National Wine & Spirits in Michiganby Becky Boyd on 2012-10-15 18:36:10
Prior to 1997, the state of Michigan was the wholesale distributor of liquor (spirits). The state purchased liquor from producers, warehoused the liquor in state-owned or leased buildings staffed with state employees, and state employees and private contractors delivered it to state-owned or leased regional stores, also operated by state employees. All licensees who sold liquor to consumers were required to pick up the liquor from these state stores.
Then the laws changed and the liquor distribution network was privatized. The state remains the legal wholesaler of liquor, but now contracts the warehousing and distribution functions to private entities known as authorized distribution agents, or ADAs. These agents receive deliveries from producers, warehouse the liquor, accept and reconcile orders from over 12,000 licensees, and make approximately 8,000 weekly deliveries. While they don’t actually own and sell the liquor, they receive a price per case fee to warehouse and ship the cases.
Total annual sales of liquor in Michigan are about $1B, with a total of 6.7 million liquor cases sold each year. National Wine & Spirits is the largest of three ADAs in Michigan.
Under the new distribution laws, ADAs receive orders for liquor online, package the order, deliver it to customers and collect the fees. Michigan requires distributors to be responsible for tracking all items through the supply chain as it is delivered from producer and brewer, through distributors, and onto the retail segment, which includes grocery stores, restaurants and taverns. One key safeguard is a system of territorial integrity, requiring one distributor to be responsible for a specific brand within a geographic area.
Requirements imposed by the state impact the cost of distribution, such as prohibition on split case fees, no minimum order size, a large number of products for picking and packaging, and a large amount (12,000) delivery points for liquor delivery.
Over 350 suppliers of wine and spirits sell their products to National Wine & Spirits. The company distributes over 7,000 products through a network of a master warehouse, a hyper-terminal, and cross docking facilities located strategically across Michigan. These operations handle the largest spirits volume and the third largest wine volume in the State of Michigan.
National decided they needed to incorporate technology to play a major role in managing the costs of distribution and to obtain efficiencies within their warehouses. They partnered with W&H Systems, a material handling equipment supplier and systems integrator specializing in the wine & beverage industry.
W&H Systems offers conveyor systems, warehouse control systems, sortation systems, AS/RS, paperless picking & packing systems, mezzanines, commodity equipment and specialty-designed equipment. In National Wine & Spirits, high-speed conveyors and sortation systems handle thousands of cases per hour.
W&H Systems automated both the main warehouse in Brownstown, MI (near Detroit) and the Hyper-Terminal in Grand Rapids, which only holds the top spirits and wine SKUs. All of the slower moving wine & spirits full case and bottle SKUs need to picked in Brownstown (the main warehouse) and reverse-reverse loaded onto the trucks so that when they get to Grand Rapids, they can be off loaded and get in reverse load sequence with the Grand Rapids goods.
Also, there is a unique aspect to this entire story – Michigan has an extreme bottle pick business. Since the state doesn’t charge a fee for individual bottles and it is a cash state, the percentage of cases that leave the warehouse that are “splits” is near 60%, where the industry average is 5% to 20%.
Plus, they have a two-day delivery window. Most Wine & Spirits distributors receive orders until 5 pm on day 1 and ship on day 2. Michigan requires National Wine & Spirits to receive an order on day 1 and ship on day 3. They work 24 hours around the clock picking the many bottles. On peak days this can approach 200,000 bottles. W&H Systems built a very large split case holding system that holds over 5,000 split cases that are queued up around the clock, then released in sequence with the full case in the evening when it is time to load the trucks.
Interestingly, National Wine & Spirits became private distributors of wine several years ago. This product follows the normal one-day cycle and has the normal 10% splits. The real challenge is that they plan the Day 3 delivery truck on day one for spirits, then on Day 2, they amend the wave planning to integrate wine deliveries.
A powerful Warehouse Control System manages all of these warehouse activities: 2 businesses, orders being filled from 2 buildings, and one consolidated delivery to the customer.