This paper will discuss the issues associated with the Michigan liquor distribution system. It will also explore the best possible solutions to the problems from managers’ perspectives.
If the government had properly redesigned Michigan liquor distribution system, current issues in the distribution process would have been resolved to some extent. The state of Michigan maintains a three-tier liquor distribution system that builds strong legal walls between state-approved wholesalers, suppliers, and retailers (legal issues…, 2010). This traditional liquor distribution system imposes more costs on consumers as it limits the chances of market competition which may end up on price cuts. It is advisable for the state of Michigan to ensure the private sector involvement in liquor distribution process as this practice would be beneficial for ultimate consumers. At the same time, authorities must ensure that the private sector operations fully comply with the state liquor distribution policies. From the case study, it seems that the number of state stores has remained fairly constant over the last years and this situation raises difficulties for both the state of Michigan and the consumers. In order to resolve such issues, opening more stores in different cities of the state would be reasonable. Similarly, the existing three state-owned and operated warehouses may not be adequate to effectively and timely meet the needs of 12,000 retail licensees that serve the consuming public throughout the state. Hence, the Michigan Liquor Control Commission might conduct a detailed market study to identify the proper distribution channels that would improve the operational efficiency of the state liquor distribution system. It is also recommendable to close the existing 75 smaller second-tier state warehouses and allow the retailers to directly get liquor products from the state-owned warehouses. The elimination of second-tier state warehouses from the liquor distribution system would be helpful for the MLCC to trim down the current distributional cost of $20 million per year.