Dram distributor

Related tags Scotch whisky

Dram distributor
Me & My Factory David Donaldson, director of supply chain, Edrington Group

Like most big whisky producers nowadays, we run our operations on an integrated, 'cask-to-glass' approach.

We own five malt distilleries spanning Orkney and Speyside in the north, plus a half share, with Diageo, in the North British Distillery in Edinburgh that supplies grain whisky for our premium blends like The Famous Grouse. We have our own cooperage in central Scotland, where we make and repair oak barrels -- for whisky to be called 'Scotch' it has to have been matured in oak casks, in Scotland, for at least three years. And then we've got this 35-acre site on the Great Western Road, Glasgow, which handles the final blending and bottling of all our whiskies, and is also our Group HQ.

We're focussed upon four Scotch Whisky core brands -- The Famous Grouse, Macallan, Highland Park and Cutty Sark -- and we sell about 85m bottles a year, which is nearly 10% of the whole industry's output. Our focus is to move towards premium brands. We've consciously got out of cheap supermarket own-labels where the sales price barely covers your costs.

Our turnover in 2003/4 was about £250m. That doesn't reflect the price in the shops, of course. The retail value would be nearer to £1bn, but most of that is duty.

The Edrington Group is unusual in that we're one of the few remaining private, independent spirits businesses. It is also pretty special as while our voting shares are owned by a charitable trust, around 90% of our employees are non-voting shareholders. Last year about £7m was donated to good causes in Scotland, and the remaining profits are either reinvested in the business or shared with employees as dividends.

We've spent £20m on capex projects over the past five years. One of those was our new Line One, a £2.5m high-speed bottling line. It can rinse, fill, cap, label and pack at up to 600 bottles per minute.

When I show videos of Line One in action, I have to tell people 'this hasn't been speeded up' because at 10 bottles a second, the bottles pass in a blur. It was a turnkey project by Krones, and there's only one other like it in the world. Our's has some extra technology, including a robot that picks up case blanks and loads them into the wrap-around packer to improve ergonomics and productivity.

The new Line One runs with four people, while the old ones it replaced ran at no more than 200 bottles a minute, with up to 10 people. So we're producing faster and cheaper, effectively replacing three lines with one.

We've currently got 12 lines, bottling everything from miniatures to one-gallon bottles. They're each designed for different types of product and run at different speeds. Some products, like Macallan, have a cork, not a cap and are more complex to produce. We do hand-labelling and packing of the really high value malts to create the extra special finish needed when consumers are paying hundreds of pounds for one bottle.

Two years ago we had 15 bottling lines. The target is to get to nine, improving asset utilisation through continuous improvement and investment, because we've got some very expensive assets that sit there seven days a week, and we're only running a day-shift and a backshift, Monday to Friday.

I'm responsible for packaging, bottling -- which is really an assembly process -- and the logistics and customer services side of things, but I also manage our technical and site services. And I'm a member of the Edrington Group Executive, so I have a joint responsibility to help deliver our overall business plans.

We have a cased goods warehouse on site, which holds up to 350,000 cases of finished product. From there it's shipped out to our global distributors in over 100 markets who each have their own warehousing in-market, from Moss End, Glasgow, which looks after the UK market, to places like the US, Southern Europe and Taiwan.

We're not big enough to have our own worldwide distribution network so we have a quarter share in a global distribution business called Maxxium, along with Remy Cointreau, Vin & Sprit (Absolut vodka) and Jim Beam.

In the past year, I've visited Greece -- a very big market for us -- Portugal and the States, talking to the logistics managers in each of those countries. I also have regular get-togethers with my opposite numbers in Maxxium to share best practice.

Bottling is a very small part of our cost of sales because the whisky business is so much about branding. We spend a huge amount on advertising and marketing. Typically, within the spirits industry, bottling is seen as non-competitive and there's quite a lot of interchange of ideas.

One thing we're looking to do is something I saw at the Remy Champagne business in Reims. Unlike whisky, Champagne is fermented in bottles. Half-way through this process it comes out of storage for secondary processing before returning for a final two years' storage in racks or crates.

That led us to think: what if, rather than filling and labelling each order as we receive it, with lots of changeovers, we actually bottled 'naked' -- just have a really, really long run and then store it until needed? Then, as we received the orders, we could bring the bottles out again, label them up and ship them out. That could work especially well on short-run premium malts. You'd be reducing the lead times to the customer and getting long, economical runs.

In this industry, there are a hell of a lot of very professional people, and we're all trying to do similar things. The limits are being pushed in technology all the time. One of our competitors is investing about £8m in a line that will fill about 300 bottles a minute in a totally enclosed, clean-room environment. We don't necessarily think that's the way to go. You can easily invest tens of millions on plant, but you have to recover the huge costs somehow. If you're not careful you can end up spending megabucks in depreciation costs alone. We believe in making sure our assets are 'fit for purpose', operated efficiently and that we make the most of what we've got.

It's very rare that we can pass on cost increases to customers. Labour costs go up every year, and glass, for example, is very expensive to produce because of the energy costs involved. We have to find ways to absorb these by working smarter.

Over the last five years we've reduced our packaging cost of sales by about 25% in real terms, which, when you are spending £25m a year on glass, cartons and labels, is a lot of money. We have done that through value engineering -- giving the consumer what they want, but more efficiently. For example, whisky cases traditionally have corrugated divisions inside them, but by strengthening our bottles and our cases we've removed the need for them.

About two years ago we kicked off a Six Sigma programme. We selected a number of people to train as 'black belts', then gave them a kit-bag of process and project management skills that will improve any part of our business. We've now got 10 black belts, who all went through a 20-day training programme -- 10 units of two days. They're cross-functional -- people in HR, manufacturing, customers services and so on -- and they are applying those skills in many ways: whether it's reducing absence, better maintenance or improving forecasting accuracy.

Being a black belt has got a strong statistical bent. But we are now getting into phase two and creating 'green belts' who can handle stuff that is less statistical and more about project management. You're creating a bunch of troubleshooters, really.

And that leads us into Lean Manufacturing, which we are about to embark on. There's a big overlap with Six Sigma, but Lean will help us really focus on efficiency improvements and working more effectively.

We've already had some consultants in, partly funded by the Scottish Executive. They seemed really impressed by our continuous improvement activities, but they drew our attention to ways we could save a lot of time between orders, with less 'faffing around', checking each run is exactly right before we start the changeover to next one. There's quite a lot of work-in-progress on the conveyors between the labeller and the packing machines. The suggestion is that once we know the right number of bottles have been filled for each order we should start changing over immediately.

We're going to get the consultants back in to share their feedback in more detail, and then we'll be integrating this, and any other ideas, into our manufacturing improvement plans which are already very well scoped-out and established. Interview by Mick Whitworth


Name: David Donaldson.

Age: 44.

Career highlights: Chartered chemical engineer with honours degree in engineering science from Edinburgh University. Has worked in chemicals (including Glaxo and Monsanto), spirits (including seven years with Diageo) and packaging. Before joining Edrington in 2001, he was md of European packaging group Polestar's East Kilbride operation.

Domestics: Married with two girls, 17 and 15. Lives in Crieff, which is "quite rural and touristy"

Outside work: "My interests are family-oriented -- I'm mainly a taxi driver at the moment! I go to a lot of concerts at the Glasgow SECC. I've seen the Manics, Pink and Travis in the past year, but the one I'm really looking forward to is U2!"

factory facts

Location: The Edrington Group, 2500 Great Western Road, Glasgow G15 6RW http://www.edringtongroup.com​.

Main products: The Famous Grouse and Cutty Sark blended whiskies, and Macallan and Highland Park single malts.

Bottling capacity: 7m cases a year across 12 bottling lines.

Employees: 470 full-time, plus up to 100 seasonal temps.

Factory size: 35-acre blending, bottling and HQ site.

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