Changing with the Times

Making important system changes at one of the largest purchasers and sellers of beverage alcohol in North America isn’t easy. But the folks at the Pennsylvania Liquor Control Board are continuing to bring their stores, sales methods, education and facilities smack into the 21st century.

To put it into perspective, the PLCB operates nearly a million square feet of warehouse space (about 19 football fields worth), managed by three privately held Pennsylvania distribution center companies. In fiscal year 2017-18, more than 17 million cases shipped from these distribution centers to more than 600 Fine Wine & Good Spirits stores, including more than 90 Premium Collection stores and 11 licensee service centers.

It’s a lot to manage. Total sales of $2.59 billion (including liquor and sales taxes) last year notched a $67.8 million (2.7 percent) increase over the prior year and set a retail sales record. Net income totaled a record $158.2 million, which is $53.4 million (50.9 percent) higher than the prior fiscal year, with contributions to state and local government beneficiaries totaling $749.6 million for the fiscal year.

The PLCB has often struggled in the past with a stodgy image, especially compared to stores in neighboring states to the east. Not anymore, as the PLCB has been taking major steps to advance the ordering process for its on-premise licensees, as well as private citizens.

Making Strides

Starting in October 2017, the PLCB launched a series of improvements to its special order program, which allows licensees and individual consumers to buy wines and spirits not already stocked in its Fine Wine & Good Spirits stores.

Now, individual consumers and licensees may place special orders online; previously orders had to be placed by phone or in-person at a store. In addition, licensees can now authorize payment for and approve each special order. That allows them to avoid confusion over what a supplier will provide and prevents unwanted or miscommunicated orders from accumulating in Fine Wine & Good Spirits stores’ storage areas.

Customers are notified as orders are accepted or rejected by suppliers, when they are prepared for shipment and when they become available for in-store pickup. The adoption of a pre-paid program requiring all Special Orders to be paid in full also eliminated a decades-old deposit program and allowed the PLCB to return nearly $784,000 in deposits to licensees.

This has also had the side benefit of improving workflow in Fine Wine & Good Spirits stores, says board member Mike Negra. Packages now arrive in sealed and labelled packages specific to each order.

“There’s a savings from an efficiency standpoint in our stores now, as each order is shipped individually and employees don’t have to spend time separating bottles,” Negra says. “If you ordered four bottles of wine in the past, we would have had to separate and re-box the items, ship and invoice them. That’s now the responsibility of the supplier. Now the staff is being utilized on the retail floor and not in the warehouse.”

In other words, no more time spent in the back room sorting, assembling and validating special orders. It took some consultation in advance –  with industry groups representing both licensees and suppliers, as well as with individuals to preview and respond to projected modifications.

“When we embarked on the new program for special orders, we engaged key stakeholders,” says Charlie Mooney, executive director of the PLCB. “Licensees, suppliers, internal employees, field personnel, brokers who use the system and consumers. We solicited all kinds of opinions and embarked on an order system that was a dramatic change.”

The web portal-based system facilitates communication between licensees and suppliers – licensees submit requests that suppliers must then answer if they will fulfill. If so, then the order will be tracked through emails (that the order has been received, is being fulfilled, and when it is received in the local store).

All suppliers and licensees were notified of the upcoming changes a month in advance of implementation, and regular communications, resources detailing program changes and training were provided proactively to Special Order suppliers and customers, as well as to PLCB employees.

Most importantly, since the PLCB never has to inventory the order, it allows the agency to expand beyond its listed items

After an initial period of adjustment, the new Special Order process became business-as-usual for suppliers, licensees, individual consumers and Fine Wine & Good Spirits stores. Between October 2017 and September 2018, more than 339,000 special orders were processed for unit sales of 10.1 million and dollar sales exceeding $109 million. A majority (90 percent) of the special order sales are coming from on-premise licensees.

“These changes were made to bring ordering electronically to customers, create more accountability and make a more efficient process to fulfill those order in stores,” says Elizabeth Brassell, director of policy and communications for the PLCB.

Increasing Efficiency

More changes have been afoot in Pennsylvania: as a way to maximize efficiency in the distribution process, the PLCB Office of Supply Chain successfully migrated to a new warehouse management system at its Scranton distribution center in fiscal year 2017-18.

Working with the PLCB’s Office of Information Technology Services and third-party logistics provider Kane (the company that owns and operates the Scranton distribution center), warehouse processes were migrated from a PLCB-owned supply chain management system, Robocom, to one that Kane had found success with, called the Manhattan Scope system.

“This was an internal process change designed to maximize efficiency in our distribution process through the management of our inventory and resources,” says Tim Holden, PLCB Chairman.

“The request to go to the new system actually came from our warehouser,” Mooney says. “They asked if we would entertain using that new system and after analyzing how it worked, we saw that the end result has been a much more flexible system for them in things like data optimization and ad hoc reporting.”

This new warehouse management system allows for improved management of inventory and resources by enabling the distribution center to receive, store, pick and ship wine and spirits with greater efficiency and accuracy. Increases in case storage space, staging area and dock doors also allowed the facility to handle more deliveries from vendors and more shipments to stores and licensees that use the licensee delivery program.

The Scranton distribution center had seen the largest increase in those delivery orders, making the changes even more important. “The new process worked so well that we have introduced it into the distribution center in Pittsburgh,” says Mooney, noting the change that took place there in August. The PLCB has three distribution centers – the third, in Philadelphia, is the busiest and has a different set-up that would prevent instituting the same system currently, Mooney says. But the PLCB plans on soliciting bids for a new distribution plan for the Philadelphia facility soon.

Other important changes include targeted onsite inspections in order to increase observance of Pennsylvania rules regarding on-premise licenses. Until a law change in 2017, the PLCB had no authority to correct situations where licensees didn’t provide sufficient seating or food to customers, as required by Pennsylvania law. Now, inspections have been increased as has observance of the rules by licensees, says Chairman Holden.

Education & Prevention

Another key initiative is underage drinking prevention through education and awareness of parents of children 8-to-12 years-old. Called “Know When. Know How,” the campaign is based on PLCB-commissioned research, including a survey of more than 500 Pennsylvania parents with children under age 21 and focus groups with parents of children between the ages of 5 and 15. The survey found that most Pennsylvania parents are not familiar with the facts about underage drinking, the long-term effects alcohol can have on kids, the penalties for underage drinking or when children start drinking. The “Know When. Know How” campaign aims to fill that gap.

“When I saw the research, I was shocked to see how young we needed to target the children,” Holden says.

The campaign stresses that underage drinking doesn’t have to be one big, intimidating talk and can instead be based on teachable moments that are brief and age-appropriate, springing out of everyday experiences.

The campaign has a heavy digital focus, while also including traditional television and radio commercials that highlight facts and statistics, emphasizes the role of parental responsibility as it relates to prevention and offer tips and resources for parents on how to start the conversation with their kids about alcohol in digestible bits and pieces, so parents can become comfortable discussing the topic without being overwhelmed.

The campaign website provides scenarios and tips on how parents can spark conversations about alcohol with their kids, and it features campaign advertisements and suggestions for community partners in prevention to help promote the campaign.

“Eight- to 12-year-olds are still listening to their parents, so it’s a good time to start talking to them about the product and the dangers of alcohol consumption, and get to them before they undergo a lot of peer pressure,” says board member Michael Newsome.

“We tried to build it as a resource that could fit multiple ages and help the parents start the conversation early and continue them often,” Brassell says. From its November 2017 launch, through October 2018, the campaign totaled 41.1 million digital impressions, resulting in more than 105,000 link clicks and 42,560 Pennsylvania-based visitors

Looking to the Future

The PLCB has plenty of plans to evolve other aspects of their enterprise. In October the agency opened of a new FineWineAndGoodSpirits.com fulfillment center that was relocated from a 4,000-square-foot facility in one part of the state (Lehigh Valley) to a nearly 30,000-square-foot facility in Montgomery County. The larger warehouse allows the PLCB to expand its online offerings to include about 4,400 of its most popular SKUs, as well as hundreds of new luxury items and Chairman’s Selection products.

“The prior facility was very limited,” Mooney says. “Our e-commerce business was originally based on hard-to-find and rare items. We’ve increased the selection of SKUs from 1,500 to more than 5,000 by the end of the year and we are incrementally growing by adding new products every week in the delivery cycle. Our objective is to have 3,200-3,500 readily available items, plus luxury items only available at about 100 Premium Collection stores. We’ve also added the Chairman’s Select and Advantage SKUs, as well as holiday gift packs.”

The e-commerce site was in serious need of an upgrade as well, and a complete redesign is on its way – a new platform with user-focused design that will offer a mobile-friendly experience and increased functionality.

“Our site and infrastructure is 12-years-old, so we were way overdue,” Negra says. “I think that as we stay agile, moving forward we probably will see another refresh in a few years. It’s how people want to shop, and with more than 600 stores servicing such a big state (with only one store in some counties with an isolated population), we want to let that person have the same access as the shopper in Pittsburgh or Philadelphia or Harrisburg or the other metropolitan areas.”

The continually expanding e-commerce product portfolio yielded sales of $3 million last year, a 21.5 percent increase over fiscal year 2016-17. Now with exploration of same-day delivery (targeted to launch in Philadelphia in the first half of 2019), the expectations are that the online sales boom will only continue.

The PLCB also helps home-grown producers, funding $1.8 million in grants in support of Pennsylvania’s wine and beer industries. Seven projects in the Pennsylvania wine industry and 13 projects in the Pennsylvania-made malt and brewed beverages received that funding recently.

 

Jack Robertiello is the former editor of Cheers magazine and writes about beer, wine, spirits and all things liquid for numerous publications. More of his work can be found at www.jackrobertiello.com.

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