With more mergers and acquisitions also in the space, as wine & spirits companies get larger and consolidate more, they want to keep their distribution center close to where the big cities and large populations are, Laman added. One of the ways that wine & spirits companies address this is through automated storage and retrieval systems (AS/RS) or smart racking systems in the event that land capacity for a big DC or warehouse is not available. High-rate systems, warehouse control systems (WCS) and other software packages to run the warehouse more efficiently also come to play to enable visibility across the distribution model.
Perishable waste—of great concern second to traceability in the food & beverage (F&B) industry—also helps drive the need for more defined distribution models. In fact, the industry will start to see more strategic infrastructure models for handling perishable supply chains, according to Jaymie Forrest, Managing Director, Georgia Tech Supply Chain & Logistics Institute.
“The current distribution network and infrastructure we have today is really set up for electronics among other things—it was never designed for a perishable supply chain,” said Forrest. “Scheduled refrigerated service by rail; better intermodal and perishable centers; improved produce gateways—such ways, closer to network design, and bigger and better infrastructure models is what we need to handle this perishable product—because we’re finally starting to pay attention to it. We’re finally coming back full circle to say, ‘Hey, perishables need to be handled differently and they need a different supply chain.’”
Important to consider in food & beverage is also which strategy works best for distribution based on target market audience. For example, Peapod, AmazonFresh, HomeGrocer and FreshDirect continue to change the game in perishables when it comes to capturing new market share in delivery direct-to-consumer. Such models do not deliver quite the same objective as a local grocer market, for which majority of the produce comes from international sources via wholesalers and brokers (direct-to-consumer delivery models are more typically sourced by local providers). Nonetheless, they do mix up the dynamics of the distribution center to help re-examine large warehouse facilities versus cross-dock locations.
“The Peapod model is real but it is different because that is looking at new ways to attract the order in the sub space and places that have mass density—they are competing with brick-and-mortar without having the brick-and-mortar,” explained Forrest. “They are being creative with electronic data, information and the Web ordering process. People can go to a digital billboard at their local train station, scan five or six items that they want, get in the train, log in to the system, finish their shopping and have it all delivered the next day.”
The United Kingdom, for example, is much further ahead in the F&B direct-to-consumer delivery model.
“Our Tesco stores were one of the first ones of the big grocers to deliver to homes and they still do to an extent,” explained William Salter, President and Chief Executive Officer, Paragon Software Systems Plc., Surrey, United Kingdom with offices in Frisco, Texas. “In the UK, you’d see someone going around in a store with great big trolleys scanning products onto it and picking for home delivery operations. It was a very clever way of approaching it because it got that operation off the ground really quickly without having to invest in any huge warehouses. But what we see now is a bit more of a move by quite a few of those delivery companies over here in the area of food to having warehouses or locations dedicated to home delivery of food. And as it’s taken off, companies found that it’s more effective to have a warehouse dedicated for home delivery. So we’re starting to see some of these food companies have things like dock stores for food and grocery home delivery. In the UK it’s taken off hugely. A lot of people will just go online and do their grocery shopping. It’s not as prevalent in the U.S. as it is over here in the UK but I don’t think it will be long before we see that kind of food home delivery in urban areas in the U.S.”
While such Internet models of delivering food is not a new concept—Tesco has been using Paragon for grocery home delivery for the last 10 years—perhaps more important is its relevance to the impact of consumer demand and need for more efficient distribution models to continue to meet increasingly high-demand levels of customer service.