It’s one of the great operational conundrums—how do you cut costs without cutting corners? When it comes to supply chain operations, improvements in efficiency enhance productivity and ultimately add up to dollars saved. However, businesses must spend money first to invest in technologies or systems that will help realize those efficiencies and savings.
And in this economy, budgets may be tighter, and the pressure to maintain margin levels makes it even more challenging to make the right investments in supply chain improvements.
However, due to these pressures, suppliers and wholesalers are now collaborating more on supply chain solutions to find ways to drive cost out of the system and maintain profitability, attests Gary Thompson, general manager at Michigan-based Powers Distributing.
For example, Boston Beer’s Freshest Beer program is a new just-in-time system of distribution in which beer is held in the company’s breweries until ordered based on what sold most recently. This translates to less inventory being held at the distributor and fresher beer to the customers.
Thompson says other suppliers, like MillerCoors and Heineken, work with the distributor on split pallet loads rather than a full load of one particular product.
Steve Golladay, president of supply chain consultant firm Swift Water Logistics, recommends that beverage distributors take a step back and evaluate their operations from a realistic standpoint to get a better understanding of their business and then look for “low-hanging fruit,” or small changes or tweaks that could add up to efficiencies and savings.
“The first really big question is, what is causing you pain today, and what are the things you can’t accomplish in your current processes? And for a lot of beverage companies, those pains are created because you’ve been in this business 20 to 30 years, but the business environment has changed so much,” says Galladay. “With the environment today, we’re sort of in a fast-moving revolution instead of an evolution of business. Beverage distributors are taking on so many SKUs and those SKUs don’t look like the SKUs a few years ago, as far as velocity and make-up. What they’ve done is constrain their systems with a lot more SKUs than they were ever designed to do and they’re trying to build and deliver within the same framework that they’ve had for years.”
Galladay, who is also the vice president of supply chain at Coca-Cola Bottling Co. Consolidated, as Swift Water is a subsidiary, also says businesses need to look ahead to see where the market is going and how their business might change in terms of volume or complexity and make changes to accommodate those evolving conditions.
Better managing inventory levels in the warehouse is one critical area that could shave some cost out of the system and help warehouse operations run more smoothly. Due to demand from suppliers and retailers, distributors now keep a high level of inventory in order to avoid out-of-stocks.
Powers Distributing turned to forecasting software and enhanced its reporting capabilities to help drive down its number of days of inventory, Thompson says.
“That has helped us keep fresher beer at retail while putting us in a situation where we reduced our dollars invested in inventory about 15 percent on an annual basis,” he says.
Chet Willey, a consultant and owner of Chet Willey Associates, says accurate forecasting is necessary to maintain the optimal inventory level.
“Inventory level can represent millions of dollars of a distributor’s investment plan, and I’ve seen where businesses have worked at getting forecasting accurate, and maintained the proper level of inventory and been able to take a million dollars out of the supply chain. Inventory control can free up capital to invest in other things that can help improve costs,” Willey says.
Supply chain technology solutions, such as a warehouse management system, while requiring a significant financial investment, can pay out in the long term with controlling inventory and improving productivity.
A more inexpensive supply chain tool is inbound shipment scheduling software programs, such as Appointment Plus, which allows suppliers to schedule their delivery times to the distributor. This creates a more even delivery schedule at the loading docks. So, instead of having several delivery trucks waiting to be unloaded during a peak delivery time, the trucks can be scheduled by intervals and unloaded more quickly.
Other inexpensive tools that can give a bump in productivity include configuring an accurate pick layout in the warehouse and investing in voice picking or layer picking.
“Voice picking can give you a 15 percent bump in productivity,” Willey says.
MillerCoors distributor Andrews Distributing invested in a number of new technologies and warehouse processes in its new 300,000-square- foot Allen, Texas beer distributorship opened this past year.
According to Mike Barnes, executive vice president and general manager at Andrews Distributing, a voice pick and layer pick system along with new equipment like Yale Rider Pallet Jacks with fast-charge batteries has helped Andrews operate more quickly and efficiently.
“The Rider Pallet Jacks allow us to pull or move three pallets at a time and reduces recharging time. We also have forklifts with four-pallet high storage and staging ability. And a forklift with a side mount layer picker attachment allows us to pick multiple layers quickly of our high volume SKUs,” Barnes says.
Other technology tools include two new Lantech automatic stretch wrapping machines that load or unload pallets three at a time and wrap in less than 60 seconds and a Steel King total warehouse racking solution that includes a combination of carton flow racks with four high pallet storage racks and three high pallet flow racks.
“The cart and flow racks help to optimize the storage capacity and the facility’s 40-foot ceiling heights by allowing us to go up rather than out,” Barnes says.
Looking at the bigger picture, the new Allen facility has helped consolidate Andrews’ warehouse operations from eight warehouses down to four for a more streamlined operation.
On the delivery side, there are a number of adjustments and improvements distributors can make to cut costs out of the system. One option is to optimize deliveries by days of the week to improve labor scheduling, avoid overtime and improve productivity, Willey says.
One progressive technology that many distributors are turning to is the CooLift, a direct-store-delivery supply chain solution developed by Swift Water Logistics. The CooLift Delivery System is a pallet cart with a hydraulic lift system that allows pre-picked and loaded pallets to be rolled into stores without requiring the driver to manually handle the pallets.
Many distributors also have converted to “pick to stop” mixed case pallets that are built in the warehouse prior to being loaded onto the truck, as opposed to the traditional method of the driver building pallets at the stop. This can save up to 20 percent on delivery times as it increases the efficiency of route drivers. Which just goes to show, that when it comes to warehouse supply chain operations, even the smallest changes can add up.