Mkt 302 - Supply Chain in Liquor Industry

Callie O’Connor

MKT 302

Professor Doering

Position Paper

Due: 2/23/2016

Efficiency among the supply chain system for the liquor industry has increased substantially due to managers making changes as it cultivates. This industry contains three levels that have all made adaptions in order for the improvements to take place, including the supplier, the distributor and the retailer. Supply chain managers have finally come to realize that all three tiers within the supply chain have to be adjusted in order to maximize efficiency and increase productivity and profitability. The modifications that have to be made include changes to aspects such as: visibility, the facilitation of collaboration, the leverage of technology, and the analyzing of data.

Stock keeping inventory (SKUs) are crucial when it comes to managing inventory effectively. Each SKU identifies a specific product from different manufacturers; the increasing number of SKUs in every retailer’s inventory is the result of the growing number of new wineries and breweries. From the consumers’ perspectives, this is favorable since it leads to more options in their choices of wine, beer, and spirits, and beneficial for the retailer since customers value variety. Although variety is good for customers, it makes the logistical side of the company more difficult; there is more open box picking when it comes to less popular choices that have little demand, which is one of the source of logistical complications. Due to the all the current options and new product consistently being produced, large amounts of inventory are required in order to meet customers needs. Having an abundance of product, especially new stock, yields the inability to forecast demand for the new product due to lack of history of sales. Furthermore, this means that product is needed to be made to stock in which challenges managers when it comes to efficiently storing inventory in warehouses.

E-commerce has an increasing demand for products in a society gone viral. There is a trend emerging on apps; allowing companies to connect with consumers everywhere. Companies offer their products online on designated websites while apps allow the online experience to go mobile. Websites and apps provide a direct channel between consumers and suppliers. The problem with this is that regulations prohibit producers and distributors from supplying directly to the consumers. Regulations vary state to state which create barriers that restrict the freedom of ecommerce for the liquor industry.

In the United States, each state has the authority to regulate the production, sale, and distribution of alcohol within its borders. This means state and local jurisdictions may have their own requirements in addition to federal requirements. State laws and regulations vary widely from state to state, and may be more restrictive than federal regulations. (Alcohol and Tobacco Tax and Trade Bureau)

This bad because e-commerce is valued by consumers for attributes involving convenience and variety. Having restrictions complicates the process, pushing companies to find ways to overcome the regulations and government taxing in order to provide customers with ecommerce capabilities.

Technological capabilities allow companies to use the e-commerce distribution strategy in order to capture more customers with the convenience factor. Technology has increased the efficiency of warehouse storage. ERPs and other technological advancements have been implemented to track, store, and move inventory throughout warehouse space. An example of technology being implemented is Amazon having the Kiva system which enables inventory to be moved throughout the warehouse, enabling the company to handle more product in an efficient manner at lower costs. Having this technology is good because in some ways it works better than humans could. An amazing feature of the Kiva system is that it re organizes inventory based on order flow; less popular product is stored deeper into the warehouse while popular merchandise with greater demand stay closer for ease of access. This process of order flow seems to be the obvious idea to have, although with out technology, it would not be efficiently done.