No one was prepared for Covid-19. But some businesses were “readier” than others, particularly those that had experience with disruption and had an emergency plan in place.
Such is the case with Southern Glazer’s Wine & Spirits, one of the nation’s largest distributors of spirits, wine, beer, non-alcoholic beverages, and food products. Like businesses from coast to coast, Southern Glazer’s saw its operations upended when the pandemic hit, bringing a host of operating restrictions and shutting down the bars and restaurants that made up a big chunk of its customer base. But unlike some of the others, the company didn’t have to create an emergency plan on the fly. A decade ago, following a string of natural disasters, Southern Glazer’s had drawn up a detailed crisis management protocol that laid out policies and procedures. And it had more than just the processes in place; it also had the people—in this case, a team it could swiftly mobilize to direct and oversee the company’s response.
The head of that crisis management team is Bobby Burg, who also serves as the company’s senior vice president of operations and chief supply chain officer. Burg recently spoke with DCV Editorial Director David Maloney about the company’s efforts to quickly shift gears when the pandemic hit and the lessons his team learned from the experience.
Q: Could you give us a brief overview of the company and your distribution operations?
A: Southern Glazer’s is a middle-tier marketing, sales, and distribution operation that supplies wine, spirits, water, beers, and food products to stores in 44 states, the District of Columbia, and Canada. As of 2018, we ranked as the 37th largest importer into the U.S.
Our distribution network includes 42 DCs with a total of 14.8 million square feet of space. The facilities are staffed by 6,000 employees and serve some 250,000 customers weekly. To support that operation, Southern Glazer’s maintains a fleet of 2,600 vehicles that make 6.5 million deliveries annually.
Q: You had an established crisis management plan in place when the pandemic hit, with a team ready to swing into action. Can you tell me about its role?
A: The crisis management methodology was adopted by the company about 10 years ago and is overseen by 12 senior leaders representing various functions in the company. I am the team leader, and I am supported by the chief information officer, the chief human resources officer, the senior vice president of operations, the controller of finance, our legal department, and others who represent our labor and customer functions along with communications and social responsibility.
Once the team is activated, these leaders come together to develop, discuss, and promulgate all of the company’s crisis-related policies and protocols. So, the foundation was there, the people were there, and the process was there. We activated the team on March 12. It was the first time the team had been activated for a public health emergency.
Q: Typically, crisis management teams focus on regional events, such as a hurricane or tornado that affects a specific geographic area. But the pandemic has disrupted business throughout the world, including all of your operations in the U.S. and Canada. How did this change your team’s focus?
A: There’s no question it made things much more difficult for us—not only because of the scale of the disruption but also because of a lack of alignment in guidance from public health organizations like the CDC [Centers for Disease Control and Prevention] and World Health Organization and even federal, state, and local governments. So, a lot of stuff we had to develop on our own. Plus, we were operating across a wide swath of states, all with different Covid risk profiles and operating restrictions. We had to do what we thought was best even though a particular safety measure might not be mandated or required in a given market.
Q: During the pandemic, you were designated as an essential business. What did that mean for your operation?
A: A large part of our business is distributing water and foodstuffs in addition to alcoholic beverages and beers, so we were designated as essential by the government. In the beginning of the pandemic, being an essential business meant we weren’t required to adhere to any of the regulations related to closures or even social distancing. Then, things got worse, and state and local jurisdictions began handing down guidelines that didn’t differentiate between essential and nonessential businesses.
Having said that, I should note that we conducted our operations as if we were not an essential business in the sense that we first determined what we needed to do to protect our employees and then decided how we were going to operate with those protective measures in place.
Our business is really made up of two different pieces. We have the “on-premise” piece of the business, which is essentially supplying alcohol to restaurants, bars, and hotels for consumption on site, and then we have the “off-premise” part of our business, supplying beverages to retail stores for off-site consumption. One part of our business did very, very well and continues to be strong. The other part of our business went from a hundred to zero in a matter of weeks because of restaurant and bar closures in most parts of the country.
Q: Are you still feeling the effects from that? Have you had to change your distribution strategy?
A: The interesting thing is that liquor consumption in the U.S. did not decline. When people stopped going to restaurants and bars, they bought more from their local retailers. So, our overall orders actually got bigger, with fewer stops and larger deliveries. You can deliver a whole truckload to Costco, for example, where you might be delivering only 10 cases to your local steak and ale establishment—and because restaurants don’t have much storage space, you might be making multiple deliveries per week. So the number of deliveries declined dramatically, which was the big change. There was definitely a difference in the dynamics of our operations.
Q: Given the lack of consistent government guidance and the patchwork of state and local regulations, how did you develop your processes? Did they vary by location and the severity of Covid in the area?
A: We set a foundational standard across the entire country. While other people and agencies were busy debating whether to, say, make masks mandatory, we came together as a team and agreed we would make our own decisions based on what would provide the best protection for both our employees and our customers. So, there are standard policies, and then we have an enhanced protocol for what we call “hot markets,” where Covid cases are high. We re-evaluate these markets every two weeks to determine whether we need to keep the enhanced protocols in place.
Q: Could you tell us about the policies you instituted?
A: In the hot markets, employees who can work from home are required to do so. In the other markets, they are allowed to work from home but not required to. We suspended visitors and vendors from entering any of our buildings. We’ve got thermal temperature testing at all of our facilities. We have a company-sponsored testing program that provides results in two days.
Within the warehouse, we suspended our individual bottle picking through last July because it’s an area that is harder to keep clean. And while that was suspended, we re-slotted the bottle rooms. In other areas, we extended the work zones to increase the distance between workers. We were able to procure aerosol-type equipment to clean those areas both before and after use. We increased the amount of PPE [personal protective equipment] the employees wore in each area, meaning they’re required to wear face shields in addition to face masks and gloves.
We also set protocols for cleaning our equipment—whether it’s hand trucks, the cabs of our delivery vehicles, or the tablets used for deliveries. We no longer require drivers to come into the building to pick up paperwork. We now put it in the truck, so they can go straight from their car into a clean truck.
We’ve also begun making “no-contact” deliveries, meaning that customers no longer have to sign a document or a tablet—or have any contact with our drivers whatsoever. We require our drivers, of course, to wear masks and gloves in all of the delivery establishments.
Q: Are you using technology to help maintain social distancing between pickers?
A: Yes, our technology does the largest part of that distancing. We run voice picking in the bottle room, and we run wireless scan guns in the warehouse, so there are screens on all the forklifts, the order pickers, and other pieces of equipment. Workers in those areas are limited to selecting picks from a single aisle, and we don’t have two pickers in the same aisle.
We also have automated equipment in our larger markets, which has allowed us to navigate the increases in volume without putting any of our team members in harm’s way. For example, our Northern and Southern California facilities have very large automated storage systems, allowing some 30% to 40% of our volume to be picked mechanically. We also have high-end automation in a new building we opened last year in Katy, Texas.
Q: Given the size of your operation, it’s inevitable that some of your workers will contract Covid-19. How do you deal with those cases?
A: We have a fairly comprehensive protocol for presumptive exposure or positive tests. Employees are required to inform their immediate supervisor and their local HR business partner. That triggers an immediate response by the crisis management team. The team manages an aggregate list of all potential cases.
We also have a robust tracking and tracing system that allows us to determine who that individual might have come in contact with and what surfaces they might have touched—whether it’s in our building, in a truck, or at a customer’s facility. After gathering all of the data, the crisis management team then determines the notification requirements.
As a result, we have a very good track record. In the past 170 days, we’ve canceled only 13 of 4,000 planned “shipping nights” across the country out of safety concerns.
Q: Did you have any trouble getting PPE?
A: Yes. In the early days of the pandemic, we certainly faced shortages of masks and cleaners. One advantage we had was that a lot of our suppliers who produce and distill alcohol were able to convert some of their production from alcohol to hand sanitizer and other cleaners.
After the first four to six weeks, we got our supply chain figured out. We then stocked up pretty aggressively to make sure all of our buildings and all of our people had enough PPE.
Q: What are some of the lessons you’ve learned, and what would you do differently?
A: I think we probably should have started accumulating supplies and developing pandemic-specific protocols a little bit earlier—maybe in February versus the middle of March. We had taken our guidance from some others who didn’t think this was going to be a big problem.
We also ran into staffing issues due to the expanded unemployment benefits. With the $600 federal stimulus payment added to the checks, unemployment benefits exceeded workers’ actual pay, which made it tough to get people to come to work. So, there were quite a few instances where we had to initiate what I would call “hero pay” in order to boost attendance so we could complete our mission. In retrospect, that’s probably something we should have addressed a bit sooner.
Then there’s the technology aspect. Although our technology is good, I do think we need to improve some of our methods of internal communication. A lot of our employees get the information they need from our internal website, but some of them—like drivers and warehousemen—don’t have internet access at work, so we probably need to develop a multi-pronged approach to communication.
One of the nice things is that the leadership and ownership of our company really took a hands-off approach. It is quite unusual for somebody at my level in a company to make those types of widespread decisions with their full endorsement. That kind of support was pretty extraordinary.
Q: Let’s talk about what happens once we get past Covid. Will your business model change?
A: I believe our industry is forever changed. There’s a good possibility that as many as 30% of the on-premise independent restaurants, local neighborhood restaurants and bars, and even chain restaurants in the U.S. may never reopen. It has been devastating for them.
In July, the on-premise channel was down 50% compared with a year ago. That number is now about 48%. I don’t think anybody can really say what things will be like 12 months from now, but it definitely will not be the same as it was at the start of 2020.
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