Customer Experience Straight Up: How Ohio Liquor and DHL Deliver Excellence

In this episode, join Lorraine Terry, Vice President, JobsOhio Beverage System and Jason Bailey, VP Business Development, Retail, DHL Supply Chain, as we explore our partnership, Ohio Liquor's new distribution move and having a customer- centricity mindset.  

Transcript

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Welcome to All Business. No Boundaries., a collection of supply chain stories by DHL Supply  Chain, the North American leader in contract logistics. I'm your host, Will Heywood. This is  a place for in-depth discussions on the difference DHL makes on your supply chain challenges.  Today's episode is Customer Experience Straight Up: How Ohio Liquor and DHL Deliver Excellence.  Let's dive in. Okay, we got a special edition today. We are offsite at an internal conference  with an old friend who has been on the podcast before, Lorraine and a new podcast guest, Jason.  Let me ask you both to introduce yourselves. Lorraine, welcome back. Tell us who you are,  what your role is, and who you're with. Oh, well, it's a pleasure to be back. I didn't realize I  trumped you a little bit on that. My name is Lorraine Terry. I am the Vice President of the  Jobs Ohio Beverage System. Publicly, I represent Ohio Liquor, and we are the distribution and sale  of all high proof spiritous liquor in the state of Ohio, and then at the end of that sale is we  take the profit from the sale of that liquor and we fund all economic development in the state of  Ohio. Good. We will break that down a little bit as we talk. Jason, how about you? Very good. Jason  Bailey, Vice President of Business Development for our Retail sector. Within the Retail sector,  our beer, wine, and spirit subsector is housed, which obviously includes Ohio Liquor. We're not  only responsible for new business development, but also account management, and in this case,  we work on a cohesive team of Operations, HR, IT, Engineering, and so forth in support of our  customers, or in this case, Ohio Liquor. All right, so 2022 is when we recorded our first  podcast with you and just to kind of connect the dots. So in that one, we were talking a lot about,  I think, the early partnership with DHL. And I wonder, Lorraine, if you could just kind of step  back in time and think about where you were then and where you are now. And kind of what's sort  of front of mind for you and for your team. No, absolutely. It is a lot of fun to actually think.  I saw that question and I was trying to figure out, well, it's only been a few years actually.  I think since we last spoke, we have done some big technology overhauls. We moved our platform  to D365. We actually implemented Manhattan in both the warehouses, which was a huge success and and  went really well. We actually have enhanced our field operations teams. So, we've added  what we call regional merchandising teams. So we have folks that are in our liquor stores every  single day. We added regional managers from the division side of our operation who have been just  integral in compliance, communication, stakeholder management. We have rolled out an app. We now have  an app, OHLQ app. So if you want to know where to find liquor in Ohio, get the app. We made our  website even better since the last time we spoke. We on the beverage system side very personally  very proud of a ratings upgrade from Moody's from a double A3 to a double A2. And then also just  went back and finished another round of financing, really helping secure what we can provide to  JobsOhio, so JobsOhio can keep doing what they do in Ohio. That's been a busy three years then. It  sounds like. Three and a half. Time flies when you're having fun. Yeah. So Jason, do you have  the app? I absolutely have the app. I use it on a, you know, a fairly frequent basis, you know.  Right. Yeah. Absolutely, but you're kind of, since we talked with Lorraine last, you're new to the  mix. Tell us sort of maybe about the beer, wine, and spirits thing that you guys are involved with  more broadly. And then I do want to come back, Lorraine, to talk about JobsOhio and sort of how  you guys connect. Absolutely. Yeah, absolutely. So our beer, wine and spirits space really  encompasses any beer, wine and spirits customer. So we actually have partnerships with a number of  you know control states, you know seven, including a couple in Canada. And then in addition to that  we partner with private brands across the beer, wine and spirit space. I continue to say that but  it's true. It's an easy definition of kind of what we do. That's everything from warehousing  to transportation to some unique solutions for a couple customers as well. Great. Okay. So, Ohio  Liquor is operating in a control state. Yes. And maybe just kind of the brass tacks of what does  that mean and what does it mean to you in terms of how you run your operation, rules of the road,  that kind of stuff? Yeah. That's a great question. So, every state in the nation does control the  sale of beer, wine, and spirits. I'll get them for you. But 17 of those states actually decided at  the end of prohibition how they wanted to control different aspects of beer, wine and liquor. For  Ohio it was we want to control the revenue from the sale of high proof spirits. So anything with  more than 42 proof is under our envelope or under our umbrella. That is what we control in Ohio. But  really what that means is we have control over the distribution of that product. So we are very  mindful of where our liquor stores are located, how many liquor stores we have in the state,  how available the product is to Ohioans. We fully understand, right? We control,  we distribute a product that can cause a lot of joy or a lot of harm and we own both aspects of  that. So you know how many locations, where those locations are, who operates those locations. Also  you know the other aspect of control is that we are the only customer to a supplier. Diageos of  the world, Jim Beam, Sazerac, those brands only have to come talk to Ohio Liquor to figure out if  we want to distribute their product in Ohio and where to put that product. So it's a really nice  relationship with all of our suppliers, especially one customer, one point of contact. What we do in  Ohio though with the sale of liquor is a thousand percent unique. There is no other model like us  in this country whatsoever. And so that model is that we take the profit from the sale of  high proof spirits of liquor and fund all economic development in the state of Ohio. So big wins,  ones that you guys have, obviously living in Ohio, know a lot about, Anduril, Intel, LG, big  wins across the state. We are a statewide network of economic developers, seven regions, JobsOhio,  and all of that profit funds those efforts, grants to attract new businesses, to keep businesses  growing in the state of Ohio. So if it's an economic development initiative or a project,  JobsOhio has probably touched it and that's how they are funded. Right. That's a very interesting  model and near and dear to my heart being an Ohio native and a customer of your outlets. It's  interesting how you pulled those things together. So Jason when you, and we had another Jason on the  last podcast, Jason Rowe from Operations, but you on the business development side, you know,  how do you think about the relationship with Ohio Liquor and JobsOhio? What kinds of things are you  guys putting in place to make sure that you know we keep evolving like we have? Yeah, we absolutely  think of ourselves as a strategic partner for Ohio Liquor, right? And the growth that they expect to  achieve in the next 5 years. And we're going to talk a little bit about opening the new DC and I  think we were a big part of that and partnering in the new DC. That's a big component for us  in terms of how we service our customers when they're experiencing growth or change in their  operations or in their needs or requirements. And so you know we do, as I mentioned, view  ourselves as a strategic partner for Ohio Liquor and really plan to continue to support your growth  the next five years and decades of your business. Absolutely. I did forget the distribution center  move we have done. So let's talk about that a little bit. That's important to all of us here.  What's the backstory? Oh goodness. The backstory is that back in 2017 when we first started working  with DHL we consolidated four distribution centers to two. Thank you to DHL for helping us, you know,  kind of map that for us, to understand where we needed to place those distribution centers from  four to two. At the time, 2017, the location in Groveport was great for our needs,  well suited for the location, the space we needed. We had a few racks in the building. We're mostly  a pallet pick floor pick operation. It worked for our business. COVID did spur our output further,  forward, further, faster. With that, we had to kind of reassess. Do we have the right room? Are  we being as efficient as possible? We actually ended up adding on another 40,000 square feet  that was adjacent but not congruent to our space. DHL did a very fantastic job of telling me that  this is not efficient. So, we took all of this information about efficiencies, about our space,  about our projected growth, went to our board, and gained favor to say, "Yes, you need a bigger  place. You need to move out of Groveport so that the next 10 years of the liquor enterprise  can grow comfortably into a new space." So, we actually really lucked out and a property had  just been built about 640,000 square feet. I say right around the corner. It was literally 2 miles  around the corner from our current location. We secured that property. We worked quite closely. I  mean really none of this would have been possible without DHL's expertise to space plan. How are we  going to operate in this space? We did not need all 640,000 but we have potential. We have more  room now. We're operating in about 400,000 of those square feet. Built an office into that  space. The backstory is we have a trajectory that says we will grow. We needed the space. We were  losing efficiency and costs in our inefficiencies and really the stars just aligned. Yeah. Great.  So Jason, as the service provider, what triggers you to think they do need more space or and  then how do you make the argument or sort of tell the story around this is what we think needs to  happen and why? How does that conversation go? Yeah, I think Lorraine hit on it just a minute  ago in terms of what triggered us and that was the fact that we were in non-congruent space,  right? We had kind of outgrown the four walls of the previous site. But you know when we started  having discussions around the new site and the 10-year growth cycle that was being anticipated  by Ohio Liquor, I think we took some other things into account too. Not just expansion of volume but  also potential expansion of SKU base or perhaps eCom and direct to store coming into the fold at  some point. We've not only accounted for that growth that's expected but also for potential  changes in profile or operational disciplines that are potentially there not necessarily, but  as Lorraine mentioned we are looking to grow into that space and that could come in many different  forms. Yeah, terrific. So, SKU growth, I know we talked about this the last time. I was interested  in particular because I like to drink bourbon. Temind us about how the partnership, you know,  kind of opened doors to access to some things that weren't coming into Ohio before. This is probably  where I shamelessly plug the last episode of All Business. No Boundaries. because we talked about  what I call the Pappy Van Winkle debacle. Our relationship with DHL was integral in creating  a relationship of trust with our suppliers. One of those biggest suppliers being Sazarac.  Ohio had truly lost access to highly allocated products of the Pappy Van Winkle persuasion  because we were not at the time, back in '15, '16, ' 17. We were not treating that product  in a way that it could be fairly distributed to as many Ohioans as we could get it to. That was  an outcome from prior failures. An outcome to a system that just wasn't operating as efficiently  as as we could. Bringing in DHL meant bringing in the inventory control that is unbeatable.  We know exactly where every bottle is in the distribution center. That supports knowing where  every bottle is in our stores and knowing where every bottle is sold to or out of. And so with  DHL, with inventory control, we slashed losses. We were able to build a relationship of trust with  all of our suppliers and new ones. So we've grown our inventory, not our inventory, we've grown our  offerings to our consumers by almost 80% since 2017. So as Ohioans, hopefully you've noticed  there are many more bourbons on the shelf. We are growing tequilas. We have done some fantastic  Irish initiatives. We had gin this summer. All sorts of new gins that were brought into the state  and all kinds of education we were able to provide to our customers. But again, that foundation  was a relationship of trust with our suppliers. Our suppliers looking to Ohio to say, "You're an  easy customer to work with. I can trust that my products are where you say it is." Every supplier  gets a chance once a year to come in and actually see both of our facilities. Hands down DHL is the  reason that only maybe 10 of them show up at any given time, not the over 400 that we have  a relationship with. Oh wow. So it's a testament to our systems and to DHL's processes. Good. Good.  Well, the Pappy supply into my house is still a little low. A little slow. Yeah. A little. Yeah.  I'll check the app. Enter the lottery. Enter the lottery. All right. I have a whole bunch  of KPIs written down here and I want you both to speak about why you know if one's more important  than another and if not like how you balance them. So, I've got availability, speed, accuracy,  assortment, satisfaction. There are probably others. Lorraine, maybe you go first. You know,  kind of how do you think about those? Yeah. Well, the KPIs we track today were created because of  failures of our past. Out of the gate, on time delivery. So, it's small things, but things that  DHL executes flawlessly, on-time delivery from our warehouses into our liquor stores. And that's  important because those liquor stores for the most part are independently owned. They are mom  and pop. They are hourly wage employees. And if the truck doesn't show up when the truck was said  it was going to show up, that employee sits and that employee is not being efficient, but they're  being paid to not unload a truck. And that is bad business for all of us. On-time delivery,  the accuracy of it, I can't stress enough. We know where every single bottle is, and that's actually  a part of the move I didn't bring up. We moved that entire distribution center and DHL did not  lose or break a single bottle. And we're talking hundreds of thousands of cases. We should all take  full credit for that. For sure. That inventory control really just is probably the most important  to me. That means that my dollars are working really hard and working very efficiently when I  know where every single bottle is in the warehouse and in our stores. Okay. Yeah. And I think I would  just add to that and say first of all, I'm really excited to hear that. I I know those stats and I  know what we're doing for you guys and it's but it's always good to hear. But for us,  it really starts with our customers customers. So of course you guys are our customer, but it's your  agencies who are your customer and our most important customer. So it starts with really  understanding having a deep understanding of their requirements and their needs and what they  need to be successful and then designing the full scope of the operation from that inventory to  the planning to the daily execution the tactical execution on a day-to-day week in week out basis  to ensure that they are satisfied and we know if those end users and customers are satisfied then  ultimately our relationship with you will remain strong and we'll continue to serve and and  function as your partner. How do you get the feedback? How do we get the feedback? Yeah,  either. Well, for us, we have, like I said, I mentioned that field operations team. So,  we are hearing directly from our field ops crews because they are in the stores every day. We also  have our liquor enterprise service center. So, we have a way for customers, suppliers,  and our agents to call us and ask any question. We're actually, we operate that call center or  not call center, service center, like 7 a.m. to 10 p.m. We are taking calls at the time that  our enterprise is operating. We hear directly and quickly and then the crew that  takes those calls is assessing is this a one-off, has the phone rang 10 times and oh my goodness,  now we actually have a problem we need to address and then just swarm to resolution. Got it. So are you tied into that as well, Jason? Yeah, absolutely. So I mean we work directly with  Ohio Liquor and we take that feedback and we can either work to resolve something immediately or  perhaps it's something they can wait for the next truck or something along those lines. But yeah,  absolutely. We respond to all of those and you know ensure that all our collective customers  are satisfied. Yeah. Terrific. Okay. So I'm seeing a note here about a five year strategy and  I think the new DC is part of that. It is. what else is in your mind about the the  next five years? Oh goodness. Yeah. The next five years. We're really excited. We've never gone  through the exercise of actually building out a five year strategy. So we're all really excited  about this. So inventory control, I keep saying that. That's at the top of our list. Making our stores current to trends. So, when you think about a liquor store and you think about  our operation, how can we make an individual store relevant to that community, relevant  to the shoppers in that location and making sure that we're just staying on trend? The trends  in the spirits industry do change quite frequently and we want to make sure that our stores and our  shelves can match that trend. We want to grow our footprint across the state. We want to make sure that our bars and restaurants have greater access to all of our offerings,  but maybe even more some new offerings we'd love to get onto the shelves and into their hands.  Probably most importantly, and thank you for referencing, Jason, eCommerce. We want to allow our consumers to shop online, place an order and have it brought to their store of  choice. So, how can we curate that order for them? Pick it by individual bottle. So, bottle pick  is, you know, space. So, we have space now. How can we take that order online, accept payment  online, pick that order and deliver it right to the store right where that customer wants to pick  up the products. So really excited about a future with eCommerce, and using our app, that  you have, and our website to help propel that forward too. Yeah. Great. And I think for us it's really about adaptability, right? So perhaps 5 years ago or six years ago, we were really trying  to you know, bring the operation to what we wanted the status quo to be. But now as we  look out for the next 5 or 10 years, we just know there's going to be a tremendous amount of change.  And whether that's the direct to store or you know other adaptabilities with consumer trending  and changes and things of that nature we stand ready and and able to adapt where maybe perhaps a  couple years ago before the move or not a couple years ago, year ago before the move we might not  have been ready and so quick to respond. Yeah. Great. Let's stay on eCommerce a little  bit more. A lot of different models out there and outside of the liquor space. I mean  it's boomed in the market. It's become the way a lot of commerce happens now. Did you guys model  other control states or liquor distribution operations or outside of your  industry did you look at those for like what's the right way to satisfy all the constituents?  All of the above actually. My team knows that looking outside of our industry is sometimes  where you'll find some of the best ideas and and even just again thank you to DHL for allowing me  to actually sit in this morning and listen because I take a lot of lessons from other organizations  structure a lot of your culture is just truly amazing. But yes, other control states,  other retailers of high proof, beer, wine spirits. Other retail or you know, Amazon, other  entities that do a great job of delivering, but more importantly, we will then ask ourselves,  does that work for our customer in Ohio? So, we want to basically follow that path. We want to  put ourselves in the shoes of the customer. We want to answer all the questions, make sure the  emails on that order, right, are relevant and timely. We want to make sure that the product gets  there safely and securely and make sure that it never ends up in the hands of who it shouldn't. Who it was intended to. So, yeah, we spend a lot of time researching and learning. So,  the operative word is control. Yes, control. I like it. Well, Jason, you guys, you know,  DHL serves a lot of different eCommerce customers or eCommerce channels.  What are your thoughts on what Lorraine and team are doing and you know how did you guys  think about that to support well with an eye towards the five-year strategy? Yeah, one thing that we're going to bring to the table when the pick operations within our beer, wine, and spirit space and we've got great relationships with those  organizations and we'll be able to bring some of those solutions and show you in person, you know,  what we do for organizations that will have a similar kind of pick profile for that. And  then we'll be able to design a solution that, you know, doesn't necessarily mirror it, but  it satisfies the profile for what we're doing in Ohio. Yeah, we're really excited  about seeing those operations and again, thank you to DHL for allowing us that opportunity. So,  looking forward to it. Terrific. So for those who aren't in liquor operations very often,  bottle pick versus I mean, what are some of the terms and what are the, practically what  does that mean? So yeah, I think typically you know and probably more common right now is just strictly case pick, right? So if one of the agencies needs I don't know maybe by the case. Where there's a number of SKUs. I mean and that's probably fine for a Tito's which  is a higher volume sort of a SKU but you might have you know right now today a lesser volume  sort of a spirit that they don't really want to buy 12 bottles, right? Or whatever the  case quantity might be. They might want to buy one or two bottles. And so enabling that will unlock  you know additional SKUs that the stores can bring in and offer to their customers.  Yeah. We can get greater distribution of that one bottle to the right customer rather  than all 12 going into one store and then sitting there. Right? So we can be very smart about  the placement of those bottles. Yeah. And operationally in the DC. So is it a different area  or how do you get that set up so that you can fulfill that? But in some  of our other operations where we do have bottle pick we employ in some cases actual manual  pick, in some cases we've actually got our Locus robots solution. It just kind of you  know depends on volume but yes it is a completely separate space where it's an entirely different  work process where we process each but they ultimately end up merged with the larger  store orders on the dock. Okay good. So I know we've spent some time talking about the future but  I'll just open up a general question. You know, maybe what are you really looking forward to  Lorraine in the you pick the time horizon? Yeah. So the nice thing about  our model with private public partnership is our model is secure through 2053. Okay.  It's a great runway. I'm actually really excited about  that runway. I love that we have a five-year strategy and we're going to dig in and we're  going to make that five-year strategy, you know, really really work for our organization. But then  I'm really most excited about well what what just happens next. Where is retail  going? Hopefully DHL's got some bots that can tell the future. But I'm really excited about  that runway for Ohio and for economic development in our state. Good. Jason,  how about for you? Yeah. Well, as you know, Will, we can't think past 2030 right now. So, look, I mean, for us really what's next, you know, with Ohio Liquor is we're  going to show up every day and we're going to do the job that we've been doing, for you for so  long and, continue to deliver results that are impactful for you and impactful for your customers  and the end users. And then we're going to continue to work out through your 5-year strategy,  whatever the changes may be, whether that is direct to store or something else,  we're going to be here and we're going to adapt and we're going to help to drive continuous  improvement in our operations and grow our partnership. Very much appreciate that. That's  great. Well, we very much appreciate you being here with us as a team. It means a lot  to have you here and I know you're going to give us a great talk tomorrow which everybody's looking forward to. Thanks for coming back on the podcast and being a repeat  guest. We haven't had many of those. I really appreciate that. No, it's great. And Jason,  thank you. Thank you. Thanks Lorainne. Thanks Will. If you enjoyed today's episode, be sure  to rate us and subscribe to us on Apple Podcasts, Spotify, or wherever you get your podcasts.  You can also listen to our entire library of episodes on our website, dhl.com/ABNBpodcast. See you next time.