Digitization: Load The Beer

Why move without beer when you can move with beer?

At AB InBev, digitalization is a critical megatrend for supply chain. Like all business organizations, cost effectiveness is always an underlying goal, and digitalization is one way to not only be cost effective but also stay competitive in the marketplace. One application of digitalization at AB InBev is in the warehouses at the breweries. The current operation of a warehouse includes employees driving fork trucks who are dedicated to one of three jobs. The first job is pulling pallets of beer from the production line with a fork truck and placing these pallets into inventory on the floor of the warehouse. The second job is called floor loading, where fork trucks move the pallets from the floor and load them into a trailer to be distributed to a wholesaler. Because AB InBev uses forecast planning to produce beer and does not want the customer to be short on product, extra pallets of beer are made and thus stored in inventory. However, this process causes extra pallet handling, more labor to move pallets, and reduces cost effectiveness. The supply chain department strives for direct loading, which is the third job in the warehouse. Direct loading is when an employee pulls pallets of beer from the production line and loads these pallets directly onto a trailer. Direct loading eliminates double handling of pallets and is more cost effective than floor loading. For the first job of placing pallets on the floor and the third job of direct loading, employees are dedicated to one production line per employee. For the second job of floor loading, employees are dedicated to one trailer per employee. Once that trailer is fully loaded, the employee is dedicated to the next trailer. Because of this dedicated setup for all three jobs, the employee travels on the fork truck one way with pallets on the forks and then returns via the same route with no pallets on the forks. Therefore, the fork trucks are only 50% efficient. Because of this poor efficiency, AB InBev turns towards digitalization by developing a new warehouse system to solve this problem.[1]

 

A short-term solution designed in-house, a new warehouse system called Interleaving was developed by a small project team with limited resources. The objective of Interleaving is to increase the efficiency of the fork trucks by reducing the travel time with no pallets on the forks. To achieve this objective, Interleaving decomposes each of the three jobs mentioned above into tasks. Interleaving sees the whole warehouse operation, including the location of every production line, pallet, trailer, and fork truck. The new system creates tasks based on the location of the fork truck and nearest pallet to be moved. Instead of being dedicated to one job, the employees are now told to complete the tasks assigned to them, so the fork trucks are traveling to the nearest pallet versus the long route of the previously dedicated job. Once Interleaving is developed, the small project team travels to different breweries for implementation.[2]

 

The first brewery is in Jacksonville, Florida, and Interleaving proves to be a great success. The second brewery is in Cartersville, Georgia, where the new warehouse system is unsuccessful by causing a bottleneck in the warehouse. Trying to determine the root cause for the Cartersville plant, the project team recognizes a few differences between the breweries. Jacksonville produces the same number of pallets each week with fewer SKUs and is 52% direct loading[3]. On the contrary, Cartersville has significantly more SKUs with a varying number of pallets produced each week. This complexity leads to a 34% direct loading rate[4]. Cartersville no longer uses Interleaving until the new system becomes more robust, but the project team does not have enough people, time, or resources to make the improvements necessary.[5]

 

From a medium-term outlook, AB InBev is concerned about the ROI of this digitalization compared to the CAPEX needed to be successful.[6] However, AB InBev should dedicate more resources to this project team and develop Interleaving to be applied throughout all breweries. While Interleaving might need to be specifically designed for each brewery, advancing this digitalization should be a priority instead of accepting the status quo. This new system has great potential to increase efficiency without having the economic impact or employee engagement of significantly reducing jobs. Additionally, if Interleaving is successful, less intervention is needed from managers. Then, managers can focus more on process improvement instead of dealing with day-to-day activities.

 

While Interleaving is being trialed, quality control has become more of an issue. Since employees are no longer dedicated to a specific job, they mindlessly follow the Interleaving tasks and are not always aware of their surroundings.[7] How do you prevent an employee from loading the wrong trailer? How do you prevent loading a pallet of 24-pack Budweiser versus 18-pack Budweiser?

 

(798 words)

[1] Phone interview with AB InBev employee Sarah Schilling, November 13, 2017.

[2] Phone interview with AB InBev Supply Chain Manager David Huskisson, November 13, 2017.

[3] Company documents.

[4] Company documents.

[5] Phone interview with AB InBev Supply Chain Manager David Huskisson, November 13, 2017.

[6] Phone interview with AB InBev Supply Chain Manager David Huskisson, November 13, 2017.

[7] Phone interview with AB InBev Quality Control Manager Christine Davenport, November 13, 2017.

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4 thoughts on “Digitization: Load The Beer

  1. J, it seems like these warehouses can be digitized even further in the medium term by increasing machines and reducing employees for the loading roles. Like the Barilla distribution video, machines should be able to move pallets appropriately, to the warehouse or to trailers, if the pallets are marked as a certain type of beer and quantity. This additional digitization may reduce space, utility, and labor costs, as some of the field trip participants described in class, even though it requires upfront capital expenditures to purchase these machines.

    As you mention, each warehouse is different based on its SKUs, direct loading rate, and space. Managing adjustments to Interleaving or the machines described above for each warehouse will always require human input, which may be a bottleneck as it is in Cartersville.

  2. I agree with Pratik that AB InBev should be utilizing more digitization in their warehouses, especially to manage the QA issues you mention. I think that there are several ways to avoid the human produced errors, such as loading the wrong pallet, with quick technological improvements. As a simple solution, I would imagine that as part of the fork lift a scanner could be added to ensure the right pallet is being moved. More complex, would be a system such as Symbotic’s, that removes the human element from the process almost entirely and therefore is required to have a very sophisticated QA system to ensure each case ends up in the right place.

    I also completely agree that AB InBev should be investing in these projects in order to improve efficiency but I would argue that ultimately warehouses will be more like what Symbotic is building and will therefore lead to significant job reduction. Therefore, I think that it is important that the company set itself up for long-term success by focusing the majority of their investments on “the warehouse of the future” while simultaneously making these smaller investments to gain incremental improvements.

  3. I like how AB is thinking about digitalizing their workflow. Oracle planning and enterprise resource planning software have become a standard way to manage inventory and resources at manufacturing companies in recent years. It’s almost like if you aren’t using ERP for production, you are behind in the game. I also like how you addressed side-effect on the system where employees attention level decreases. I don’t think this is a huge concern because if I were to pick between people not paying attention due to overloading vs underloading, I’d pick the later. And this can be easily corrected with a better design in information screen making the information more interactive and engaging.

  4. It is very interesting to see how you can reap such large efficiency gains from a seemingly simple improvement to the coordination process and work flow structure. It is contradictory that a larger factory with a bigger number of SKUs, where the potential for efficiency gains is presumably much larger, has been deemed unsuccessful due to the system causing a bottleneck. I fully agree that the company needs to dedicate more resources towards this initiative and implement it across its whole manufacturing network, as the learning economies of scale from repetitive trial-and-error can be huge. I would also take this reasoning one step further and investigate whether the human component could be further reduced or removed altogether, along the lines of Amazon’s driverless robots shifting merchandise in its warehouses. This would reduce the risk of human errors such as loading the wrong Budweiser pack onto a truck and would allow for automation, better quality control and ultimately lower costs.

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