ContainerWorld Forwarding Services Inc. Briefing Note B.C. Liquor Policy Review

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1 ContainerWorld Forwarding Services Inc. Briefing Note B.C. Liquor Policy Review Recommendation ContainerWorld Forwarding Services Inc. (ContainerWorld) is BC s largest, privately held provider of door-to-door liquor logistics services to the import, domestic and export alcohol beverage industry. As a significant stakeholder within the industry, ContainerWorld appreciates this opportunity to present our submission in response to the BC government s invitation to stakeholders to provide input to the government s current review of liquor distribution within the province. ContainerWorld commits to work with the British Columbia Liquor Distribution Branch (BCLDB), the BC Government and other industry stakeholders, during and after the review process, to identify and implement any potential developments and improvements to support continuous improvements to the province s competitive liquor distribution system and the benefits this system provides to the government and British Columbians. With this in mind, as the BCLDB has announced that it is looking to move to a new and more efficient distribution center, ContainerWorld respectfully requests and recommends: 1. That the BCLDB does not replicate or move to the Alberta private monopoly warehousing and distribution model; rather, that the BCLDB maintain the existing concept of a free and competitive marketplace for those products permitted to be warehoused and distributed through the private sector. 2. That the BCLDB s competitive, free enterprise Agents Stocking Program, and all of its components, be maintained, including the Import Agents having the right to store their products at a warehouser of their choice, in a free and competitive marketplace; 3. That BC suppliers of domestic wines, wine coolers, beers, spirits and ciders have the right to store their products at a private warehouse of their choice; 4. That BC suppliers of domestic wines, wine coolers, beers and non-spirit based ciders retain the right to use the private sector to distribute these products; 5. That the design and operation of the new BCLDB distribution facility be predicated upon the BCLDB not wanting to experience a significant reduction (if any) to its current annual inventory turns per year ratios. Page 1 of 6

2 ContainerWorld Background ContainerWorld, a privately held B.C. based company, offers worldwide door-to-door logistics services to the import, domestic and export alcohol beverage industry of British Columbia. Founded in May 1993, ContainerWorld, (including its wholly owned subsidiary Commercial Logistics Inc), employs 320 British Columbians, with its Head Office and 496,000 foot, 107 door distribution center located in East Richmond. In addition, the company operates satellite warehouse and distribution facilities in Kelowna and Kamloops. The company also maintains a significant delivery fleet, based in Richmond, Kelowna and Kamloops. The fleet includes: 13 straight trucks, 38 city tractors, 23 line-haul tractors and 152 trailers. ContainerWorld employs its own drivers, fleet and warehouses for all direct deliveries in the Lower Mainland, Squamish/Whistler, Okanagan, Cariboo and North to Prince George. The company has dedicated delivery agents for shipments to Vancouver Island and Gulf Islands, Sunshine Coast, Kootenays and Northern BC. ContainerWorld Facility Expansion Construction is currently underway to add approximately 150,000 square feet of warehousing and 35 additional truck doors to the company s existing East Richmond Head Office/Distribution Center. This facility expansion is scheduled for completion by July 2014, at which time our Richmond warehouse facility will be approximately 650,000 square feet with 142 truck doors. ContainerWorld s Operations As a specialized service provider within BC s alcohol beverage industry, over the past 20 years ContainerWorld has made a large investment in mobile and building equipment, storage facilities and racking and, in state-of-the-art computer technology. These investments have been made with a view to provide customers with cost effective and efficient inventory management, forwarding, warehousing and distribution support services, as well as the flexibility they require to meet the evolving requirements in today s marketplace. Currently, ContainerWorld stores approximately 2.2 million cases of import and domestic beer, wine and spirit products, for approximately 330 small, mid-size and major import and domestic suppliers to the BCLDB. ContainerWorld also provides domestic trucking and international freight forwarding services for a large portion of the 11 million cases received annually into its distribution center. Page 2 of 6

3 With an annual warehouse throughput (receiving and shipping) of 22 million cases and over 12,500 active SKUs (over 100,000 administrative SKUs), the company has been successful with the implementation of a scheduled, province-wide direct store distribution program, to approximately 3,500 customers, with next-day scheduled service to 95% of its customer base. These customers include: BC Government Liquor Stores Private Liquor Stores Hotels Pubs Restaurants and other Licensees ContainerWorld s Commitment to Liquor Distribution Efficiency ContainerWorld works hard to continually improve the efficiency and effectiveness of its distribution services for the benefit of its customers and the BCLDB. For example, in addition to the company s dedication to forwarding, warehousing, direct distribution and line-haul transportation, ContainerWorld specializes in the development and/or integration of innovative company built and off-the-shelf software systems. The company employs an in-house Information Technology (IT) department consisting of 9 specialized employees, including certified software, network and DBA professionals, all to ensure the timely delivery of efficient and robust business-to-business transactions. This is evidenced by the fact that the company has made a major investment in and is currently in the final stages of installing a new off-theshelf warehouse management system (WMS). ContainerWorld s Commitment to Green Technology With BC s growing concern towards technology and its impact on the environment, ContainerWorld has dedicated itself to being a part of the solution, by investing, where applicable and feasible, in green technology. By installing a fluorescent lighting system with occupancy sensors in its warehouse the company has increased energy efficiency by 75 percent. The company s fleet of warehouse equipment is fully electric with interchangeable batteries, and all equipment has been converted to non-carbon tires. These initiatives have eliminated black propane emissions. Other environmental initiatives include the implementation of a material handling recycling program, refuse disposal, equipment maintenance, and green janitorial programs (sealed concrete floors and the use of eco-friendly citrus-based cleaners). Page 3 of 6

4 ContainerWorld was asked to participate in the validation of a Guide sponsored by Metro Vancouver called Smart Steps Sustainable Supply Chain Logistics. Smart Steps is a program of tools, technical assistance and information to help other businesses become more eco-efficient and more competitive. The company s participation in this exciting initiative has helped ContainerWorld understand other environmental impacts and risks associated with supply chain logistics activities. ContainerWorld s Socio-Economic Contribution ContainerWorld currently manages corporate revenues of approximately $70 million. The majority of the company s revenues benefit BC communities in the form of wages paid to employees, and the BC Government in the form of taxes supporting the provision of government services, including health care and education. As noted above, the company has a long-standing practice of re-investing a portion of its revenues in the modernization of its facility and operations to maintain an efficient and effective liquor distribution service for our customers. About British Columbia s Beverage Alcohol Agent s Stocking Program Prior to 1978 Prior to 1978 the freight, warehousing, distribution and inventory replenishment activities for all import beers, wines and spirits was performed by the BCLDB. That is, the BCLDB: Monitored and issued replenishment Purchase Orders to foreign suppliers; Paid foreign suppliers for the Purchase Order quantity; Negotiated rates with carriers and freight forwarders and paid all inbound freight costs; Arranged for and paid for the inbound movement of all containers, from the Vancouver docks, truck terminals and rail yards, into the BCLDB s Broadway warehouse facility (the Kamloops warehouse did not exist at this time); Delivered or arranged delivery of all import products, from the Broadway warehouse to Government Liquor Stores (GLS s). Change in 1978 Creation of the Agent s Stocking Program Inventories and product selection in BC were increasing and the Government/BCLDB was faced with having to consider building a new and larger distribution center, to handle the increased volumes and product count; as well, to insure that British Columbian s were able to obtain products on a timely basis. A review was conducted, options evaluated and a decision was made. Instead of building a new warehouse, the BCLDB/Government decided to privatize a portion of the import beer, wine and spirit supply chain. It was recognized that, not only could the BCLDB avoid having to invest in a new Page 4 of 6

5 warehouse, as well, by converting the existing BCLDB warehouse from a long term warehouse to a high turnover warehouse, the BCLDB was to able increase its annual profits. Specifically, the decision was made to have the Import Agent be responsible for all costs to supply and maintain an inventory of all of the Agent s import products sold to and by the BCLDB. This inventory was to be maintained at a BCLDB and Canada Customs (now known as CBSA) approved private bonded warehouse, within the Vancouver Customs port authority. The Import Agent would be responsible for: maintaining sufficient inventory, all international freight costs to the private warehouse in Vancouver, all warehousing and related costs at the private warehouse, and for the cost of delivery to the BCLDB receiving doors. All of the costs incurred by the Import Agent would then be included in the Import Agent s product invoice price to the BCLDB (Landed Cost). The BCLDB then ordered and paid for product more frequently and in smaller quantities, instead of paying for a whole or partial container or truckload if the additional cases were not necessary. This new program allowed the BCLDB to dramatically increase annual inventory turns through its warehouse. This newly created program was known as The Agent s Stocking Program (ASP) and was made official with an Order-In-Council passed in Today the ASP is still the foundation of the existing private warehousing and distribution supply chain services provided by ContainerWorld and other private companies providing logistic services for products sold through the BCLDB. Additional Change in (approximately) 1992 Prior to 1992 all of the products processed through the Agent s Stocking Program were required to be delivered to the BCLDB s Broadway warehouse direct store delivery from the Agent s warehouse, either to government liquor stores (GLS s) or to private liquor stores and licensees was not permitted. In 1992 the BCLDB permitted import beers to be privately delivered. That is, if an Import Agent so decided, the import Agent s warehouser/distributor could receive customers orders directly from and deliver directly to GLS s, private liquor stores, hotels, pubs, restaurants and other licensees. If the Import Agent chose this distribution model, the product would not also be delivered to the BCLDB Broadway or Kamloops warehouses, as GLS s would now receive direct service from the Import Agent s private warehouse operator. Focusing around the approximate time of 1992, if requested by the domestic Supplier or Agent, the private sector was already permitted to direct deliver domestic beers and BC bottled wines, non-spirit based ciders and non-spirit based refreshment drinks (e.g. wine coolers). The addition of import beers as described above further increased the private sector s direct involvement in BC s alcohol supply chain. Page 5 of 6

6 Benefits of BC s Existing Competitive Liquor Distribution System British Columbia currently benefits from the existing competitive liquor distribution system and has in place a successfully working privatized warehousing and distribution model. This model manages much of the warehousing and distribution requirements for products sold by the BCLDB and also provides many benefits to the province, including: Necessary controls to safeguard Government revenues; Competitive pricing with respect to costs which are passed onto the consumers of BC; Delivery of an efficient, effective, customer friendly liquor distribution system, and; Functioning free enterprise model for efficient distribution of beverage alcohol in British Columbia. In summary, and as noted above, ContainerWorld is committed to its long standing practice of providing our customers, the BCLDB, government and other industry stakeholders with cost effective, efficient and service oriented distribution services, in a manner that incorporates the needs and evolving operational requirements of the BCLDB s growing business. The company looks forward to working with the BCLDB in its efforts to generate additional efficiencies and cost reductions. Page 6 of 6