Now that the Coronavirus has reached most of Europe and North America in sizeable numbers, preparations at many companies are in full swing to do whatever they can to try and be resilient to infections in their distributions centers. Here, I provide an overview what can be done, even at this late stage, to try and contains the effects on supplying your customers.

1. Take care of your associates

Your employees’ health is of critical importance to them and their loved ones. It is also critical to your operations, since infected associated may force you to close your facility. Much has been written about hygiene matters and access control checks, and I will not repeat them here. However, specifically for distribution centers, there is more that you can do. In many cases, distribution centers are staffed with temporary contract workers. In Western Europe, they are often workers from other parts of Europe that often change jobs and live in shared housing. Work with your temp agency to increase hygiene across these sharing housing facilities. Your responsibility in this case extends beyond your fully employed associated, also in your own interest. If you do home delivery to consumers, your associates will be in touch with many people, further increasing their and your risk. You will need to provide hand hygiene materials in your delivery vans.

2. Make sure you have sufficient supply

As trivial as it sounds, this is less than obvious. Many retailers have followed policies to try and limit inventories to reduce inventory cost. Instead, they require suppliers to hold inventory and only replenish when there is an immediate need. Given the likelihood of some disruption occurring due to facilities being temporarily closed, you want to pull in inventory to your locations rather than leaving them at your suppliers. Having the inventory in hand gives you more control in case of shortages and disruptions. Obviously, you should avoid creating a bullwhip further upstream but providing transparency to your suppliers that this is not demand-driven, but driven by an analysis of the supply chain risk. In all cases, it is important to be transparent and communicate intensively with your suppliers about such actions.

3. Distribute your inventory across multiple locations

Given the likelihood of disruptions, it is now more critical then ever to keep inventories at at multiple locations. Most companies tend to have more locations downstream rather than upstream, so moving inventory downstream makes all the sense in the world. With a virus like Corona around, traditional inventory risk-pooling suddenly becomes more risky rather than less risky. If you pool your inventory in a single location, your are unable to deliver if that location needs to be isolated. Spreading inventory across multiple locations increases the likelihood of regular out-of-stocks in each of the locations, so you need to equip your distribution network with options for lateral transshipments between locations. In the same line of thought, you need to be able to serve markets from alternate distribution centers. This may require making arrangements with logistics service providers. In case of regulated products, such as pharmaceuticals, this may require permission from the relevant authorities. It could be a good idea to obtain such permissions in advance.

4. Improve robustness in your warehousing operation

Warehouse staffing is typically fully flexible. Moving order pickers across the warehouse provides such flexibility and lowest cost. However, is also provides for maximum contact and infection risk. An option could be to virtually compartmentalize your warehouse, and assign pickers to a certain compartment only. A friend of mine relayed this to me as an option, which I think is highly interesting and where others could benefit. Slightly more cost, but much less risk.

This article was published on LinkedIn on March 6, 2020