Wine and Spirits Logistics

What country drinks the most wine and spirits in the world, per capita?

Drumroll, please….

According to Alcohol.com, it’s Belarus, followed by Lithuania, Grenada and the Czech Republic.

What 3PL distributes the most wine and spirits in the U.S.?

We’re not sure, but this year Kane Logistics will ship about 26 million cases of wine & spirits for its customers, building on our 30-year strategic focus on wine and spirits logistics. We recently sat down with two of KANE’s top operators for wine and spirits logistics – Richard Reilly and Mike Kelly – to discuss the top challenges associated with this type of product. Following are 7 priority challenges that they identified.

Achieve safe and efficient material handling

Alcohol products are heavy and fragile, so it pays to invest in technology that improves safety, increases productivity and reduces damage. For instance, KANE’s RF-enabled warehouse management system integrates with wearable devices for hands-free picking of heavy cases. The wearable computers strap to the wrist, with the RF scanner on the operator’s finger. This technology has increased individual picks per hour by 8 and led to a 5% productivity gain. The RF guns that had been used in the past were cumbersome. Pickers would often have to put them down, resulting in drops and damage, and even forgetting the device as they drove to the next pick location.

Another operator-friendly technology in wine and spirits logistics is quick-pick pallet trucks. Typically, after picking cases at a particular aisle location, a picker would need to return to the truck to advance it to the next location – possibly even hopping up onto the truck. With quick-pick trucks, the picker simply presses a button on his hand and the truck moves to the next designated pick location. This results in far less walking and effort for the picker. Another advantage is that you can regulate the speed of these pallet trucks and program them to stop gradually. This is important when dealing with cases of alcohol, since sudden stops can cause cases to shift and fall.

Minimize damage-related claims and payouts

Damage concerns don’t stop when the product leaves the distribution center. In fact, in-transit damage can be a real profit-draining problem for wine and spirits manufacturers and distributors since retailers can issue chargebacks and make damage claims for product that does not arrive in pristine condition. One way to reduce the financial impact of such claims is to take photographs of pallets from all sides that show the condition when they leave the DC. If product looked good when it left the DC, you don’t want to pay for someone else’s mistake downstream. Software, like Load Proof, makes it easy to store and access a repository of photos in the cloud for all supply chain partners to see, including retailers. A BOL number is associated with each photo for easy reference. Over the course of a year, companies can achieve 6-figure savings by refuting claims and avoiding chargebacks.

Manage slow-moving wine and spirits inventory

In any warehouse, you don’t want slow movers eating up inventory locations that could be used by top-selling products. But it happens – particularly in the wine and spirits industry, where manufacturers frequently introduce new products and change packaging. What’s needed in wine and spirits logistics is close, proactive monitoring of turn rates and a collaborative relationship with the merchandising side of the business. If a new brand of hard seltzer is taking off, you don’t want to expand your warehouse to add inventory if you’ve got 25 other SKUs collecting dust. Here it’s incumbent upon brand managers – through price reductions and special promotions – to move this older inventory out to maintain a high-volume, high-turn wine and spirits warehouse.

Manage seasonality

People consume more alcohol around holidays and holiday seasons. Because of this, shipment volume can vary wildly, making labor management and transportation capacity management a challenge. Wine and spirits stores are highly dependent on timely deliveries, so there is little sympathy for the DC that can’t effectively manage a major volume spike.

The good thing is that many of these spikes are predictable based on past history, so the distribution center can rely on forecasts to plan in advance. 3PLs, in particular, are skilled at economically managing demand volatility in wine and spirits logistics since they can pull in cross-trained associates from other accounts to assist, or make strategic use of temporary labor for warehouse staffing to satisfy a short-term need.

Continuously reduce costs

When it comes to continuous improvement, particularly with regard to cost control, there’s no finish line – just a series of milestones that serve as new starting lines. They key to success: an active quality management program that trains and encourages all associates to identify problems and suggest solutions.

One great example of this is KANE’s management of inbound rail cars of wine products into one of the company’s Scranton, PA distribution centers – a 711,000-sq. ft building with 179 docks doors and 10 rail doors. Most DCs don’t have a rail siding, and those that do have a single track that runs along one side of the building. In an effort to increase capacity, KANE proactively added a rail line that now parallels the original spur, effectively doubling the capacity without having to alter the building. When two trains are pulled up side by side, we simply drop a dock plate between cars and the outer car can be unloaded through the car on the inner spur. At one point, KANE was limited to receiving 10 rail cars per day at this DC; today, we receive 17 rail cars of inventory per day, but have the capacity to receive 20 per day, if needed (40 a day if new shifts were added). Labor utilization skyrocketed once the new spur was added, reducing all-in labor costs for this large wine account by 20%.

Hire right and increase association retention

The cost of having to replace a warehouse associate is at least $7,000. So, high-turnover environments can prove very costly. Attrition can be higher for associates in wine and spirits logistics because the work is demanding, with each case weighing about 38 pounds.

The best way to increase associate retention is to hire right in the first place. At KANE, for hiring and training purposes, we create pallets that consist of 38-pound cases of sand. We have prospective hires transfer these cases to another pallet and tell us how many cases of each SKU number is on the pallet. This allows us to test their accuracy, and also to give them first-hand experience handling the heavy cases. Many decide, themselves, that the work is not for them. This practice has significantly improved our retention rate for wine & spirits accounts. And, as we all know, long-tenured workers are more accurate and productive, improving overall operational performance.

Communicate

This final point is critical when wine & spirits distribution is outsourced to a 3PL. The 3PL’s team cannot see itself as one step removed from the end customer – whether it’s a retailer or consumer. Associates must think and act like part of the client’s team, sweating every last detail just as clients would, and keeping them informed every step of the way.

There’s nothing unique or magical about such an approach. But it’s this old-school, customer-first attitude that, in the end, makes all the difference. At KANE, we rely on the KANE Code as the guidepost for how we behave.

Looking for a partner?

When it comes to wine and spirits logistics, there’s no substitute for experience. If you are managing distribution yourself, you are familiar with the challenges we’ve outlined. If you plan to lean on a 3PL to assist, it helps to work with a 3PL experienced in distributing beverages, wine and spirits. To learn more, connect with KANE.