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Distribution

Republic National faces $26K in fines, lost revenue over liquor delivery woes

Attorney General Dana Nessel’s office moved Monday to impose financial penalties on Michigan’s largest liquor distribution company for rampant delays and problems with delivering wine and spirits after consolidating shipping warehouses.

NWS Michigan LLC, which does business as Republican National Distributing Co., was hit with an 88-count complaint from Nessel’s office detailing dozens of violations for failure to deliver liquor and spirits to individual restaurants, retail stores and bars in August, September and October.

The company faces fines totaling $26,000 — $300 per count — and a reduction of 50 cents per case of liquor it delivers to some 13,000 customers. It’s unclear how many cases Republic National distributes annually in Michigan, but the fines will likely be dwarfed by the reduced fee-for-service.

Under Michigan’s three-tier liquor control system, Republic National and two other companies that are the state’s only authorized distribution agents get paid $9.25 per case of liquor they deliver to licensed retailers. The other distributors are Highland Park-based General Wine & Liquor Co. Inc. and Kalamazoo-based Imperial Beverage Co.

The financial penalties against Republic National are a result of months of distribution and delivery problems the company has faced since it moved to consolidate two distribution warehouses in Grand Rapids and Brownstown Township under one roof in Livonia — a new $80 million, highly automated warehouse in Livonia near I-275 and I-96.

Republic National company executives have blamed computer glitches and struggles among its employees to learn a new system for custom-packing cases of liquor orders for individual bars, party stores and restaurants.

Eighty-five of the 88 counts in the complaint stem from failure to satisfy minimum requirements of delivery of liquor to individual licensed retailers. They include Imperial Liquor in Roseville, the 300 Bowl bowling alley in Waterford, The Lakes Bar & Grille in Commerce Township and Red Lobster Hospitality LLC in Novi.

The complaint cites Republic National for failing to maintain adequate operations and failure to maintain telephone answering equipment that have “kept callers on hold for multiple hours, disconnected calls after a lengthy hold, failed to answer multiple calls, and failed to return multiple messages.”

Republic National has hired a third-party call center to answer a flood of phone calls from liquor retailers “just to make sure they get a human being and are not waiting … on the phone,” said Joe Gigliotti, a regional president for Republic National Distributing Co.

Nessel’s proposed administrative sanctions against Republic National call for the company to be placed on probation and be required to pay for an audit of its operations, “including, but not limited to, its receipt and storage of spirits from suppliers, accountability and security for commission funds, and storage of commission inventory.”

The sanctions include the 50-cent-per-case reduced fee for Republic National until the audit “is completed and all corrective action taken, to the commission’s satisfaction,” according to the Attorney General’s complaint.

The administrative legal proceeding against Republic National comes on the heels of a Friday meeting of the Michigan Liquor Control Commission, where company executives updated commissioners on their progress in restoring normal operations.

But liquor control commission staff members told commissioners that delivery and accounting issues related to Republic National’s weeks of delays have gotten “worse,” even as the company has sought to fix problems stemming from a glitches at the new state-of-the-art distribution center in Livonia.

“I think things are getting worse overall,” said Pam Hamilton, director of the commission’s financial management division. “Accounting is definitely worse.”

The state of Michigan, which acts as the wholesaler of distilled spirits and contracts with the private distribution companies, is short $58 million in gross sales, resulting in $7 million in lost liquor taxes as a result of Republic National’s delivery snafus, Hamilton said.

Gigliotti was pressed by one commissioner as to when licensed retailers and bars could expect the company to be back on normal delivery schedules as it tries to catch up with months of delays and missed deliveries that have left some retail shelves with bare spots.

“I think the situation is fluid,” Gigliotti said. “… Two hundred and sixty days out of the year, orders maneuvering and all of that stuff is fluid. We reroute and move trucks on a daily basis. That’s just part of the drill.”

Gigliotti said Republic National will be delivering alcohol every day this week but Thursday during the Thanksgiving holiday. The night before Thanksgiving is traditionally the biggest bar night of the year.

“We hear what the customers are saying,” Gigliotti told Crain’s after the commission meeting. “We’re not going to be satisfied until the customers are feeling success on the orders.”

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