Food and Beverage Challenged to do More With Less

For an industry historically challenged by thin margins and high costs, creative solutions and out-of-box thinking are not new. Those in the business of food and beverage have long worked to do more with less, but today, the industry faces some of its biggest challenges yet. A nearly decade-long labor shortage tops this list, exacerbated by constantly changing consumer preferences and a growing demand for more variety.

Mark Koffarnus, director of major accounts at Yale Lift Truck Technologies:

“Both food and beverage, from a distribution and wholesale standpoint, are very low margin contributors to overall profitability, so the slightest strain—whether that be labor costs, input costs, raw materials costs, transportation costs—all heavily affect the margins and the profitability of producers, wholesalers and distributors.”

To combat these strains on operations and profits, the industry is turning to technology. Advances in forklift technology, automated solutions and robotics that once seemed out of reach for small- to mid-sized companies are quickly becoming an everyday reality. Solutions that were reserved for the industry’s biggest players are now being implemented in warehouses across the country as companies struggle to attract the skilled labor needed to efficiently run their operations.

Food and beverage are low margin contributors to profitability, so strains in labor costs, input costs, raw materials costs or transportation costs­ have a big impact.

Koffarnus Continues:

“Demand is not down. The pandemic, if anything, increased demand to a new level. We still need to move the same amount of goods with less labor, and you have to rely on technology to be able to do that. There’s no other way to do it.”

Maximizing Labor Top of Mind

The food and beverage market is growing fast and the “Food and Beverages Global Market Report 2023,” by The Business Research Company expects it to reach to $9.23 billion by 2027.

To keep up with this demand, deliver on time and keep shelves stocked, the industry has traditionally relied on its workforce. It has always made more sense to raise wages and invest in people rather than large capital projects.

Today, that’s no longer an option, with thousands of jobs going unfilled each month and record-high turnover numbers. More than 100,000 manufacturing jobs were unfilled for U.S. consumer packaged goods (CPG) companies as of July 2022, according to a recent Consumer Brands Association (CBA) analysis of U.S. Bureau of Labor Statistics data.

The result of these job vacancies is slowed production and stagnant growth. It also means employee retention is key. Automated solutions and technologies are not only helping to fill the labor gap, but they help make a traditionally undesirable job easier and safer.

Rickey Woodley, national sales manager for Murata Machinery USA:

“We’re never trying to displace anyone in a facility, as much as empower a company to repurpose staff to more meaningful tasks. Let automation take care of the mundane, monotonous day-to-day routine tasks. The key with automation is if the task is repetitive, we can automate it and free that person to work on more critical functions.”

James Sharples, vice president of Global Business Acceleration at Swisslog, adds that as labor costs increase, automation has become a more viable option.

Sharples:

“A lot of the food and beverage manufacturers and retailers that can’t find people are having to pay more, so their costs increase.And that’s where automation really can answer some of those challenges. And that’s where we see a lot of demand now for more automation to address those issues.”

SKU Proliferation and Mixed Pallets Create New Challenges

The types of automation and technologies being used in food and beverage varies depending on operations, but a few solutions are having a big impact. Among them are automated storage and retrieval systems (AS/RS), which are being used to efficiently pick and sort pallets to be delivered to a retailer.

This is particularly important in today’s retail climate, where the demand for product assortment has skyrocketed. Consumers are looking for more variation in products, such as flavor and packaging sizes and materials.

Sharples Continues:

“What we see today in particular is really a big trend toward more and more case picking, so not supplying full pallet quantities or a single SKU or product. Retailers are looking for much more flexibility in terms of their order sizes and how things are delivered to them. We see more and more solutions developed and available and going to market around case picking solutions for that food and beverage market.”

This also has a huge impact on the warehouse that may be set up to accommodate traditional pallet loads. It forces companies to consider how they can modify their current warehouse to meet the demand.

Mark Koffarnus:

“That’s a challenge all the way down the supply chain to be able to accommodate that. How do you re-slot a warehouse? Or, how do you add pick levels that are accessible with traditional or non-traditional means, and how do you still keep your productivity up in your warehouse? People think that maybe just adding an extra flavor in a warehouse or in a grocery store isn’t a big deal, but it is a big deal. And there’s a lot of trickle-down effect by adding that extra flavor.”

Though the idea of mixed pallets is not new, using automation to build the pallets is.

Rickey Woodley:

“It’s one of those things where it’s been around forever, but it’s always been a human that’s doing that portion of it. Putting the trust in machines to actually identify exactly what’s going onto that pallet and ensure the correct product has been a challenge.”

He adds that operations have a comfort level knowing a human is there to actually perform the count, so automating that process can be unnerving to a warehouse manager.

The key to overcoming this uncertainty is finding an automated solution flexible enough to handle a variety of products and sizes.

James Sharples:

“You want the automation to be really flexible and able to handle this wide range of products and packaging formats. For our mixed case palletizing solution, the ACPaQ solution, we use trays, and the trays are there really to maximize the range of products we can handle. We are much more tolerant of the type and quality of packaging and sizes of products and to handle that wide range that the retailer wants within the automation.”

Koffarnus, however, acknowledges that automation is still not for everyone. Solving for this challenge, he says, is about creating solutions that only require slight modifications to the warehouse. Multi-level forklift pickers, for example, allow operators to reach an extra level or two without having to reconfigure your warehouse.

Mark Koffarnus:

“Using existing facilities, just using them in a different way, can be a really great solution for many of these companies distributing in food and beverage. They don’t traditionally have the money to be highly automated. So, they’re looking for methods to just expand the traditional methods and take advantage of some new solutions out there.”

Solving the Grocery Fulfillment Puzzle

The pandemic created a huge shift to online fulfillment and delivery that few were prepared for. Retailers were forced to quickly create an e-commerce strategy that met customer expectations but also made money. Many took the basic approach of using stores to fulfill online orders, which worked well while customers were not shopping in store.

Today, online ordering is still popular, but the number of in-store customers has largely returned to pre-pandemic levels. This means retailers still using in-store fulfillment for online orders are challenged with empty shelves and stock outs.

James Sharples:

“Customers are quite happy going back into store, they can’t wait to go back into the store. And I think some of the assumptions around growth of the online business that people made during the pandemic period haven’t been fulfilled. It’s gone back, kind of reset back to the pre-pandemic levels, and I think you see, in lots of industries, lots of suppliers either changing their growth assumptions or resetting expectations to try and match what’s the new normal post-pandemic demand, and how to still make a profitable business out of that.”

For retailers that means re-evaluating their online fulfillment strategy with a focus on efficiently replenishing stores.

“They have these two problems, kind of two conflicting challenges of keeping the store replenishment process as efficient as possible, but also having this direct-to-consumer shadow and trying to be as efficient as possible,” says Sharples.

When it comes to online fulfillment, Sharples adds that he expects to see more operations looking at the potential of automation inside the store or next to the store to optimize the fulfillment of those orders.

Like with SKU proliferation, mixed case palletizing can help retailers looking to optimize the store replenishment process, while also picking efficiently at the item level for direct-to-consumer transactions, such as store pickup or delivery.

Mixed case palletizers give suppliers and retailers a zero-touch, fully automated system to create store-friendly, stable pallets that can be safely and efficiently shipped to a store.

Automation isn’t just for the big retailers though. In smaller store footprints, like a convenience store, break-pack solutions are gaining traction. These solutions move away from case handling to replenishing at the single-item level.

Instead of taking on full cases of slow-moving product that take up needed space on the shelf or back room, retailers are able to offer a wider assortment and leave room for fast-moving product.

Sharples Continues:

“Moving away from full case replenishment to each level replenishment in stores, we really see some advantages. You have this kind of mixed approach where fast movers or large, bulky products are still satisfied best with full cases, but your small format, slower-moving products, specialty items, or higher value products would be then more efficiently replenished at single item level.”

When you have the option to only replenish what you need, you can reduce storage space, optimize store layout, and reduce shrinkage and waste.

Robotics Offer Flexible Solution for the Future

According to Koffarnus, in food and beverage, about 70% to 80% of a warehouse operations workforce is involved in picking. A key to better using your labor and optimizing operations will be figuring out how you can reduce that. Robotic item picking may be the answer.

“That’s an area we see growing in the next years. There’ll be more and more demand for that kind of high-level automation, taking as much of the product range into an automatic process as possible,” says Sharples.

Beyond case picking or item picking, interest in autonomous mobile robots (AMR) is growing. These solutions provide a more flexible, modular approach to automation.

“People are looking for a more modular, scalable solution that they can start small, that they can grow into that automation,” says Sharples.

“This kind of modular approach certainly fits the needs of a lot of customers,” he adds. “There perhaps is less certainty these days around how these future trends will develop, and they want solutions that are seen as scalable and more modular that they can flex as they grow. And as their business changes, they can adapt more easily more quickly.”