BURTON’S WINE CELLAR
CASE STUDY
GROUP 5
San Miguel, James Vincent
Sandig, Angiela Grace
Solmerano, John Patrick
Solomon, Cyrah Bien
Talawa, Marian
Tanawan, Rhea Rose
Telan, Ma. Olivia Joan
Umali, Dennisse
Villaluz, Laica
Villarino, Audrey Kazy
Submitted to:
Prof. John Benvers Malabanan
2 | P a g e
I. INTRODUCTION
Figure 1: Wine cellar (source: https://www.customwinecellarsvancouver.com/wp-
content/uploads/2016/06/Contemporay–Wine-Cellar-Design-Canada-Master-
Builders.jpg)
A wine cellar is a place where wines are stored. It provides a fully climate-controlled
environment, ideal for a larger wine collection. These cellars are classified mainly into
cooling systems as either passive wine cellar or active wine cellar. Passive wine cellars
do not use controlling systems to provide the proper treatment for the wine but rather,
natural heat and humidity of the storage location are used. it is usually built underground,
like a closet (storage which contains fewer than 500 bottles) and other out of direct light
or heat storage places, constructed out of stone or bricks to reduce conditions affecting
wine. Active wine cellar on the other hand uses cooling systems and insulation to keep
an ideal room temperature and humidity for wine. This location provides the humidity and
proper ventilation that wines needed to age properly. Just like any consumer product on
the market, wines undergo myriad stage and processes before it reaches the consumer’s
table.
The wine supply chain is generally classified into several value-added activities as follows:
A. Grape production – Agricultural yields, includes land R & D, tillage, pruning, and
harvesting.
B. Wine production – This is where harvested grapes are converted into wine on the
winery and transported in barrels to improve quality and aging.
C. Packaging – processes include bottle filling, corking, labeling, and pallet placement.
D. Distribution – is the conveyance process of wine through distribution channels
3 | P a g e
Figure 2: Wine supply chain (source: https://www.domenicowinery.com/the-art-of-winemaking/)
II. RELEVANT CASE FACTS
Burton’s Wine Cellar (BWC)
Burton’s Wine cellar is an immense retail outlet that caters to various wine brands
and types to the wine enthusiast. They satisfy their customers through their sale of value
wine, being sold at a tolerable price level and a wide array of inventories including
exclusive wines. Customers often visit their store to browse and eventually pick whichever
they wanted, however; stock out occasionally occurs. To augment these situations, the
staff on the floor resort to brand substitution so there is hardly a case of a total lost sale.
Nonetheless, Burton’s Wine Cellar established a benchmark policy of maintaining 95% of
inventory to get through the order cycle and be able to prevent stock out for the particular
brand.
Due to regulatory requirements governing the sale of alcohol, as well as incidental
losses from bottle breakage, physical inventory counts are crucial for BWC. As a result,
BWC management believes it would be impossible to allow more than eight weeks
between physical inventory counts for reordering purposes. The variety of wine brands
makes storing problematic, as most boxes contain multiple brands in order to minimize
storage requirements. Physical counts are particularly difficult and time-consuming
because each carton and bottle must be open and accounted for correctly. Because of
the huge number of brands accessible at BWC, management has chosen to replenish
4 | P a g e
inventories using a fixed-order-period strategy. BWC keeps a running inventory count
based on sales records and also conducts physical inventory counts on a regular basis.
To prevent misconceptions of brands running out, BWC maintains fully stocked
store shelves. However, the ordering, shipping, and receiving costs amounted to $125
each. The management is concerned with the frequency of the physical count to be
performed. The longer the order cycle, the greater the need for storage, safety stock to
meet the established benchmark policy. On the other hand, a longer order cycle will
significantly reduce the ordering cost. Furthermore, according to the accountant of BWC,
the average total inventory value for all products held in the previous year was
approximately $ 2,119,000 while total inventory-related cost was $ 1,861,000 which is
relatively low than the total inventory value of $ 2,327,000 and total inventory-related
expense of $ 1,886,000 of last year. BWC wanted to know which among of the 4,5,6,7, or
8 weeks will provide an optimal order cycle given that they operate for 52 weeks in a year.
SWOT ANALYSIS
STRENGTHS
• Burton’s Wine Cellar is an immense retail outlet.
• BWC is glorified for its extensive inventory and exclusive brand of wines.
• They target a specific market base that they satisfy.
• There is minimal theft accident because of the strict security system.
