COLUMBUS — A little more than three years ago, Ohio paid $21 million for a new system to run its liquor business. Two years later, the state spent $19 million to replace it.
It turns out, it’s the second time that’s the charm.
The first new system, which debuted in 2015, brought none of the hoped-for improvements. Inventory wasn’t accurate, payments to suppliers were often short and distribution was a mess thanks to inaccurate orders and no focus on the consumers buying the liquor. In the 18 months since the second system launched, it has been nothing short of a complete turnaround.
“It’s great, just great, a dramatic change in the last year and a half,” said Brian Farrier, regional vice president of operations for Giant Eagle, one of the state’s largest operators of liquor agencies. “Historically, we were struggling to keep up with demand, we had out-of-stocks all the time. We are in a much better inventory position today.
“The changes have paid off.”
Along with a new system to control inventory and ordering, the Division of Liquor Control brought on a new distribution partner, global giant DHL. The former distributor, Spartan Logistics, ran four warehouses across the state to feed the hundreds of agencies. DHL consolidated that into two, one here in central Ohio and one in northern Ohio.
The local warehouse is brand new: 315,000 square feet chock full of booze, 470,000 cases in all. The state carries about 2,400 different items, from Fireball and every flavor of Crown Royal to Tito’s vodka, actor George Clooney’s tequila and Middle West’s whiskeys.
DHL ships out 20,000 cases of liquor a day from its Columbus warehouse to agencies in central and southern Ohio, and receives about as many cases from distributors and distilleries.
In the former system, agencies almost never received the liquor they ordered, or knew what was coming on the next truck. The state simply sent what it had, and sometimes a few surprises. That doesn’t happen anymore, according to multiple local agencies.
The new system’s order accuracy has been almost flawless, better than 99 percent, said Greg Faller, operations manager for DHL.
“We know where the product is and which suppliers need to be paid,” said Lorraine Terry, senior director of JobsOhio’s beverage system, which gets the revenue from Ohio’s liquor sales and uses the profits to fund economic development.
“It has exceeded our expectations,” said Jim Canepa, Ohio’s superintendent of liquor control, who took over the division in the middle of the system transition. “Inventory control in a retail business is priority one. You need to know who is buying it, who is selling it and people need to get paid for their product. All of that is happening now.”
The new setup goes far beyond inventory control, although that drove the $19 million overhaul. The data in the new system is visible to everyone in the chain: suppliers, the distribution system and agencies. The state can see what liquor is selling in which stores and can move inventory around to accommodate consumers. Before Canepa came on board, consumers were not a priority.
“The Division of Liquor Control and Superintendent Canepa have done a great job on gathering retailers’ perspective on the project,” Kroger, the largest liquor agency operator in Ohio, said in a statement. “From Kroger’s perspective, the biggest win from the modernization project is better service to our customers.”
The state’s numerous rare bourbon raffles, well-stocked shelves, its single-barrel whiskey program, the widely successful Last Call pop-up and a soon-to-be-released searchable online database of the state’s liquor inventory are all proceeds of the new system. The data allows the state to manage its liquor better, and since it is no longer fighting its own computers and constantly putting out fires, the Division of Liquor Control has been able to put resources into things it has long ignored: merchandising and marketing.
“It is much more customer-focused,” Terry said. “We’re increasing the attention to detail and we’ve had a lot of good response.”
At a bourbon raffle last month, for a few bottles of Weller 12, more than 1,200 people lined up at a Giant Eagle store in Dublin.
“They have done a great job taking advantage of trends,” Farrier said. “We had to achieve stability, better communications, better supply chains and put more product on the shelf. Then we were able to start to have fun.
“Oh, and by the way, sales are up.”
According to JobsOhio’s financial statements, sales have risen 13 percent since the new system came online, from $1.05 billion in 2016 to $1.18 billion this year. (JobsOhio’s fiscal year runs through June.) Profits have increased as well, and JobsOhio cites the new system and distribution changes as the key drivers behind improved profitability.
Canepa sees other benefits as well, like having the data to show that the state needed more liquor stores. In the past year or so, 27 new agencies have opened across the state and more are on the way. A service center for agencies, suppliers and consumers has also been set up to pinpoint issues and resolve them as quickly as possible, or just to field questions about where someone can find a specific bottle of liquor.
The online database is the next piece in the state’s effort to please consumers and give agencies a boost. The database, which should be up and running by early 2019, will be searchable by agency, letting consumers know which one has, for instance, Russell’s Reserve 10 in stock and how much of it.
“We couldn’t have done that before, no one knew what was in stock anywhere,” Canepa said. “That has really taken a lot of time and effort and expertise.”
The next step is a mobile app giving consumers that same access to data, but also allowing the state to send push notifications about bourbon raffles, or suggesting recipes and more.
“We want it to be a more personal customer experience, we want that to be our brand: informative, friendly, convenient,” Canepa said. “That’s where we want to take it.”