Managing SKU Proliferation in the Beverage Industry
Q: What is SKU proliferation, and what drives it?
A: Competition is driving beverage makers to expand their portfolios to provide a wider array of product, flavor, package, and beverage choices. All these choices generate new stockkeeping units (SKUs). SKU proliferation, in turn, drives the need for smarter use of labor, distribution networks, warehousing space, and transportation resources.
Q: What are some new beverage product and SKU categories?
A: New product categories are a huge contributor to SKU proliferation. Coconut water is a case in point: this emerging segment grew nearly 30 percent in 2013.
Existing segments such as alcoholic beverages are also expanding. No longer satisfied with a glass bottle option, consumers demand more portable and eco-friendly packages. Today, wine and spirits come in standard and mini bottles, boxes, cans, and pouches, all of which add to packaging, distribution, and transportation complexity. Given the growing diversity of spirit flavors and boutique wines, some wine and spirits distributors handle as many as 15,000 SKUs.
Craft beers are also growing. In the past 10 years, beer SKUs have jumped from 300 to more than 1,000. As big brewers increase the premium offering in their portfolios, distributors must be able to keep up.
Q: What are the implications of this SKU growth?
A: While the dazzling array of beverage choices is great for consumers, adding new brands, varieties, and packages can wreak havoc on even the most robust supply chains. Fleet and supply chain managers face a number of challenges, including:
- Growth in shipping volumes and orders with more complex fulfillment requirements.
- Need for more efficient picking processes, and the right technology to handle portfolio depth and complexity.
- Need for warehousing capacity, including mobile storage alternatives, and inventory management systems.
- Demand for better means of handling and storing lower-volume SKUs.
- Flexible transportation systems to handle surges in capacity and smaller quantity shipments.
Q: What steps can companies take to manage these changes?
A: The beverage SKU explosion, together with competitive pressures, is driving the need for smarter transportation and supply chain strategies. To tackle the challenge, companies should take the following actions:
- Make sure your fleet of beverage trucks and trailers is tailored to your specific needs, and investigate dedicated transportation solutions that can handle driver management, fleet maintenance, route design, and delivery.
- Focus on operating practices to drive supply chain efficiency and continuous improvement while reducing costs and eliminating waste.
- Explore a greener fleet. Alternative fuels such as natural gas can lower a fleet's carbon emissions footprint and overall fuel costs.
- Consider asset-based and supply chain management solutions that offer flexibility to adapt to changes in demand, staffing, and service.