The wine & spirits storage and logistics industry has gone through a variety of changes in an effort to be more responsive to changing customer expectations. Each level/tier of the supply chain has been affected in its own unique way due to their unique SCM purpose. The three main tiers of the wine & spirits supply chain include: Tier 1 – wineries, breweries, distilleries (those performing transformative functions); Tier 2 – wholesale distributors; and Tier 3 – retailers (liquor stores, grocers, restaurants). The tier that has seen the most change in recent years is Tier 2. Here, third party logistics operations have begun to provide a variety of services such as storage, handling and value-add services. These activities are being outsourced to 3PL partners due to their strategic positioning and ability to perform these tasks more efficiently and cost effectively than their Tier 1 counterparts. 3PLs and distributors are also helping wine & spirits businesses adjust to growing SKU proliferation. Consumers are demanding more options than ever which makes the storage and fulfillment of product more complex than ever. Top tier 2 SCM operators are implementing advanced technologies such as automated storage and retrieval systems (AS/RS) to simplify inventory handling. They are also utilizing robust forecasting technologies to help manufacturers set production schedules. Forecasting tools have given these businesses the ability to track key market attributes and market churn in an effort to refine their product mix. Having this ability helps the tier 1 manufacturers and distillers to reduce on-hand inventory and associated costs. While these changes mainly impacted tier 2 businesses, increasing governmental regulations impacted wine & spirits operations across the board. Shipments being imported into the US must be pre-registered before crossing any borders, complicating the day to day operations of wine & spirits shippers. Many have chosen to become members of specialized trade organizations to receive membership benefits after completing regular site visits and evaluations. This helps to get inventory to consumers faster. The distribution networks through which product is delivered has also evolved significantly. Networks are being consolidated to just a few large facilities where crossdocking can be performed. These facilities are able to become more specialized and offer savings that can be passed on to consumers. The high complexity of these distribution networks are now being managed by robust warehouse management technologies in an effort to move away from slow, laborious paper-based processes. To learn more about how the wine & spirits supply chain has adapted to these changes and many more contact Datex today at marketing@datexcorp.com or 800.933.2839 ext 243.

1. SUPPLY CHAIN
MANAGEMENT
BASICS:
WINE & SPIRITS
STORAGE AND
LOGISTICS
BY: ANGELA CARVER

2. Wine and Spirits Supply Chain Logistics
• Like other industries, the wine & spirits supply chain consistsof
multiple tiers that each serve an individual SCM purpose.
• When evaluated from end-to-end, these tiers transform raw
materials into inventory and deliver finished goods into the handsof
consumers.
• The wine and spirits supply chain is broken into these three tiers:
– Tier 1: wineries, breweries, distilleries, brand owners and importers
– Tier 2: wholesale distributors
– Tier 3: retailers (i.e. liquor stores, grocers, restaurants, pubs, etc.)

3. The Role of 3PLs & Distribution Centers
• 3PLs and distributors fall into the Tier 2 category of the wine and spirits
supply chain. These operations provide a variety of storage, handling and
value-add services for wine and spirits manufacturers that do not
specialize in the storage and handling aspects of the supply chain and
can more easily navigate complex regulatory requirements.
• Third party logistics and distribution operations can often perform these
services more efficiently and at a lower cost than their Tier 1
counterparts.
• Typical services provided by these Tier 2 supply chain operators include:
• D2C delivery & order fulfillment
• Import & export services
• Repacking
• Temperature & humiditycontrol
• General storage
• Distribution & crossdocking
• Product mixingmanagement
• Custom bottling & labeling
• Inventory tasting
• Aging

4. Evolution of the Wine & Spirits Supply Chain
• SKU proliferation
– The wine & spirits industry is in a constant state of change as
consumer demands evolve and more options are made available.
The number of SKUs being handled by Tier 2 suppliers are
increasing annually, making storage and order fulfillment more
complex than ever.
– In an effort to adapt to these challenges, many warehouse
operators are implementing technologies such as automated
storage & retrieval systems (AS/RS) to simplify the handling of
numerous SKUs and inventory types.

5. Evolution of the Wine & Spirits Supply Chain
• Forecasting
– With the introduction of new technologies, wineries, distilleries
and breweries can now use robust forecasting tools to set
production schedules. This is a critical function as many
producers plan multiple years in advance to allow foraging.
– The introduction of these tools have optimized the tracking of
market attributes and market churn, allowing manufacturers to
refine their product mix to meet changing consumer drinking
patterns.
– This helps to both increase profits for Tier 1 wine & spirits
businesses and reduce on-hand inventory costs for slowmoving
and non-moving inventory.

6. Evolution of the Wine & Spirits Supply Chain
• Regulations and Customs
– More stringent governmental regulations are impacting every tier
of the wine and spirits supply chain. Although the supply chain is
becoming more globalized each year, moving inventory across
borders is becoming more complex.
– The U.S. Customs & Border Protection Import Security Filing
Committee regulates driver hours of service, container weight
restrictions and much more.
• Each inbound shipment must be registered with this committee before
crossing any US border. This agency is now requiring shippers to file this
documentation earlier than ever, complicating the day to day operations of
wine & spirits shippers.

7. Evolution of the Wine & Spirits Supply Chain
• Regulations and Customs
– In an effort to balance the growing complexities of importing
goods into the U.S. shippers are becoming members of the
Customs – Trade Partnership Against Terrorism (C-TPAT).
– The C-TPAT organization focuses on identifying areas for
improvement within each member organization through regular
site visits and evaluations. Member organizations benefit from
membership with reduced screenings at ports.
– This helps to expedite the delivery process and gets inventory in
the hands of consumers faster.

8. Evolution of the Wine & Spirits Supply Chain
• Distribution networks
– Many wine & spirits distributors are working towards
consolidating their distribution networks into one or few main
distribution facilities. These larger facilities are implementing
crossdocking to accommodate the high velocity inventory flow
through.
– These centralized facilities are able to offer higher levels of
specialization, automation and inventory pooling which can
reduce overall handling and storage costs. These savings can
then be passed on to consumers.

9. Evolution of the Wine & Spirits Supply Chain
• Technology Implementation
– The transition from paper-based operations to automated
warehouse management software in the wine and spirits industry
began in the early 90’s. This number has surged to 90% with the
top 100 distributors according to an article by Josh Bond in
.
– This surge in WMS implementation has been driven by the
significant improvements recognized by those making the
change.

10. Evolution of the Wine & Spirits Supply Chain
• Technology Implementation
– In the previously mentioned SupplyChain247.com article “Wine &
spirits distribution: The right blend of automation” studies
identified that with the proper mix of WMS, WCS & automation
tools travel time for picking and putaway activities can be
reduced from an average of 26 miles per day to 5 miles or less.
– Warehouse management system implementation can also help
to increase inventory processing from 700 cases per hour in a
manually operated facility to over 100,000 cases a night.

11. Conclusion
• The wine & spirits supply chain, like many others, is in a constant
state of evolution. This evolution is necessary in order to meet
changing customer demands.
• All three tiers are focusing on warehouse management software and
automation technology implementation in order to meet changing
customer expectations, growing regulatory requirements and the
globalization of the supply chain.
http://www.inboundlogistics.com/cms/article/cheers-managing-the-spirited-supply-chain/
http://www.supplychain247.com/article/wine_spirits_distribution_the_right_blend_of_automation