The beverage industry is awash in SKUs. While beer, energy drinks, spirits, carbonated soft drinks, and ready-to-drink coffee and teas have grown, bottled water was the rising tide that lifted all boats in the past year. That growth has become a challenge for bottled water companies and logistics operations across the industry.
According to results presented during the State of the Beverage Market panel webinar hosted in June by Beverage World, the bottled water market share compared to other U.S. liquid refreshment beverages was 29.6% in 2014, up from 25.4% in 2011. Bottled water was second only to carbonated soft drinks, which held a 39.8% market share in 2014, down from 43.7% in 2011. In addition, the International Bottled Water Association predicted that bottled water would surpass carbonated soft drinks this year.
The growth in the beverage industry is a blessing and curse. Each year, more than 5,000 new products are released to the market. In fact, SKU proliferation is creating complexity in warehousing and transportation. Left untamed, it can wreak havoc on even the most sophisticated supply chain operation. More SKUs mean more inventory, more need for space, and an increased probability of picking and delivery errors.
What’s more, growing product lines create contention for limited capacity in the supply chain — there are only so many slots on a pallet, positions on the truck, or facings at retail.
From the warehouse to transportation to the retail location, allocating SKUs is a challenge. How can bottlers and shippers channel the flood of new products and use capacity most effectively?
1. Minimize transportation costs. Whether owning or leasing vehicles, analyzing the Total Cost of Ownership (TCO) to ensure that the cost of transportation – including fixed or variable costs, administration, overhead and other costs – is the lowest it can be.
2. Maximize asset utilization. Evaluate assets to make sure they’re designed and spec’d to provide the maximum capacity. This includes trucks, warehouse facilities and MHE all configured to maximize capacity.
3. Maintain the assets. If a truck, fork lift, conveyor, or other material handling equipment cannot function, that translates into lost capacity. Implement a comprehensive maintenance program to reduce the possibility of failure to ensure capacity is maintained.
4. Implement LEAN processes. Across your supply chain, take a methodical, deliberate and structured approach to continuous improvement. Look for areas of waste; by eliminating waste, you may improve resources and reveal capacity that might not have existed before. Simply put, if something doesn’t add value, eliminate it.
5. Collaborate. If you’re sending partially loaded trucks on the road, or your warehouse has excess capacity, partner with other companies in the same predicament. Seek out co-loaded transportation or shared warehouse opportunities, possibly with the help of a vendor. With more than 4,000 food and beverage customers – including the 10 largest in the U.S. – a 3PL like Ryder can help identify collaborative opportunities.
Numerous strategies exist to help bottled water providers improve operations, implement continuous improvement, save time and cut costs across the supply chain, while also complying with safety regulations and ensuring high levels of customer service. With the flood of SKU proliferation having no end in sight, make sure you’re rising with the tide.
This blog was adapted from a presentation by Paul Lomas at the State of the Beverage Market panel webinar. Paul is Vice President, Business Development for the Consumer Packaged Goods Group within Ryder. Prior to Ryder, he led the supply chain practice for Accenture in New York City, was a Vice President with Cleveland Consulting Associates and held materials management responsibilities for General Motors.
