The core tenet of a successful distribution center is minimizing warehousing and handling costs, while improving customer fulfillment and delivery goals. That’s why technologies and innovations within the alcohol beverage industry are gaining momentum.
In the past, beverage industry warehousing was often viewed as just a cost center, where not all that much innovation was necessary. As Paul Laman, vice president at DMW&H, Food & Beverage Group, explains, now many beverage warehouses have become very innovative. Wholesalers understand that the warehouse operations and capabilities contribute a lot to the overall business success.
“The warehouses have become denser to maximize inventory cube and minimize footprint,” Laman says. Today, warehouse management systems (WMS) have been implemented to maximize receiving, put-away, inventory management and returns. Material-handling systems also have gone into place to maximize the production rate and complement smart picking systems.
The beer industry is one such example. According to Matt Ellis, principal at Precision Distribution Consulting, the number of breweries and SKUs in the 1930s was similar to the early 1990s (around 150 to 185 SKUs in a warehouse). The number of SKUs in 2019 was around 1,200 — meaning the first 60 years was very different from the last 30 years.
“With a lower number of SKUs, the wholesaler business was solely about sales,” Ellis says. But with the complexity changes, a wholesaler is both a sales and distribution company. From a profitability standpoint, reducing distribution costs can have a larger impact than increasing sales.
According to Mike Klaer, president of Twinlode Automation, the U.S. seems to trail behind Europe in automation trends. Right now we are at the tipping point of U.S. companies seeing the value in automating warehouse systems, even for industries not previously considered automation-friendly, such as the beverage industry.
“Even today, with the health of workers nationwide as a top concern for companies and the worker shortages that have been felt over the last few years, beverage brands need to implement automation plans now in order to make up for the shortages that will surely come quickly,” Klaer says.
Not surprisingly, many innovations have attempted to accomplish this. For example, today’s beverage wholesalers have implemented smart wave picking systems, high-rate merges and gentle sortation systems. Some have also started installing shuttle buffer systems, as well as dispensers, for high volume SKUs.
“Taller storage racking systems with narrower aisles have been implemented to maximize density in response to SKU proliferation,” Laman says. “And we’re seeing voice-picking system for individual loose picks as well as for full cases.”
DHL Supply Chain Management has made a strong commitment to innovation in its warehouses — not only for efficiency improvement, but also to fill voids in a very tough labor market.
“We struggle to keep our site fully staffed,” says Patrick Kerns, general manager at DHL Supply Chain Management, formerly Exel. “There is a strong move towards autonomous equipment. Our company utilizes these in all aspects of our business where practical.”
DHL’s warehouse management system tracks inventory from the moment it arrives until it leaves the building, and also tracks productivity. Other systems used by DHL include:
- Vocollect Voice Pick & Vision: Allows for hands-free picking, improving efficiency.
- Autonomous equipment: This is increasingly more important as the workforce shrinks.
- Infolink: Monitors all functions on the materials handling equipment. Allows management to easily monitor equipment performance and usage.
- XRS: A transportation tool which tracks miles, speed, MPG, idle time and other driver functions. It’s fed directly to management for monitoring.
What are the other technological changes and innovations within the beverage warehousing space that alcohol wholesalers, distributors and brokers need to pay attention to?
For Klaer, the sky is the limit. Here’s why: There are warehouses incorporating distribution strategies right into the end of the production cycle, so that automation is touching a product from the moment it is created and bottled to when it is shipped out to another warehouse (and sometimes directly to the store).
Klaer says the key to success in this space is to ensure that you have a complete, end-to-end plan to execute. That way, every piece of the warehouse environment works seamlessly, from software to complex systems.
“While it is possible to ‘plug-and-play’ for some elements within this environment — and there are cases where that will save productivity — true success will come from a fully managed and executed, cohesive strategy,” Klaer says. “That includes warehouse design as it relates to technological innovations.”
Warehouse Design & Technology
Today’s warehouse management systems can provide granular data about inventory, which impacts where products are stored within the warehouse to maximize efficiency. Stark says that by understanding things like SKU velocity, order frequency, seasonality by SKU, inventory volume and which items often ship together, industrial engineers can place fast- and slow-moving inventory in places that make the most sense in order to cut labor costs as much as 20 percent.
Ellis adds that the largest changes to warehouse design and technology must start with increased levels of warehouse management. Historically speaking, warehouse technology evolved by first starting with enhanced inventory stock locator systems that tracked inventory by specific locations. The systems then increased into directed and tracked warehouse management system tasks. The increased systems led to voice-pick, touchscreen picking with scan verification, task tracking and productivity tracking.
“From a materials-handling equipment standpoint, there has been and will continue to be an increase in automated handling solutions,” Ellis says. “There are various types of automation that have been used in distribution in other industries for years and are beginning to make their way into the beverage industry.”
As such, warehouse design is indeed an important step prior to executing strategy on warehouse planning. From software for management of employees, products, shift changes and seasonal fluctuations, to the actual automation pieces themselves that help move product, to shipping in the most efficient and timely manner, the design of the warehouse and how it relates to the technology involved is vital.
As Klaer explains, most beverage warehouse environments have evolved significantly from an open floor plan of pallets to a highly sophisticated environment that can handle any challenge.
“Unobstructed pathways are very important with autonomous equipment,” Kerns says. “Sites have also updated and expanded wireless bandwidth to handle all of the technologies required.”
As a result of this evolution, beverage warehouse designs are beginning to look like other distribution industries. In the conventional environment, buildings are getting taller and the use of racks is becoming a necessity. As Ellis explains, the result is an increase in the number of smaller storage locations to accommodate the growing number of SKUs and the decrease in the number of single SKU loads (beer) or single SKU pallets (wine and spirits).
“The warehouse design must match the increased complexity of products and customer orders,” Ellis says. “Trying to operate a beverage business today in a physical layout similar to what it was in the 1990s will result in higher-than-needed labor and operation costs.”
With beverages, we’re also talking about heavy, breakable products. So Alex Stark, senior director of marketing at Kane is Able says the use of wearable technology like wrist scanners, voice-directed headsets and “smart” glasses free up both hands to make the picking process safer.
“Wearable devices also reduce the steps required to complete a task, so there is a significant boost to productivity,” he adds.
The biggest challenges that the industry is seeing in today’s beverage warehouse environment is labor. For example, nearly 100% of Precision Distribution Consulting’s clients are making operational changes to account for the inability to find enough people to perform the required work.
“Based on the increase in SKUs and the complexity of the orders, the warehouse and delivery functions are harder,” Ellis says. The newer workforce is also less willing to do the jobs.
The new workforce does have capabilities that the previous workforce lacked, and the job needs to reflect these changes, Ellis adds. “Increased use of technology and tracking programs is becoming one of the biggest competitive advantages to attract and keep employees.”
One concern for many warehouse companies is delivering product to customers in a timely manner, especially when warehouse staff is slim, and production is down, as a result of labor shortages.
“It’s a delicate balance because of the misconception that a machine can do everything and replace humans for the same job,” Klaer says. “The key to success is to partner with companies that can help get a broader view of the goals of the company and make recommendations that can help improve outdated processes and provide a solid plan for implementing additional changes.”
It’s also important to remember that most beverage alcohol is still packaged in glass, so minimizing damage is always a top concern. That’s what led Kane Is Able to adopt automation tools like orbital shrink-wrap machines.
“With traditional wrappers, pallets are placed on a spinning turntable. A spinning pallet obviously creates potential for damage,” Stark says. “Orbital wrappers move around a stationary pallet to basically eliminate damage when preparing pallets to be loaded onto a truck.”
For a large liquor distribution operation, this use of orbital wrappers, together with other steps, helped Kane Is Able reduce over, short and damaged (OS&D) product as a percentage of total inventory by 68%.
“Something as mundane as selecting the correct wrap strength can have huge impact on reducing damage in transit. Heavy loads like beverage pallets obviously require thicker, stronger wrap to stabilize the cargo,” Stark says.
So what does the future hold for the technologies and innovations making their way into the beverage warehouse environment? More automation has certainly become the trend. As Laman explains, pallet ASRS systems with automated cranes are being implemented to save put-away labor, minimize damage and increase storage density. In addition, dispensers are being utilized for high-volume SKU handling, and shuttle systems are being used for consolidation of the slow-moving SKUs for more efficient fulfillment when needed.
Ellis envisions more automated solutions being created and being installed within the beverage warehouse industry. “Beverage operators need to start studying other industries that have more SKUs and lower margins,” Ellis says. “The technologies and operations being used by those industries can add significant value to the beverage business.”
Maura Keller is a Minneapolis-based writer and editor. She writes for dozens of publications on a variety of business-related topics. When not writing, Maura serves as executive director of the literacy nonprofit, Read Indeed.