According to Greg Ellis, principal and president of Precision Distribution Consulting, Inc. (PDC) of York, PA, the biggest issues facing beverage distributors these days are the proliferation of SKUs and, at the same time, an increase in response demand from customers (decreased cycle times). “In other words, as the business is becoming more complex, customers want their products even faster,” notes Ellis.

Ned Bauhof, principal and vice president with the firm, and also the author of Supply Chain and Real Estate: Where Universes Collide, agrees. Ten years ago, a high SKU count was around 200. Today, according to Bauhof, if a facility only has 350, it’s lucky. “I’ve been in facilities doing beer and soda where there are in excess of 900, and facilities that are doing beer and wine can have over 2,000.”

Fortunately for bottlers and distributors facing these changes, companies like PDC offer an invaluable resource: experience. The combined resumés of Ellis and Bauhof list more than 250 projects in 18 countries, which provides a lot of real-life examples to draw from.

And when it comes to addressing the problems of increased volume, proliferating SKUs and increased customer demand, the pair agrees that the critical first step is the right-sizing of warehouse facilities. This goes well beyond the building and extends to overall operations. Regardless of the type of business, it is critical to get the warehouse properly sized, based not only on the current demand, but the expected future demand, as well as optimal operating practices.

PDC recommends following a four-step right-sizing process. The first step in right-sizing a distribution facility is to calculate the shipping and storage requirements now and in the future. The next is storage planning, which involves having enough individual unique locations to be able to store all of the SKUs in the appropriate amounts. Then comes having enough dock doors or loading positions to handle the amount of business. And, finally, it is necessary to have enough external space to support site flow, loading and truck/trailer parking.

Part of storage planning involves racking. “It is important to look at the different applications of rack tech- nologies,” advises Ellis. “Since there are so many SKUs being offered these days, all the way from very fast-movers to very slow-movers, it often makes more sense to utilize a blend of different racking technologies.”

It’s also important to consider automation opportunities. “Automated material handling equipment, especially automated case handling equipment, is becoming increasingly popular,” reports Bauhof. “This industry is becoming very competitive, and there are a lot of manufacturers who are trying to create new solutions.”

Ellis points to the Vertique system, an automated case picker, as an example. “It’s not right for everyone, but it does work for many, and they have over a dozen installations that are up and running,” he says.

But, Bauhof emphasizes, without creating and implementing the correct processes, nothing will really work the way it is intended to work. “The real key to success in beverage distribution these days is creating and following proper processes,” he says.

While the specific opportunities vary by site, the major process improvement opportunities can be bracketed into the following four categories:
Preparation process: This involves creating a process to make sure the facility is ready to begin loading. Examples include processes for replenishment of the pick area, housekeeping and sanitation and getting the dock area cleaned up from the previous day. “These activities are often ignored and cause unnecessary congestion and other problems for the next day loading activity,” explains Bauhof.

Performance measurement: Evaluating the productivity of every individual employee is critical to sustaining high levels of performance.

Target-setting: Having a target provides the managers with a method to determine, based on the current work requirements, how productive the workforce should be. “This allows them to get the right number of people into each job function,” says Bauhof.

Loading activity: Optimization of the trucks loading process.

When implemented properly, these strategies work well for large distributors/bottlers, as well as for small beverage distributors. What is important is the proper mindset and a willingness to look outside the organization for ideas, according to Ellis. Most beverage distributors want to do things the same way they have always done them. “This ‘back of the napkin’ design approach is what is costing distributors the most money these days,” he asserts.

Precision Distribution Consulting, www.pdcinc.us, Tel: 717-718-3234