Getting the Balance Right
10/10/2008
Food and drink companies of every kind need to carefully consider the central role their warehousing function plays in delivering more than just products to customers, says Kenneth Porter, partner at independent supply chain consultancy, Total Logistics. He argues that getting warehousing wrong can sabotage an otherwise excellent customer experience.
“Seasonality is always an issue where warehousing is concerned. Be it Easter, Christmas or the summertime, spikes in demand for chocolate eggs, fine wines or juice drinks create challenges for supply chain practitioners in the food and beverage sector. Key issues here include the sourcing of appropriate labour, equipment or processes that can cope with the demand. Seasonality is a huge issue for food and beverage producers as it places tough demands on the warehouse function. And while automation might often appear to offer a tempting solution, seasonal variances in demand make truly flexible systems difficult to implement in practice.
“The use of promotions in the food sector is another issue that can trip up otherwise well managed warehousing operations. Special offers and other promotions obviously create a significant demand spike, which can also require the creation of new SKUs (stock keeping units) to track special packs in order to measure their success as a promotional tool. Often, promotions need to be tracked and handled in a different way. Hence, a warehouse function may need additional support to facilitate a ‘BOGOF’ campaign, when in practice they are often the last to know when the sales team launches a major promotion.
“The phenomenon of buying one item and getting another free creates special issues for warehousing systems, especially when the offer items are bigger than the prime product. Instances where giveaway items are often larger than the brought item – say you buy a chocolate bar and get a free mug – involve fundamental changes to the warehousing system, often requiring completely new processes to be undertaken.
“Another trend that food manufacturers are having to engage with is the move towards smaller batch sizes. As retailers demand more choice and less stock, so the use of regional distribution centres (RDCs) is now commonplace. The greater adoption of cross-docking activities throws up specific issues from a manufacturers’ point of view, especially in terms of the frequency of deliveries and the implications this has for picking and packing activities.
“Sell by date is of course a critical issue for the food and drink sector where all products, not just the chilled variety, have a shelf life of some sort. This issue has a direct impact on issues such as wastage and rotation of stock as well as batching of stock. This is a key consideration for food manufacturers, who are now being expected to fit in with retailers’ own rotation models. Increasingly, those food manufacturers that cannot deliver perishables in chronological sell-by date order are likely to face the spectre of product refusal at the retailers’ gates.
“Product tracking is also becoming something of a logistical pre-requisite, as recent recalls involving the likes of food colouring manufacturers and big brands like Cadbury’s show that no-one is immune from human error.
“Finally, warehouse management systems in general are an area where food and drink manufacturers can get it horribly wrong. Often at the forefront of new technologies, manufacturers are increasingly replacing manual systems with automated ones that can improve accuracy, supply chain visibility and reduce costs. However, integrating these systems to create a genuinely joined-up supply chain can often be problematic. Should you run automated technologies alongside existing ERP systems, or opt for a best of breed bolt-on solution? This question has big implications for IT and supply chain strategies and can cause major internal pressures if not properly planned and executed.”
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