No longer a buzzword in the beverage industry, SKU proliferation is impossible to ignore. Pressure to adapt processes to accommodate its effects is felt by manufacturers and distributors seeking methods to best suit their operation.
“Product volume may or may not be going up, but complexity is going up everywhere, which is driving up manufacturers’ and distributors’ costs, and affecting delivery,” said Greg Ellis, president of Precision Distribution Consulting (PDC), Denver, and York, Pa. “Picking products from the warehouse is more productive if you get five of something 10 times for 50 cases, than if you have 25 different SKUs and pick two of each. Order complexity is the single biggest factor of productivity in warehouses.”
Ellis says SKU proliferation is necessitating different approaches than those previously taken.
“If you sell more items you already carry because you’ve grown your volume, you simply do what you did before, more times,” he says. “But if you’ve never sold it before, you’re not getting a truckload of it, you’re getting a layer of it. You have to hand-stack that layer, which gets sold one case at a time instead of 10 at a time, impacting business. It’s changing the cost, labor learning curves and the physical layouts of the buildings.”
Ellis also says that while the number of SKUs is critical, their dynamic nature is the next big undertaking.
“Data shows that SKUs are turning. What is thriving now may not be thriving eight or 18 months from now. The beverage industry needs to be more agile relative to a constantly churning SKU base and what that means for business,” Ellis says.
“PDC designs agility into the warehouse — to picking and even delivery — be it automated, mechanized or conventional,” he says. “It’s all in response to the SKUs turning and the individual client’s unique volume, needs and resources.”
Innovations improve efficiency
Eager to optimize processes before operations suffer, manufacturers adopt cutting-edge solutions, which are growing sleeker, savvier and smarter. Saloni Walimbe, research content developer at Global Market Insights (GMI), Selbyville, Del., reports that automated storage and retrieval systems (AS/RS) are a valuable method leveraged by the beverage industry.
“The system increases efficiency in complex warehousing scenarios by enabling case-picking system automation that picks and palletizes various mixed SKU pallets without needing direct labor, as well as utilizes miniload AS/RS and shuttles that pick and sequence random SKU pallets to automatic palletizers,” Walimbe says.
Dan Labell, president at Westfalia Technologies Inc., York, Pa., highlights how AS/RS operations allow warehouse professionals to achieve better management of SKUs.
“The ability to accommodate for both slow- and fast-moving SKUs can be built into an AS/RS design,” Labell explains. “Integrating a warehouse execution system (WES) with the AS/RS, allows organizations [to] have total control over inventory, whether it’s a slow-moving beverage for winter months or a drink popular year-round. Therefore, without worrying about inventory and maximizing space, manufacturers and distributors can focus on more critical areas like fulfilling orders.”
Westfalia’s AS/RS and Warehouse Execution System (WES), Savanna.NET, helps warehouses implement just-in-time strategies, decreasing the need for advanced order preparation, Labell says. When the truck arrives on-site, operators initiate the order-fulfillment process by the Savanna.NET portal, thereby directing Westfalia’s storage/retrieval machine to pick and deliver the order to the appropriate loading area.
The speed of the AS/RS means products do not need to be staged on loading docks, but instead can be retrieved from inventory when it’s time for truck-loading, keeping perishables in freezers until then and freeing up warehouse space to improve operations, he adds.
Matthew Boykin, senior vice president of sales and marketing at Cirrus Tech Inc., Kearney, Neb., shares that beverage distributors continue to consolidate operations from neighboring territories, necessitating more warehouse space for operations and SKU growth, which automation addresses.
“[Consolidation] has created a greater demand for AS/RS solutions that allow distributors to reclaim existing space or build significantly less square footage for either an expansion or a greenfield facility,” Boykin says. “In either case, there are huge opportunities to save on construction and operational costs while building in the opportunity for future growth.”
This savings is no small chunk of change, either. “To pour less concrete, save millions in construction costs and take advantage of the cost benefit of depreciation, along with saving hundreds of thousands of dollars yearly in efficiencies, has become the most compelling reason beverage distributors and suppliers choose AS/RS,” he continues.
As an example, when growth in acquisitions at Bardstown, Ky.-based Heaven Hill Brands depleted space for finished case goods onsite, the company implemented Westfalia’s high-density AS/RS, which included an automated layer picking system. Both engineering teams collaborated for six months, incorporating systems into existing operations, phasing in pieces of the integration without disrupting workflows and processes. The four tandem storage and retrieval machines (S/RM) and one fully automated layer picker increased Heaven Hill’s storage capacity by 40 percent, and by automating previously manual processes, the AS/RS enabled them to ship products 400 percent faster than before, while cutting dock times by 49 percent, it says.
No “one size fits all” solution
Westfalia’s Labell notes that despite the preconceptions about automation technology, it is simple to decide whether an automated system is the right investment.
“You need to take a three-fold approach,” Labell says. “First, perform an analysis of the warehousing system’s existing design and framework. Then, examine some basic, yet key criteria to determine if the operation is suited for automation technology. And finally, justify the basic cost for such a system by demonstrating its overall benefits.”
GMI’s Walimbe states that throughput, sortation and various other factors must be considered to select the ideal AS/RS, plus training, networking, vendor support, remote activity, maintenance and other infrastructural factors should be implemented to ensure system efficiency.
PDC’s Ellis says one of the most important considerations is whether or not automation is the right solution for each manufacturer. Be it conventional, mechanical or automated, Ellis advises companies to consider several factors when choosing a storage system: order mix, labor cost, financial return, availability of labor, market share, add activity, building size and travel distance.
“If you work from methods or data that worked five or even 10 years ago, it’s not specific enough,” Ellis says. “My biggest caution to businesses is to select the solution for their unique needs, regardless of what’s trending. In this day and age, with the analytical tools we have available, there’s no reason not to have a custom-tailored solution per customer.”
Now, more than ever, companies should be careful not to jump into a solution unless it’s appropriate for their specific situation, he says, stressing that their response to a challenging environment can transform the cost of doing business to a competitive advantage.
Cirrus Tech’s Boykin echoes similar sentiments: “We have one client who chose a Cirrus AS/RS System for one of their locations to maximize their usable square footage. Yet, at another location, they chose to put in a Cirrus Semi-Automated Case Picking System because they had plenty of square footage but needed to pick and replenish product more efficiently with less headcount,” he says. “So, in fact, one solution does not fit all even within the same company due to differences in geographies and facilities.”
Armed with operational data, manufacturers can anticipate leveraging a variety of options to surmount challenges of SKU proliferation, achieving efficiency and profitability in the process. BI