Alcohol beverage distributors in general face a fast-paced business en-vironment with very strict regulatory and financial guidelines. And, unlike most food categories-where margins are only a few pennies-the margins on most bottles of wine and distilled spirits are quite high, and retail price points average $25 or higher.
Warehouse systems that cut down on the amount of mispicks are, therefore, critical to their efficient operation and financial stability.
"One mispick could become an $80 or $100 error because of our higher margins," says Patrick Quinn, vice president of administration at Major Brands, Missouri's highest-volume distributor of premium wines, beers and spirits through multiple retail and foodservice channels throughout the state.
And, for distributors like St. Louis-based Major Brands, the potential for mispicks is huge. "There are 4,500 unique SKUs that we carry, and many look alike and have the same basic size and shape configurations, so the potential for human error is great in picking and put-away," Quinn adds. "We have a lot of volume on a lot of SKUs, and an expensive value per case."
Inside its main 250,000-square-foot distribution center in St. Louis, Major Brands' receiving department can handle up to 20,000 cases per day, and on the outbound side, 13,000-15,000 full cases and 20,000 individual bottles can leave the facility each morning.
Shipment sizes also vary greatly from one customer to the next. "We do a lot of small shipments multiple times a week. We could deliver two cases at one stop and a full truckload at the next," Quinn explains.
For Brown-Forman Beverages Worldwide, Louisville, KY, which markets more than 30 brands of wine and spirits, including Jack Daniel's, Southern Comfort, Finlandia Vodka, and Bolla Italian Wines, picking is just as difficult. Most pallets shipped from Brown-Forman are not made up of a single product. "We might have a truckload that has 40 different line items on it," explains Chris Ford, the company's enterprise solutions consultant.
In addition to managing its own brand portfolio, City Brewing Co., LaCrosse, WI, a large, independent producer and packager of alcoholic beverages, manages and supports a full third-party logistics function for other beverage companies that market malt beverages, teas and energy drinks. It operates five high-volume distribution centers that handle a large portfolio of SKUs and millions of cases.
To help them in picking and put-away, many beverage distributors have implemented warehouse management systems (WMS) in the last few years, and those systems have quickly become the lifeblood of the organization in a short amount of time.
Major Brands just went live with the Warehouse Advantage solution from HighJump Software, Eden Prairie, MN. Quinn already calls it his "personal organizer for 265,000 cases of inventory."
"Now, we have shelf-accurate details about all the inventory we have," he says. "We're not running around the warehouse looking for products. The computer can tell us where anything is on the shelves and where to put it in the warehouse after it's received."
Brown-Forman's Ford reported a 20 percent increase in throughput just two months after implementing a WMS from SAP, headquartered in Walldorf, Germany, in January 2002. Shipping errors dropped from 3 percent to 0.3 percent over that same time period.
A Matter Of Time
For alcoholic beverage distributors, though, the greatest benefit has been the longer picking windows that their WMS solutions have given them. Prior to the WMS, most warehouse workers couldn't start assembling orders until late at night, and, as in any distribution operation, that is typically the hardest shift to fill.
At Premium Distributing, a San Bernardino, CA-based beer distributor, for example, pre-sales personnel now send their customer orders directly to the enterprise resource planning (ERP) solution from Beverage Solutions Inc., Waterloo, Ontario, Canada, two or three times a day. The ERP processes the order and turns it over to the Distribution and Delivery Engine, a beverage distribution and warehouse management system also from BSI.
Previously, route salesmen and drivers had to wait until the end of the day when they docked their mobile computers to enter orders into the system. Warehouse workers at Premium couldn't start planning loads and routes until all salespeople returned and downloaded their data, leaving only about an eight-hour window to enter and pick orders, plan routes and load trucks. Getting trucks out on time in the morning was a challenge.
"You can only do so much in eight hours. After a point, it doesn't matter how many people you put on the job. Only so many forklifts can fit through a door at one time," says John Stange, director of operations.
By receiving orders throughout the day, though, Premium has opened its processing window to nearly 15 hours. Stange can manage an even workflow throughout the day. "We can balance our work loads better, which makes it easier to run the business," he says.
Balancing the workload throughout the day also produces a healthier bottom line. "We have eliminated about 20 hours a week of overtime during high-volume weeks so far, which has lowered our labor costs. At time-and-a-half, that can save several thousand dollars a month," Stange says.
Time saved also allows Premium Distributing to make more efficient use of its assets. "We can send a single truck instead of two to make deliveries before 10 a.m., which customers really want. "
Picking at Major Brands is typically done at night Monday through Thursday so that trucks can leave the docks early in the morning Tuesday through Friday. "Orders are keyed in by the ordering and sales department, then the WMS builds the loads, sends it down to the warehouse and does all that is needed within minutes," Quinn explains. "The suppliers we serve need to know their products are on the shelves as quickly as possible."
Another benefit of the WMS is that it allows warehouse workers at Major Brands to replenish pick slots while preparing orders. "It used to be crazy at the end of the night because we would be running out of pallet loads at the pick locations and guys would be running around to get products to fill them that they may not really need for the day's orders," says Quinn. Now, with all the ordering, picking and replenishment information on one platform, that's no longer necessary.
At Brown-Forman, the WMS allows the company to pick partial portions a day or two in advance, then set them aside to await the truck. They are staged for the specific truck and assigned a unique barcode. Some might have 20 different items on one pallet, but they are all tied to one barcode, so that when it's time to load the truck, all the operator has to do is scan the one barcode.
"To do that kind of picking while a truck is parked in your dock takes a long time, and likely generates [detention] penalties," says Ford.
Inventory rotation, something which really became a necessity with things like born-on dating, is also another strength incorporated into most current WMS packages used by beverage distributors.
"Beer and wine now have sell-by dates, and our WMS guarantees first-in-first-out," says Major Brands' Quinn. "Before, we had to have a guy to look around for the oldest stuff in inventory and it took time."
These date stamps have created another concern for warehouse operators in the beverage sector. Major Brands now has in its St. Louis facility a 15,000-square-foot area for refrigerated storage of bottled and canned beer and kegs and a 20,000-square-foot climate-controlled section for some of its more high-endwines. Such areas in the warehouse were never an issue just a few years ago.
Even worse than expired product, though, beverage distributors also often find themselves in the middle of an industry where breakage is a fact of life. As with a mispick, though, each item damaged inside the warehouse could cost a bundle.
Warehouses in the beverage industry have taken extra care to minimize product damage, but, when it does occur, the WMS comes into play. "Breakage is more easily tracked, and we can dispose of it more quickly with our WMS. Because of our WMS, we can give credits to customers for damaged goods, mispicks and errors on the same day," says Quinn.
Because of the way state laws are written, in Missouri customers can't return products to the distributor after three days. "Now, our computer kicks those claims out automatically. There was a lot of time checking orders and delivery dates before," Quinn relates.
With higher margins, however, many beverage companies have found that it is cheaper and more efficient to install the right material handling equipment early on than to deal with damaged products later on. Most notably, warehouses have to be careful in the way they convey product, especially since most alcohol beverages come in glass bottles.
"The tendency has been to go to thinner materials on the bottles themselves, and it's all related to costs," says Charlie Rizzo, a consultant at Forte Industries, a Mason, OH-based consultancy and software and systems integrator that has worked on a few projects within the beverage industry.
"As they get thinner and thinner on the bottle materials, there is more potential for damage. You need more sophisticated conveyors and more gentle handling equipment. Conveyors with more support and less widely-spaced rollers are the norm, and you also need guide rails on the sides of the conveyors."
For that reason, in the beverage industry in particular, the bumpless case turner from St. Louis-based FKI Logistex is quickly gaining popularity. This product works with automated material handling equipment to gently handle and selectively turn products requiring high speed case turning when moving into a palletizing operation. They eliminate the bump-turning impact of conventional case turning methods and guarantee label-out or barcode-out case turning for retail display, especially at big-box retailers.
According to Rizzo, building these retail displays is among the greatest challenges for beverage distributors today. "Everyone used to ship in a simple, sealed corrugated container," he says, noting that many retailers are now requiring their suppliers to build and ship products to them in floor-ready displays or plastic trays.
"Both have resulted in significant warehouse problems," he continues. "In the past, you used to be able to stack nicely sealed cases four or five high on the floor, but now, you're limited in how you can stack pallets before the bottom gets crushed and the whole stack comes down."
According to Alan McDonald, another Forte consultant, "retailers are also telling suppliers that they do not want to just sell single containers at a time. They can increase sales by packaging multiple bottles together. There's a lot more demand to mix products on pallets or in display cases. It puts the onus on the automated picking and conveying equipment so that things get palletized in a specific order and configuration. Everything in the processing line that packages and handles these products has to be modified, and that tends to be very expensive."
As distributors and suppliers look to incorporate these things into their systems, it brought the added challenge of making sure that the WMS employed could work well with sortation and conveying equipment.
"For us, there is some configuration that has to take place to handle the peculiarities of these systems," says Chris Heim, president of HighJump Software. "There's a lot of integration of conveyors and sortation devices for orders that are mixed. Our systems have to be integrated from the receiving line all the way out the door."
Case In Point: Premium Distributing
Getting Real-Time Access
For beer distributor Premium Distributing, San Bernardino, CA, business was growing and its legacy mobile computers were growing old. After wringing nearly 10 years of life from its Intermec 6100 and 6110 computers and SDM software, Premium Distributing knew it had to build a bridge that would preserve the benefits of its route automation system, yet provide new efficiencies and create a technology platform for the future.
"We wanted to reduce labor bottlenecks in our warehouse and manage our warehouse and mobile work forces more effectively," says John Stange, director of operations at Premium Distributing. "We got our life out of the old computers and knew we had to replace them.
He considered all types of mobile technology for Premium Distributing's 42 route sales and delivery workers, who serve approximately 3,000 customers, before selecting a new system developed with GBG, a partner of Intermec Technologies Corp., Everett, WA.
Premium Distributing uses the Microsoft Windows Mobile 2003 operating system, which it runs on Intermec 760C handheld computers with a Sprint Nationwide PCS Network wireless connection. GBG's mobile presales software application installed on the 760C has replaced Premium's previous system and provides advanced functionality.
The GBG mobile software forecasts sales based on the customer's current on-hand inventory and sales history to produce a suggested order for each account. Route sales representatives review the suggested orders with their customers on the 760C. After the order is adjusted and agreed to, it is entered and transmitted to the headquarters computer system. Salespeople can also use the 760C to review shelf plan schematics with their customers, enter data required by breweries and more.
Real-time access over the Sprint network adds certainty and service to route operations. Salespeople can check inventory availability before confirming orders with customers.
California law prohibits beer distributors from delivering to customers who are past due. When the potential situation arises, Premium Distributing salespeople can quickly check the customer's accounts receivable status at headquarters before accepting an order.
"The biggest difference is having wide-area wireless connectivity. It didn't cost that much to add it to the system, and it's made a big difference in our operations," Stange says.