Increasing Efficiency in the Pennsylvania Alcohol Industry: Home-delivery of Product

Open Access
Author:
Rajan, Suresh
Area of Honors:
Supply Chain and Information Systems
Degree:
Bachelor of Arts
Document Type:
Thesis
Thesis Supervisors:
  • Robert Alexander Novack, Thesis Supervisor
  • John C Spychalski, Honors Advisor
Keywords:
  • supply chain management
  • logistics
  • home-delivery
  • transportation
  • eCommerce
  • Pennsylvania Liquor Control
  • alcohol
Abstract:
Pennsylvania maintains one of the most regulated, some even say “prohibitionist,” alcohol industries in the United States, namely due to the fact that beer, wine, and spirits are sold separately, and only in licensed stores. Consequently, it can be inconvenient for consumers to purchase product, as an alcohol run including both beer and liquor stops is very time consuming, creating a high barrier and opportunity cost to consumption. There are two facets at the core of this inconvenience: 1) fractionalized markets between liquor and beer, and 2) sub-optimal store locations, which create high barrier to consumption. Consequently, the PLCB and its licensed retailers lose sales when consumers choose to save time by: a) not purchasing, or b) purchasing either beer or liquor (but not both). It is estimated that the Pennsylvania Liquor Control Board loses about fifteen percent of sales, amassing to $360 million annually. This paper asserts that home delivery of product to consumers’ homes would remove this crippling barrier, and employing a third-party delivery company in particular would be more effective and efficient to operate and scale. Given some of the unique regulations in Pennsylvania and differences in consumer profiles, a proposed distribution system and transaction process is discussed to lower this consumption barrier that places a glass ceiling over the Pennsylvania alcohol industry.