Case Study: VA ABC
About VA ABC
The Virginia Department of Alcoholic Beverage Control (VA ABC) which is located in Richmond, Virginia controls the sales and distribution of alcoholic beverages in the Commonwealth of Virginia (www.abc.virginia.gov ). VA ABC strives to provide superior customer service to over 300 retail outlets in addition to providing a major source of revenue for the Commonwealth.
Mission Statement:
"To control the distribution of alcoholic beverages; operate efficient, conveniently located retail outlets; enforce the laws of the Commonwealth pertaining to alcoholic beverages and youth access to tobacco products; and provide excellent customer service, a reliable source of revenue, and effective public safety."
Challenges facing VA ABC
Last year, VA ABC had sales of over $490M and shipped more than 3.2M cases of distilled spirits. Over the last 5 years VA ABC has grown from 255 stores to over 305 stores. In addition to adding more stores VA ABC faced challenges from their suppliers. They found that the number of SKU’s that they were carrying had been steadily rising from about 2,000 to well over 3,500. “Look at what has been happening in the spirits industry with all the flavors, there isn’t just one flavor of vodka anymore; you have a dozen flavors of vodka and that’s happening in rum and even in tequila now”, says Gordon Millikan, Assistant Director of Distribution for VA ABC.
Due to their unprecedented growth VA ABC found it challenging to meet their customer demands. Their old material handling system simply did not have the capacity to service their existing stores. To further compound the issue they are looking to increase the total number of retail stores to around 350 to 400 in the future.
Time for a change
VA ABC realized it was time for a change from the way they had been running their distribution center. Originally VA ABC workers picked cases of spirits from pallets loaded on the warehouse floor so they essentially were using the entire floor space in the warehouse for picking operations. As their SKU count rose they were literally running out of space.
As time progressed, three factors drove the need for change. The first was the increased volume flowing through their distribution center. The second was the required capacity for future expansion. And the third was the ergonomic challenges their workers were facing working in the distribution center with heavy products.
There has to be a better way
As the challenges facing VA ABC started to rise they called upon material handling consultants, Tompkins Associates to help them figure out how to solve some of these critical issues. After completing a consulting study VA ABC realized they needed a modernized material handling system that could help them automate their processes and handle the increased volume that came with both the retail store and SKU growth.
After a very through and exhaustive bidding process VA ABC selected Bastian Material Handling to implement and manage their distribution project. Bastian was selected based on several criteria including prior experience, engineering ingenuity, overall cost, proposed design, and the ability to deliver on a mission critical schedule.
A system was ultimately designed that would allow VA ABC to ship more cases without increasing the amount of time required. The system was designed to ship 20,000 cases of distilled spirits in an 8 hour day. With store growth and the volume growth this design allowed VA ABC to maintain a single shift operation with an appropriate staff and fulfill all their orders working a five day work week.
The Results
VA ABC is very proud of the fact that through the whole project they were able to maintain the stock performance of their retail stores. They have maintained 97% of the items in stock in their stores and are setting their goal now at 98% in stock rate for all SKU’s.
In their old distribution system it would take 22 to 23 order selectors between 10 and 11 hours to process what their new system is designed to handle in 8 hours with the same number of order selectors.
Other results include improved order accuracy for retail store deliveries and improved worker conditions. By incorporating ergonomic designs into the distribution center, improved worker conditions have been provided.
Overall, the new facility has provided for increased throughput and storage capacity required to successfully grow both from a product and a retail store perspective without adding a second shift or increasing labor requirements. VA ABC is now in the initial phases of developing operational efficiency standards to better measure worker performance and efficiency which will ultimately lead to even better performance in the future!
