Value-add, the practice of tailoring a generic product for individual sales channels, is an important element of the picking and dispatch process and an increasingly widespread marketing strategy. Common in the apparel and footwear industries, especially where manufacturers are selling through independent retail channels, it is now also emerging in the food and drinks sector. Unless it is carefully managed, this stage can add a high degree of extra cost, which needs to be recouped from the additional sales generated to make the value add strategy commercially viable.
Common ways apparel manufacturers offer value add to retailers
• An outdoor clothing manufacturer supplying retailers will pack replenishment orders in such a way that products can go straight onto the shop floor with no additional sorting required. Pickers work to a set matrix and need to ensure that each product SKU is grouped by size and colour. This way retail staff at the back end of the process don’t receive mixed up replenishments. Suppliers to the PPE industry typically use a process known as a ‘man-pack’ to group all items for a particular new ‘individual’ together therefore making a simple package to be given to the new employee.
• A lingerie manufacturer offers multiple variants of products within their value add strategy and reworks products sold in the marshalling areas of the warehouse to up to 5 configurations. Generic product lines are customised for up to seven customers, to create a product offering that is unique for each sales channel. These include lingerie sets, individual item sales, custom hanger displays, sleeve protection and unique drop-tag with barcodes.
• A beer manufacturer may offer 50 different varieties and bundling different bottles of beers in one selection pack gives customers a chance to try out less well known beers. Since high speed production lines don’t have the capability to pack selection boxes automatically, they have to be created manually in the marshalling area at the end of the production process.
The essential role of a WMS during value add
The desire to ‘add value’ often originates from a marketing department seeking to differentiate products; offer value multipacks; or offer unique packaging.
Manufacturers often go to great lengths to ensure required stock is picked and prepared in the right way. In many cases, although they will have made investments in picking systems to help streamline labour costs and improve accuracy, less attention may have been paid to the commercial implications of the value add process. In reality, picking is the ‘easy’ part and unless care is taken, thousands of hours a day can be burned during the ‘adding value’ process.
Experience has shown that a warehouse management system (WMS) is critical to operating an efficient value add process because it can automatically control the information sent to the packing stations. This informs the picker of his or her instructions. Using a WMS to manage this process ensures instructions are presented in the most logical and efficient order.
Flexibility vs efficiency
To try and reduce the operational costs associated with the value add process, there may be a temptation to complete anticipated activity in advance. In practice this is rarely viable because of the need to maximise stock liquidity and ensure inventory is not overly ‘personalised’ and unnecessarily allocated to a particular customer. Underestimating stock values is one of the biggest challenges a manufacturer has and order cancellations are always a risk.
Rather than commit large amounts of inventory to a particular value add process, many manufacturers prefer to split orders, complete a proportion of their value add in advance and leave the remainder to be completed in shorter time scales. Working this way enables a manufacturer to achieve the right balance between efficiency and flexibility.
Author
Eric Carter is Solutions Architect at Indigo Software and specializes in advising manufacturers on how to optimise their warehouse using an integrated warehouse management system (WMS)
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