Two provincial liquor boards join forces to move low-volume products
By combining low-volume orders from certain European countries with the Société des alcools du Québec (SAQ), the Liquor Control Board of Ontario (LCBO) has mixed up a winning combination: lower shipping costs, more frequent ordering and more responsiveness to changing customer demand.
Of the consolidation pilot, begun in June 2014, LCBO media relations coordinator Christine Bujold says, “The consolidation pilot enabled both respective liquor boards with the ability to more quickly build a full container for products for which neither would ever order in full containers.”
The SAQ did not respond to requests from Canadian Shipper to comment on the consolidation pilot. However, in an LCBO document on the consolidation pilot, Stéphane Groleau, director, Transportation and Procurement, at the SAQ, says, “The initial results of our collaboration with the LCBO have been positive and we look forward to continuing to explore other ways we can work together in the future.”
The goal of the pilot has been for the LCBO and SAQ to place lower-volume orders together, thus more quickly building up a combined order that fills a shipping container. This gets around their rule of not shipping an order until they have ordered enough product to fill a container.
“Both boards move full containers only, even consolidated containers are only moved once there is enough freight consolidated to build a full container. The benefit in comingling separately purchased product is a more regular dispatch of full containers,” Bujold explains.
The liquor boards are co-loading freight in eastern and central European countries such as Bulgaria, Croatia, Estonia, Latvia, Lithuania, Finland, Sweden, Slovakia, Slovania and Russia. They include spirits and wine.
Neither liquor board moves a large volume of product from these countries, according to an LCBO document. Speaking for itself, the LCBO notes that co-loading has increased the frequency of dispatches from these countries to every week or two, instead of once a month.
“The LCBO and the SAQ purchase products separately and the orders are put together for shipping. By combining the orders to make larger shipments, both LCBO and SAQ can order low volume product from these countries on a more frequent basis,” Bujold says. “The efficiency comes in the ability to respond more quickly to changing customer demands by reducing the time it takes for either liquor board, on their own, to consolidate less than container load freight into a full container to move.”
This not only means that sufficient product is more likely to be on the shelves for customers, since the shipping cycles are shorter. It also means that the liquor boards can respond more quickly to increases in demand – a specific focus of the partnership, according to Bujold – and reduce the risk of product shortages.
“We are able to receive products more frequently, and therefore better able to respond to changing consumer demand for lower volume product. This ensures we provide excellent service to our customers, which is a top priority for LCBO,” Bujold says.
As well, by having shorter ordering cycles, the LCBO can reduce costs by keeping less inventory on hand.
Usually, the LCBO destuffs all of its inbound freight at its own distribution centres and then distributes it to its 650 stores. For these combined orders, however, a third party in Montreal destuffs the shared containers. The LCBO portion is transported, mostly by rail, but sometimes by truck, to its distribution centres.
“Shipments can be sent to one of our distribution centres in either Durham, London, Toronto or Ottawa,” Bujold says.
The consolidation pilot is still under development, but the LCBO already sees potential for further collaboration. For example, according to the LCBO, since spirit sales are much higher in Ontario than in Quebec, it might benefit the SAQ to purchase spirits directly from the LCBO, with products shipped from its Durham Warehouse. At the same time, the LCBO would reduce its costs by being able to order more freight.
“As a single entity, we transport more volume over the North Atlantic than anyone else. Together we basically dominate this trade. Having this additional freight would help continue to drive down our costs,” notes the LCBO’s Nick Nanos, director, Traffic, Customs, Toronto & Ottawa Logistics Operations, in the LCBO document.
The LCBO even envisions such arrangements with other liquor jurisdictions to better manage transportation and obtain economies of scale for all concerned. After all, Nanos notes, “If the majority of product is shipping through the eastern seaboard, anything going to Manitoba is going right by our doorstep.”