Analyst insight: Consumers’ changing tastes have heralded the rise of many small breweries in the U.S. As a result, the quantity of SKUs used by food and beverage distributors has risen. In working to address SKU proliferation and enable the storage and picking of a greater variety of product, distributors are avoiding the purchase of warehouse space or adding on to existing distribution centers. Instead, they’re maximizing existing space to increase efficiency, product density and availability.

The U.S. craft brew industry has grown to incorporate thousands of SKUs. Increased choice and quantity are great news for consumers and distributors who desire a broader portfolio of brands and packages. But it also introduces the need to store and move more cases and barrels of beer, while optimizing piece picking and managing fluctuating demand for individual SKUs.

Companies undertake warehouse and DC optimization by analyzing product mix. Such assessments require the complex statistical analysis of case-picking volume for each SKU. The results are translated into optimal storage, pick area, staging, cleanliness, material handling equipment, vehicle parking, congestion, product slotting, replenishment and vehicle flow. Issues to be addressed include:

• Conventional case selection requires product profiling, calculating not only annual demand based on case picking volume (excluding full pallet volume), but also yearly peak periods, and understanding seasonal SKUs for pick optimization.
• Single customer pallet picking usually means the pick path through the warehouse impacts the order of SKUs built on the pallet. As the SKU count increases, managing the pick path and accounting for these frequently lower-volume sales becomes an ongoing challenge. If overall customer volume is relatively stable and distributed across more SKUs, the impact on this type of truck loading is not too significant.
• With multiple customers on a pallet, it makes sense to move from chimney stacking to building a base of premium SKUs with a limited number of small volume SKUs on top, for smooth relocation to an open bay as the truck is depleted.
• Potential pick-area strategies for packaged or cased beer depend on available warehouse space, clear height, material-handling vehicles, and aisle widths. In addition, they rest on the use of product-profile information, and understanding daily demand for each SKU, number of pick facings, and the right amount of product within the smallest possible footprint for each SKU.
• Varying keg sizes require adjustable keg flow lanes as an alternative to palletized storage in a first-in, last-out (FILO) or first-in, first-out (FIFO) inventory retrieval system. Labeling each lane eliminates picking error and reduces overall operating costs. Previously, two or four kegs were stored on pallets, but now users can place eight or 16 kegs in the same space, enabling distributors to offer more beer variations. 
• In each pick, a single item or SKU is picked from a master carton and bundled or packaged with other SKUs, creating higher labor costs. E-commerce and omnichannel demands mean direct-to-consumer picking operations are growing, requiring fast, 100% accurate order fulfillment and improved ergonomics.
• Focused initially on labor reduction, pick-area automation now enables voice pick or automated case-picking technologies to ensure order accuracy and increase productivity.

Outlook

The craft and microbrew boom isn't showing any signs of slowing down. As part of a comprehensive warehousing and storage optimization strategy, distributors must optimize warehouses, DCs, technologies, and systems to consolidate floor space, reduce transportation spend, and improve stock rotation.

Brian Neuwirth is president of UNEX Manufacturing.