Executive Briefings

A Streamlined New Product Supply Chain Was Key To Makeover of LCBO

New products are the backbone of business for the Liquor Control Board of Ontario, but its process for getting new products to market was slow and antiquated. An innovative solution developed with partner QLogitek changed all that.

The Liquor Control Board of Ontario, the world's largest purveyor of beverage alcohol, has undergone an incredible transformation. Once a bureaucratic, regulatory agency focused on control, the LCBO sold a limited selection of beverages from small, dark facilities that looked an awful lot like jails. Today, it is a world-class retailer with 600-plus beautiful, inviting stores, a huge selection of products and a healthy profit for its owner, the government of Ontario.

One innovation that contributed to this transformation was a new supply chain process for bringing new products to market. Known internally as the New Item Submission System (NISS), this program was designed to streamline and automate the process by which suppliers submit new products for review and testing.

"New products are the backbone of our business and a huge driver of satisfaction for our customers, who are sophisticated, knowledgeable, multicultural and interested in premium products," says Lisa MacGregor, director-supply chain.

Before NISS, the LCBO received approximately 17,000 product submissions a year from a network of vendors covering 70 countries. The process was entirely paper-based and was, basically, "a confusing mess," MacGregor says. "We were buried in paper, and communication with our vendors was mostly by fax or phone. When someone called in to check on the status of a submission, we would have to run around to try and find out where the product was in the process. It was extremely inefficient."

That translated into a long time-to-market and lost sales opportunities as well as high administration costs. "Our employees hated dealing with new products," she says. "The system simply was not working well and we had to change."

The LCBO had several goals for a new system: online accessibility, with submission status transparent to all vendors; reduced paper-based applications to avoid errors in transcriptions and processes; minimized turnaround times and improved time to market; and better integrity and integration of data.

As its technology partner in this project, the LCBO chose QLogitek, a software and systems integration company based in Toronto. An LCBO cross-functional team, representing supply chain, information technology, sales and marketing and suppliers/agents worked with QLogitek to develop NISS.

The system was tested extensively before it went live. Initially, eight suppliers re-submitted two products within their existing product portfolio using the new system. Every facet of NISS was tried, including status checks and the sending of automatic email notifications to suppliers/agents. After the test, stakeholders met to suggest refinements and a little tweaking was done. A pilot program next was conducted, involving 18,000 newly submitted products and 400,000 tests. Suppliers/agents were thoroughly trained and provided with 24/7support until they became familiar with the system.

After testing, prior to going live, the trade was notified through personalized letters to associations, letters and packages of frequently asked questions to participating vendors and letters to associations apprising them of test results. Internal and external user manuals were created for staff and for vendors/agents.

"By the time all this was done, we were confident we were ready to go," MacGregor says.

With NISS, suppliers/agents log onto the LCBO's business-to-business web site, which is the point of entry to the NISS portal, and which is hosted and maintained by QLogitek. "At this point, they are able to see our postings that show the types of products we are looking for," MacGregor says. "For example, if our research has shown that we have a product gap for tequila in a certain price range or for Australian white wines, the vendors can see that and can drill down into any product area."

If a vendor wants to submit a product for consideration, all the information is entered online and the submission is assigned an ID number for tracking. "Just having the vendor enter all the information online so that it can be captured is a real win for us," McGregor says. "Before all of that had to be re-keyed and there was a lot of room for error."

New product submissions go through an evaluation process that includes testing and tasting panels. "Vendors can track the status of their product all the way through to a final decision," MacGregor says. The system also sends automatic alerts and notifications to let users know if the LCBO needs more information or if a decision has been made to accept or reject a submission.

NISS has been successful in meeting all the LCBO's goals. "Quantitative measurements indicate that NISS delivered both a time and money savings for the LCBO and its suppliers/agents," MacGregor says. Before NISS, the LCBO handled approximately 17,000 new submissions each year. After NISS, that number climbed to 41,500 and the LCBO added 40 percent more suppliers/agents. This growth occurred with fewer errors and costs due to a 50 percent reduction in manual activities. Administration time to process an application for new submissions was reduced by 78 percent, which helped speed time to market.

"We saw an increase in customer satisfaction and sales because we brought more new products to market faster," says MacGregor. In 2006, sales of new products generated more than $150m. With total annual savings calculated at $1.375m, project payback was achieved in the first three months of production. "This project delivered an incredible return on investment-more than 340 percent," MacGregor says.

The Liquor Control Board of Ontario, the world's largest purveyor of beverage alcohol, has undergone an incredible transformation. Once a bureaucratic, regulatory agency focused on control, the LCBO sold a limited selection of beverages from small, dark facilities that looked an awful lot like jails. Today, it is a world-class retailer with 600-plus beautiful, inviting stores, a huge selection of products and a healthy profit for its owner, the government of Ontario.

One innovation that contributed to this transformation was a new supply chain process for bringing new products to market. Known internally as the New Item Submission System (NISS), this program was designed to streamline and automate the process by which suppliers submit new products for review and testing.

"New products are the backbone of our business and a huge driver of satisfaction for our customers, who are sophisticated, knowledgeable, multicultural and interested in premium products," says Lisa MacGregor, director-supply chain.

Before NISS, the LCBO received approximately 17,000 product submissions a year from a network of vendors covering 70 countries. The process was entirely paper-based and was, basically, "a confusing mess," MacGregor says. "We were buried in paper, and communication with our vendors was mostly by fax or phone. When someone called in to check on the status of a submission, we would have to run around to try and find out where the product was in the process. It was extremely inefficient."

That translated into a long time-to-market and lost sales opportunities as well as high administration costs. "Our employees hated dealing with new products," she says. "The system simply was not working well and we had to change."

The LCBO had several goals for a new system: online accessibility, with submission status transparent to all vendors; reduced paper-based applications to avoid errors in transcriptions and processes; minimized turnaround times and improved time to market; and better integrity and integration of data.

As its technology partner in this project, the LCBO chose QLogitek, a software and systems integration company based in Toronto. An LCBO cross-functional team, representing supply chain, information technology, sales and marketing and suppliers/agents worked with QLogitek to develop NISS.

The system was tested extensively before it went live. Initially, eight suppliers re-submitted two products within their existing product portfolio using the new system. Every facet of NISS was tried, including status checks and the sending of automatic email notifications to suppliers/agents. After the test, stakeholders met to suggest refinements and a little tweaking was done. A pilot program next was conducted, involving 18,000 newly submitted products and 400,000 tests. Suppliers/agents were thoroughly trained and provided with 24/7support until they became familiar with the system.

After testing, prior to going live, the trade was notified through personalized letters to associations, letters and packages of frequently asked questions to participating vendors and letters to associations apprising them of test results. Internal and external user manuals were created for staff and for vendors/agents.

"By the time all this was done, we were confident we were ready to go," MacGregor says.

With NISS, suppliers/agents log onto the LCBO's business-to-business web site, which is the point of entry to the NISS portal, and which is hosted and maintained by QLogitek. "At this point, they are able to see our postings that show the types of products we are looking for," MacGregor says. "For example, if our research has shown that we have a product gap for tequila in a certain price range or for Australian white wines, the vendors can see that and can drill down into any product area."

If a vendor wants to submit a product for consideration, all the information is entered online and the submission is assigned an ID number for tracking. "Just having the vendor enter all the information online so that it can be captured is a real win for us," McGregor says. "Before all of that had to be re-keyed and there was a lot of room for error."

New product submissions go through an evaluation process that includes testing and tasting panels. "Vendors can track the status of their product all the way through to a final decision," MacGregor says. The system also sends automatic alerts and notifications to let users know if the LCBO needs more information or if a decision has been made to accept or reject a submission.

NISS has been successful in meeting all the LCBO's goals. "Quantitative measurements indicate that NISS delivered both a time and money savings for the LCBO and its suppliers/agents," MacGregor says. Before NISS, the LCBO handled approximately 17,000 new submissions each year. After NISS, that number climbed to 41,500 and the LCBO added 40 percent more suppliers/agents. This growth occurred with fewer errors and costs due to a 50 percent reduction in manual activities. Administration time to process an application for new submissions was reduced by 78 percent, which helped speed time to market.

"We saw an increase in customer satisfaction and sales because we brought more new products to market faster," says MacGregor. In 2006, sales of new products generated more than $150m. With total annual savings calculated at $1.375m, project payback was achieved in the first three months of production. "This project delivered an incredible return on investment-more than 340 percent," MacGregor says.