In Stock Now: Efficiency Evaluations Identify Opportunities to Improve DABS Inventory Management

September 1, 2023

Efficiency evaluations are a collaborative process between the Office of the Legislative Fiscal Analyst (LFA) and the Governor’s Office of Planning and Budget (GOPB). The July 2023 efficiency evaluation of the Department of Alcoholic Beverage Services (DABS) identified opportunities to improve revenues by preventing empty shelves for top-selling products (a.k.a stockout) and avoiding losses from spoilage of low-volume products.

Efficiency Evaluations Aim to Improve State Government
In 2021, the Utah State Legislature enacted UCA 63J-1-904, establishing a cross-branch initiative focused on operational efficiencies and performance measurement. As a result, opportunities to improve efficiency throughout state government can be found in the four publicly available evaluations:

Applying the principles of process improvement while building mutual trust, these products from the legislative-executive branch collaboration are designed to eliminate sources of waste and reduce errors. The goal of efficiency evaluations is not merely to cut costs, rather the intent is often to improve the quality of services provided to Utah residents and reduce stress placed on agencies in providing these services.

The recent evaluation of DABS pointed out that calculated values for inventory and forecasts are insufficient, increasing the reliance on human estimates. Automating data-driven tasks allows state employees to focus on services that provide greater value to customers. A similar situation was identified in the Office of the Medical Examiner, where a recommendation was made for employees to utilize data collection and automation to expedite publication time for their final reports.

DABS Inventory Management Best Practices
During the three-month evaluation, the team met with DABS to learn their process, conduct site visits to warehouses and stores, and reviewed agency data. LFA and GOPB staff worked with DABS to identify the process where improvement would generate the most value: inventory management and product selection; the processes that most directly impact DABS customers’ experience.

DABS has many successful inventory practices including their well-known automated warehouse. However, examples exist of best-selling items being out of stock and low-volume items being at risk of spoilage due to excess inventory. These situations can result in missed revenue opportunities and product losses, and potentially diminish the customer experience.

DABS shared an example where insufficient forecasting for special events almost scratched a popular bourbon selection for Kentucky Derby viewers in Utah. In this case, it required extra efforts from DABS staff down the home stretch to preserve this springtime customer beverage tradition. DABS’ stockpile of Stella Rosa Moscato demonstrates the opposite problem: with average sales of roughly 1,600 bottles per month, the nearly 35,000 bottles in the DABS warehouse (nearly 2 years expected supply) could lead to spoilage based on the product’s recommended shelf life of 1-2 years.

DABS Recommendations
As detailed in the report, DABS’ inventory management practices have capacity for improvement, including the following recommended best practices:

  • Fully utilize forecasting and planning software;
  • Avoid rough estimates or ‘rules of thumb’—instead rely on calculated values;
  • Adopt inventory models that match customer demand data;
  • Extend DABS’ planning horizon for inventory; and
  • Ensure data-driven decision making for the listing and delisting processes.

These recommendations should ensure that popular items are on DABS shelves when they are likely to be in the highest demand and avoid wasting of low-volume items.