Reopened Food Lion DC: A Lesson in Recovery

DUNN, N.C. — On April 22 last year, at 4:22 p.m., Gerald Greenleaf, vice president, distribution and transportation, Delhaize America, got a call at his Hannaford Bros. office in Scarborough, Maine.

It was from Lou DeLorenzo, Southeast regional distribution director of Delhaize subsidiary Food Lion, who said that “something happened” to the Food Lion distribution center here. “I’m used to him saying that the IT system went down again,” recalled Greenleaf. But this time it was more significant. “He said the roof’s gone and the walls have disappeared.”

Lou DeLorenzo and Gerald Greenleaf, Delhaize America

The 1.2 million-square-foot Dunn DC had been victimized by a tornado that damaged all of its perishable and refrigerated space and about 25% of its grocery operation. The good news: None of the building’s employees were hurt. “The timing was perfect,” said Greenleaf. “It was not while we were operating. A few hours earlier or later and we would have had 100-something people in that facility.”

It took until last month for the warehouse to be fully rebuilt and operational in all phases. Yet in the wake of the disaster Food Lion was able to continue serving the 270 stores normally supplied by that DC — a process Greenleaf and DeLorenzo described in January, a few weeks before the reopening, at the Supply Chain Conference, sponsored by the Grocery Manufacturers Association and the Food Marketing Institute

The biggest lesson, said Greenleaf, is that food retailers and wholesalers need to be ready to deal with a natural disaster — an increasingly common occurrence in the U.S. — “so that if it happens, you can make lemonade out of a lemon.” He advised having a plan in place that is continually reviewed and updated. “We could have done more due diligence, looking at our plan more frequently.”

In the immediate aftermath of the tornado, after ascertaining the safety of employees and the security of the facility, Food Lion created “assessment teams” to contact employees, assess the state of the facility and products and guide operations. In addition, a steering committee, consisting of Greenleaf and representatives from retail, loss prevention and engineering, was created to get the facility “back to life” and figure out how to serve stores depending on the damaged warehouse. Teams were also created to handle insurance processing, inventory disposition and inventory rebuild.

Disposition of non-usable inventory via the insurance company was a key learning experience, said DeLorenzo. “We had never had a claim like this. It was a slow process.”

Cascading Fulfillment

Perhaps Food Lion’s biggest advantage in surviving the tornado was that it could shift responsibility for store fulfillment — Greenleaf called it “cascading” — to adjacent facilities within the chain’s network of 12 DCs. Service for 100 stores was switched to the DC in Salisbury, N.C., which in turn moved service for 50 of its stores to the DC in Clinton, Tenn. Delivery for another 100 stores was picked up by the DC in Disputanta, Va., which handed off 50 of its stores to the DC in Greencastle, Pa. The remaining 70 stores were rotated to the DC in Elloree, S.C. The redeployment of shipments was already part of Food Lion’s existing emergency plan when the tornado hit, noted Greenleaf.

The transfer of operations to sister DCs happened within 24 hours of the disaster. Some surviving grocery inventory from the Dunn facility was redeployed to the supporting DCs. DeLorenzo acknowledged that service levels to the stores “declined slightly” — about 3% to 4% during the first month after the event.

Within the first week after the tornado, 150 of the 600 employees at the Dunn DC were transferred to the supporting DCs. Other employees were brought back to the Dunn facility as it was rebuilt. Keeping most employees employed was “pretty cool to be able to do after you wake up and find your building has been destroyed,” said Greenleaf. For workers left without unemployment, Food Lion sustained payroll for three months, and then shifted them to unemployment insurance, said Greenleaf.

Food Lion’s community and government contacts played a crucial role in helping the recovery, noted DeLorenzo. “We worked closely with the emergency management division in Dunn.”

The first part of the Dunn DC that returned to operation was grocery, which began functioning in about 75% of its original space within four weeks. But the perishable and refrigerated departments and office space did not come back until last month.

The rebuilt DC features an expansion of the perishable departments as well as a fitness center and enhanced offices. “It will be the best DC in the [Food Lion] network — the envy,” said DeLorenzo. More rugged roof supports have been added to the new facility.

“I don’t advise having a tornado take out your facility as a way to do an upgrade,” added Greenleaf. “But it does simplify getting the cash you need to make it happen. That’s the only thing that’s simple — everything else is pretty demanding.”