Pinnacle’s operational model is based on the seasonality of some of its products—like Vlasic Pickles whose shipments peak in the spring and summer months and Duncan Hines cake mixes and frostings with a fall and winter peak. For this reason, consolidation in a shared facility with multiple vendors allows Pinnacle to expand or contract its space requirement in DSC’s facilities, reducing its warehousing costs.
“If they didn’t have that additional capacity for me, I would have to go out and rent another warehouse in the area to accommodate that surge,” explains Siberski at Pinnacle.
Cost-Efficient Shared Warehousing
Seasonal and promotional fluctuations can be a headache for food and beverage companies’ financial departments and supply chain managers. On the one hand, they don’t want to commit to paying for too much warehousing space, especially during the times their surges diminish. On the other hand, they don’t want to be caught without the space those surges require.
Saddle Creek Corp. found an effective solution recently, balancing the requirements of a beverage manufacturer with those of a food manufacturer—each with surges happening opposite to the other.
When the beverage client’s requirements for space began to increase significantly, Saddle Creek suggested consolidating inventory for the sake of cost efficiency and increased control of inventory management. The beverage company had a production facility in Lakeland, FL, where it was also housing product, in addition to product in facilities on Saddle Creek’s campus. Clearly, its growth was pointing to consolidation.
“We analyzed what their space requirements would be, considering their peaks during the summer months,” reports Stephen Cook, vice president of marketing and business development for the Lakeland, FL-based company. As a base requirement, Cook and his team determined the client would need about 200,000 square feet of space, allowing for current needs as well as the flexibility to grow.
At about the same time, Saddle Creek began talks with a major food company in the process of conducting a network optimization study. “This company had purchased two other companies and they wanted to combine their inventories, housed in separate DCs,” explains Cook.
The study indicated they needed to be in the central Florida area and they needed a base requirement of 150,000 square feet of space. And they needed the flexibility to accommodate future growth and acquisitions.
With a commitment of 350,000 square feet of space for the combined requirements of the two clients, Saddle Creek went ahead and constructed a 486,000 square foot facility on its Lakeland campus for these two companies. The facility began operating this past January. Each company is located at opposite ends of the building so each can ebb and flow toward the middle as required. “We guaranteed both of them that when they require additional space it will be theirs, but they will only pay for the overflow space as they need it,” Cook says.
The three companies couldn’t have asked for a better solution to satisfy each of their needs. Saddle Creek has its commitment from its two clients, and each client is assured space will be there when they require it.
“The beverage company was able to consolidate and have inventory in one central location and Saddle Creek provides them with a transportation shuttle from the production site to our campus,” continues Cook.
“And the food company has combined the two inventories into one central location. The key point is each company does not have to commit to larger blocks of space to accommodate surges and future growth.” –A.T.