SKU proliferation and delivery challenges

STANDISH, Michigan—Variety may be the spice of life, but variety can also cause heartburn for the logistician who needs to ensure that broadening ranges of inventory make it onto the shelves of a growing number of business types.

Today’s retail customers are being more demanding. They don’t want to see just one type of product. They want a variety of options to choose from—different sizes, different configurations and different prices. While this may be a boon for the retailer—the chance to sell more items to a more people—retail sales can only happen if the supply chain industry makes changes to how the goods are handled on the invisible-to-the-customer back end. SKU proliferation and other developments including warehouse automation, alternative store types, shifting workforce dynamics are all forces that are coming together to drive changes in route distribution systems with the goals of increasing productivity and reducing operating costs.

Customer demand for package and size options

One of the key factors affecting the need for improved route distribution systems results from an amazing amount of product innovation in recent years. Examples abound in all segments, but are especially evident in the food and beverage industry. From chips now available in twelve or more flavors, to beers offered in different sizes (with multiple flavors in each size), to a boom in single serve packages, customers are purchasing a much wider variety of products.

This change in how consumers want to purchase has introduced complexity into the supply chain, with resulting impacts to warehouse management systems as well as route distribution systems that get the goods onto the shelves.

Table 1 shows the impact of the rapid rise in SKU growth from increased product options over the past few years. Note that the average number of SKUs on a route has more than doubled between 2003 and 2011. Clearly, this increase makes it increasingly difficult to move goods through the supply chain and is causing the need for innovation in route distribution systems. The ubiquitous 2-wheel hand truck in use since the 1940s is in need of some help. To add to the mix, at the customers’ end, there is a feeling that the distribution equipment is taking up valuable aisle space and a desire to get product delivered to the shelf faster.

The SKU proliferation has required the supply chain to look at ways to manage SKU complexity within the warehouse and a desire to speed up delivery by taking it out of the route drivers’ hands. Those who can efficiently pre-pick and package the large number of different items in the warehouse differentiate themselves by meeting the growing demand for packaging variety.

New store environments

No discussion of route distribution changes would be complete without a mention of another important trend, the growth of smaller retail outlets, including non-traditional outlets like gas station mini-marts, and pharmacies, which are attracting shoppers looking to purchase snacks and necessities on their homeward drives. These outlets do not have a lot of inventory and do not have access to large truck bays in the back of their facilities. Instead, merchandise must find its way through a double door in the front or back of the store. Bringing these smaller loads in through the front door and getting it onto the shelf can be a real challenge and getting it from the truck to its final destination without the driver having to touch it multiple times can be difficult.

Attracting and retaining employees in a challenging business environment

At the same time as SKUs are proliferating and new outlet types are springing up, another business challenge is a growing concern about the employees performing distribution jobs. Seeking productivity gains, companies have turned to warehouse automation, and to putting fewer trucks and trailers out on the road—both factors in a potentially shrinking workforce with fewer route distribution drivers. The shrinking work force means tenured employees tend to stay on the job longer and, as the workforce ages, it becomes more difficult to do the work at the same level with the amount of bending and twisting involved.

These concerns, as well as the desire to attract alternative workers, like older or younger or female route distribution employees, causes product distributors to ask, “How can we attract and retain new employees, and how do we keep employees on the job longer without increasing fatigue and injury risks?”

Delivery equipment options

The industry and workforce trends discussed means there is a need for robust route distribution systems. Available options include pallet jacks, traditional 2-wheel carts, fixed caster carts, and lift-pallet systems. Let’s review the pluses and minuses of each.

The generic pallet jack is relatively inexpensive and widely used as a way to move product into a store. However, the pallet jack is not conducive to in-store, through-the-front-door-delivery. They lack maneuverability across the topology in a tight store hallway, and are difficult to use to cross a parking lot, incline, or threshold. They do not turn effectively and are not ergonomically correct.

A traditional two-wheel truck is a simple solution and is a relatively inexpensive single capital expense, although maintenance and upkeep over time can be costly. More of a drawback is the fact that this option cannot easily adapt to the rise in SKUs per stop, so it tends to increase route delivery time.

Fixed caster carts and lift-pallet systems both enable increased stops per standard work day and provide a safer environment for the driver on the street. These systems reduce the non-value-added handling of products, so they support reductions in routes and delivery costs.

The fixed caster cart generally  has two handles and a deck with six casters that swivel. The chief drawback to this option is cart storage —When you wheel them off the trailer, where do you store them until they are needed again? Most warehouses would have space constraints that would preclude widespread use of fixed caster carts. This is a great option where product mobility within the store 100 percent of the time is paramount and warehouse storage space is available.

The lift-pallet system was specifically developed as a way of adapting to the challenge of rapidly increasing SKUs and improving ergonomics to reduce worker injury. The goal was to reduce the amount of time the driver spends touching the product, thereby reducing the time at an individual account. The eventual time savings was expected to translate into reducing fuel consumption, reducing the number of trucks in the fleet, and ultimately reducing the distributor’s carbon footprint. Reducing worker loss time events was another key goal, as designers sought to reduce bending and twisting involved with loading from a side bay truck to a hand truck.

Depending on how they are configured, lift-pallet systems can be compatible with automated order pick systems. The system allows orders to be built directly onto a special, smaller-sized pallet inside the warehouse, and then loaded into trailers using traditional fork lifts with unique pallet adapters. The pallets are then delivered directly to the stores.

Lift-pallet systems should be designed to permit the driver to transfer product to the final destination through a standard sized door, unlike with full-size pallets, because of the pallets’ compact size. The system should be designed around the footprint of getting through a doorway easily, maneuvering store aisles, and turning in tight radius corners.

Distribution jobs are not easy—moving product can be a challenging task—and there is an increased focus on figuring out how to keep the work force longer and reduce back injuries and related worker’s compensation claims. These workforce challenges, along with the need to respond to greatly increased product choices, are causing companies to look for route delivery innovations, and that includes looking for delivery equipment that better suits the needs of the new retail environment.

Greg Ecker is president of Standish, Michigan-based hand truck manufacturer Magliner.