geographic areas, Swire operates a number of overnight routes. Drivers cover a lot of miles and many of those miles are void of customers. In the most extreme cases drivers will travel two or three hours before making their first customer delivery.
Swire Coca-Cola USA is an independent bottler and takes that opportunity to handle its own vending equipment needs. Swire operates approximately 15,000 vending machines in its territories.
In Draper, adjacent to its corporate headquarters, Swire operates a full spectrum vending remanufacturing center. Swire refurbishes vending and fountain machines in order to extend the life of its capital assets and occasionally give the equipment an updated look and feel. The center also serves as a central storage and shipping point for all cold drink equipment for outlying sales centers.
Each sales center has a local vending capability to support its market, says Wes Bowling, Swire’s corporate equipment operations manager. The sales center houses equipment inventory for its immediate needs and manages its cold drink customer accounts from there.
Swire uses a 10-year straight-line depreciation on its vending machines, Bowling says. “Every piece of equipment can be expected to be remanufactured within six years, so that adds another three years to the depreciation life of the equipment,” he explains.
Equipment is discarded only when it is beyond repair. “As a refurbish center, we don’t need to get rid of as much equipment as other independents,” Bowling says.
Swire operates a streamlined vending machine refurbishing process, which pulls the machine apart and puts it back together. The facility runs with 27 employees working 10 hour days, four days a week.
“Our people can rewire an entire machine from scratch and that’s a huge benefit to us,” Bowling says.
The refurbishment center features a refrigeration repair area since all coolers and vending machines have refrigeration decks. The center also has a full body and paint shop where employees repair machine exteriors. Swire uses water-based primer and paints that can cure within 30 minutes.
With graphics placed, repairs completed and the equipment completely washed, the machine moves to quality control and endures a complete quality inspection. The checks include tests to make sure the decks are cooling, the lights and buttons all work and that the sales center’s repair request was met.
“Our whole philosophy is that by the time it comes out of here it’s like new,” Bowling says.
Swire has an annual budget of $3 million for new cold drink equipment to help balance the inventory of new and old machines. “We budget for new equipment because we have a continual improvement process and sometimes it is not feasible to remanufacture again,” Bowling says. “In those cases, we’ll go ahead and replace the equipment.”
As an independent bottler, Swire also has the opportunity to distribute other beverages besides Coca-Cola products. In certain vending machines, Swire places both Coca-Cola and non-Coca-Cola products. For example, a machine could hold Dasani water, Monster Energy drinks and Dr Pepper products.
“We actually develop our own graphics on our own equipment that enables us to have additional equipment out in the market,” Bowling says.
In 2007, Swire embarked on a large initiative with the addition of Glacéau’s Vitaminwater brands to its portfolio. Swire purchased around 700 pieces of equipment to support its launch of Vitaminwater. The new Vitaminwater vending machines are distributed to the sales centers based on the size of the territory and projected sales.
In addition to new equipment to support Swire’s new SKUs, Swire is in the process of testing cashless vending machines. With about 150 machines in the marketplace, Swire is testing credit card readers and wireless communication. The machines will have the ability to accept bank credit cards and also feature monitors where the company can display commercials and video advertisements.
“In five to 10 years, we’re going to be required to do that,” Bowling says.
For the test market, Swire selected 150 of its highest-paying accounts, because the solution is not for every machine, Bowling says. “It’s truly an 80/20 rule,” he says.
For a number of years, Swire already has operated pre-paid card systems on vending machines at a number of universities and other large accounts in its territory.