Wine & spirits distribution: The right blend of automation

In the wilderness of the supply chain, the distribution of wine and spirits is a unique animal. Of the few hundred of these specialized facilities across the country, each is subject to stringent state- or county-level regulations. Each building serves only customers in that state and is usually located as close as possible to population centers.

And as suppliers broaden their product ranges, steadily increase the number of SKUs and minimize packaging, these facilities struggle to cope with inventory variability. Facing higher costs for real estate and labor, managers are compelled to make the most efficient use of space and staff.
Then again, maybe wine and spirits distributors are not so different from the rest of the distribution world.

“Wine and spirits operations are aiming for 99% accuracy or better, like all other industries, but they have not been very automated in the past,” says Kyle Brock, sales engineer at Intelligrated. “Some still pick with paper and don’t have a good handle on where inventory is stocked. Joe might know where the Crown Royal is, but there might not be anything in the system that necessarily says that.”

On the other hand, some have deployed automation with an eye toward route stop sequencing and a few are even implementing voice-directed bottle pick lines, case pick lines replenished by automated storage and retrieval systems (AS/RS) and some of the fastest case sortation systems in the business. As a whole, the industry is confronting changing conditions that open the door to conventional warehousing and distribution automation, but realize that this automation will assume a unique form for wine and spirits distribution.

In a challenge familiar to many markets, distributors face increased pressure from customers who want to place smaller and more frequent orders, and place them later in the day for next-day delivery. “Those delivery objectives become the key to justifying automation or making improvements inside the facility,” says Brock.

Paul Laman, vice president of W&H Systems, adds that significant consolidation among wine and spirits distributors and suppliers in recent years has contributed to the segment’s progressive mindset. “When a wholesaler makes the pitch to handle a particular brand or group of brands, it includes an emphasis on the wholesaler’s order fulfillment capabilities,” he says. “In the past, that was not much of a concern. Now, it’s a big part of landing new business.”

Hard data helps find the right mix
Wine and spirits distributors are weighing a number of factors in the design and location of their facilities, especially as they bump up against the limits of conventional approaches to distribution.

SKU proliferation, for instance, has extended the tail of slow movers, resulting in significant volumes of split case bottle picking. So, facilities are handling various SKU ranges differently, replacing uniform facility layouts with areas of heavy or light automation where appropriate. Before setting out on any new projects, John Barry, vice president of sales and marketing for ITW Warehouse Automation, suggests that a solid software foundation is critical to ensuring disparate processes and technologies work in harmony.

“Improvement has to start there, and these companies have to build an understanding of what is happening with SKUs, inventory and labor,” Barry says. “Otherwise you’re just guessing.”

Laman notes a transition in the 1990s where wave-based picking with labels replaced discrete order picking to increase productivity and overall production capacity. These tools also supported route stop sequencing and visibility. Initially, Laman says, only a few of the largest wine and spirits facilities adopted this approach; since then, that number has increased to around 90% of the top 100 distributors.

Still, the homegrown software in some facilities is often well short of a proper warehouse management system (WMS), says Brock. Ten years ago, as wave-building features were folded into fulfillment systems, the end result still didn’t perform true inventory control. “Many found that canned software packages did the trick, allowing them to manually build waves to drive picks so they would show up at the dock in the right sequence for deliveries,” says Brock. “It’s why many don’t have a WMS today, so things like slotting, yard management, automatic waving, inventory control and quality control systems might be new to them. The next big transition in this industry will be the move from an order fulfillment system to a full WMS.”

Many will welcome the ability to take control of inventory in an environment where “SKU proliferation is on fire,” says Jon Schultz, vice president of business development for Westfalia. In other industries, manufacturers can comfortably produce to a forecast, perhaps working to warehouse a 12- or 30-day supply of a product. “With the variability in wine and spirits, all those bets are off,” he says. “It’s not uncommon to hold six months to a year of a particular low-volume SKU.” Visibility into inventory will support efficiency inside each building, but it can also inform strategies for the wider business.

“Given the logistics of having inventory in several places, as SKUs get more numerous and include more slow-movers, the harder the inventory holding model becomes,” Schultz says. “But pooling inventory saves a lot of headaches. A number of the companies we work with have begun closing satellite facilities in favor of a big central DC that crossdocks to smaller markets.”

For instance, a large facility near Chicago can handle that dense population, but the rest of the state still needs to be serviced. Instead of holding inventory or picking orders in each of the remote locations throughout the state, those warehouses are shuttered, leaving only a sales office and the crossdock system. With the combined volume, the central facility can justify automation.

Top shelf to bottom
The targeted deployment of automation should result in the most efficient processes for each product and order type. Similarly, storage methodologies should be designed around specific SKU profiles to achieve optimum density. The two overlap in AS/RS, which Schultz says can help manage SKU variability by providing the flexibility to configure storage and achieve high density.

“The traditional approach involves a lot of empty selective rack or floor storage,” he explains. “If you have 30 pallets of a particular SKU, you will fill your selective rack and run out of space to store slow movers. If it were predictable, you could have the rack ready for dedicated SKUs. Floor storage is flexible, so many go that route, stacking and making lanes as they want, but you get very low utilization.”

Barry describes the transformation of a customer that upgraded its software, reconfigured its storage and deployed targeted automation. “It was a big, disorganized operation, with a big footprint of stored product and a lot of equipment running around,” Schultz says. “Using a homegrown WMS, they would print a piece of paper, then run around and look for the inventory. Some of the studies we did suggested that pickers collectively traveled 26 miles per day.” With automation, a new warehouse control system (WCS) and a WMS, that number shrank to less than 5 miles.

The operation—familiar to beer distributors and increasingly appealing to wine and spirits—was divided into two areas. One uses full automation for fast movers, as one associate picks layers from inbound pallets and feeds them into the AS/RS where fast movers are stored in case quantities. In the second, semi-automated area, the picker does not have to know the order details, but when the software calls for a case he or she feeds it into the system. Those cases replenish a flow rack and manual each-pick area where they are coordinated so that individual picks are performed in a more consolidated footprint.

The process removes much of the decision-making responsibility from pickers, where traditional manual practices create the most opportunity for error. Unlike other markets, where errors primarily aggravate customers, misplacement of the high-value products common to wine and spirits is most expensive for the distributor.

“Bars don’t get a case of high-end vodka, they get a bottle or two,” Brock says. “But if you ship the wrong bottle, the bar will probably sell it. They’re not going to return it, so you didn’t get paid.”

In many cases, more expensive bottles of wine might not have bar codes to preserve a premium shelf presence. Or, the bottler might apply the same UPC for a wine of both 2012 and 2010 vintages, whose prices can be very different. “This can make it very hard on the bottle pick side,” Brock says, and those compelled to do a manual read of each pick still assume a certain amount of loss and pilferage.”

Technologies to increase pick accuracy at the same time as productivity are critical to a successful operation, and businesses have several options.

Raising the bar
Laman recalls when most of the industry would use duplicate copies of invoices as a pick ticket. A pick console could expect to move about 700 cases per hour in those days, and if an operation needed more throughput, it simply used two consoles with two conveyor lines in every pick module. People still walked with invoices, picking to conveyors with no batching benefits, scanners or labels on cases. “Now, there are all kinds of mobile technologies, scanning systems, vision capture systems and other solutions to ensure accuracy,” Laman says. “Some houses now move more than 100,000 cases a night through automated systems.”

Sean O’Farrell, market development director for Dematic, says voice-enabled picking is a good starting point for a smaller operation, especially in split-case, bottle picking operations. Hands-free and directed picking allow for improvements in order cycle time and accuracy, he says, and might also complement an automated system.

The next step can be a shuttle used as a replenishment engine to the pick face, after which the shuttle can serve as an order consolidation buffer to accumulate cases and totes until the order is complete. The order can then be quickly released from the shuttle to the assigned shipping door in route stop sequence.

“We have a customer using a shuttle to pick wine and spirits out of totes that are delivered to goods-to-person workstations,” O’Farrell says. “Pick rates doubled while accuracy improved and product damage decreased. Software also cubes out the order carton or tote to make the tote ‘aisle-ready’ for shelf replenishment.”

O’Farrell says the customer reduced shipping costs and picking uses only 40% of the floor space it once required. “In wine and spirits in recent years, order fulfillment has gone from full pallet to full case to each-level picking,” he says. “The good news is that although order fulfillment costs in the supply chain are going up, automation costs are coming down. DC automation is increasingly within reach for large and small companies alike.”

Companies mentioned in this article
Dematic: dematic.com
Intelligrated: intelligrated.com
ITW Warehouse Automation: itwwa.com
viastore: viastore.com
Westfalia Technologies: westfaliausa.com
W&H Systems: whsystems.com