Effect of Lockdowns on Essential Goods Value Chain

These interesting times that we are currently living through have thrown open a lot of challenges. Organizations and decision-makers must be agile and innovative to overcome the challenges that COVID-19 has thrown at us. In India, we had 2 lockdown periods in the last 15 months. During lockdowns, the local administration (Politicians and Bureaucrats) huddles together to publish Standard Operating Procedures (SOP) that highlight dos and don’ts for citizens. I do appreciate all the hard work and disaster management that the administration is doing because it is not an easy task for a country as diverse as India. Being a supply chain student, I try to watch and analyze day-to-day situations with a lot of interest and I see one area that needs improvement when lockdowns are implemented. And this I think is common in all countries.

What is a Lockdown?

Lockdown means a complete shutdown of all day-to-day activities except Hospitals, Police, and essential goods. The idea is to make people less “adventurous” and make them stay at home to stop any human-to-human interaction to “Break the Chain” of disease transmission. In the last 15 months, we have seen several countries implement lockdowns or mini lockdowns to some degree or other based on the situation. In India, the first nationwide lockdown was during the Summer of 2020, and then during the 2^nd COVID-19 wave in Summer 2021, there were state and district-wide lockdowns that were decided by the state and local administrations.

Essential Goods Movement During Lockdowns:

When you are locked inside your house you still need daily essential goods so that you can survive. So, when the announcement for lockdowns/curfew comes from the administration, the most common first question is “What about Grocery Stores”? The reason for this anxiety is because people have seen a lot of uncertainty in the way essential goods availability was handled in the last 15 months. We have seen complete closure of grocery stores for a few days, squeezed timings that are 6 AM to 10 AM, sub relaxation that is 8 AM to 2 PM, weekend closure, weekend squeezed timings, etc.

The foundation course of Supply chain management tells you that “uncertainty = disturbed and distorted supply chain”. I tried to explain this to my district administration back in the Summer of 2020, but I guess that did not reach the right ears. Then in April 2021 when the 2^nd wave of lockdowns was announced, I immediately sent a presentation to the administration to explain why it is a bad idea to let Grocery stores open only from 6 AM to 10 AM on the weekdays and why Grocery Stores should be allowed to function normal hours. To my surprise, a new order came to extend grocery stores opening hours until 2 PM, but that only stayed in effect for a week. Without any data analysis and rationale, it was moved back to closure at 10 AM. I think such changes can be considered as knee jerk reactions due to varying and increasing case counts during the peak of the wave. Again, fundamentals of Supply Chain Management tell you to “avoid knee jerk reactions to run an efficient supply chain”.

To understand the behavior of consumer demand and to access the impact of short shopping hours at Grocery stores on the overall Supply Chain, I decided to visit a few Grocery stores near my home in the mornings on a regular basis and gather some data. I did this when the essential shopping hours were between 6 AM to 10 AM and then when the hours were extended to be from 8 AM to 2 PM. On paper, it is 4 hours of shopping time to 6 hours of shopping time, but the key thing to note is that most people are not even awake until 7:30 AM. That points to an effective shopping time of about 2.5 hours.

Talking to the store workers confirmed my belief that on the days of shorter shopping hours, there was more crowding, and it sometimes became unmanageable. During the 1^st lockdown, we could see limited people being let inside the store and big lines outside the stores, sometimes even managed by the Police. Like everything else, fatigue has set in, and in this 2^nd lockdown, people were freely let into the store.

The stores I visited are on an average 3,500 to 5,000 square feet. For simplicity’s sake let us assume an average store size of about 4,000 square feet. In India, the way aisles in the Grocery Stores are arranged is about 50% of the space is taken by the shelves and another 10% is taken by the billing counter and other infrastructure. Meaning effective space for human movement is about 1,600 Square feet. According to the CDC, for effective Social Distancing, you must be at least 6 feet away from the next person. So, we are looking at about 64 people in that space at a given time. In these grocery stores, if we assume a workforce of about 10 at a time, the expectation is to have about 54 customers in the store at a time. The data that I have gathered gave me an average of about 75 customers inside the stores during the peak morning hours during a short shopping window. However, once the relaxation was made from 8 AM to 2 PM, the average peak I got was about 30 customers. This was for the same day of the week. Another observation is that during the short shopping window, if you swing by the grocery store you see a fair-like atmosphere with people and vehicles between 9:30 AM to 10 AM (closure time). However, in the extended shopping hours, you hardly see such a rush around closing time (2 PM).

Here are some of the consequences of short shopping window and inconsistent times at grocery stores. This includes feedback I gathered from the store workforce to corroborate my findings:

Panic Buying: Shorter and rushed shopping time leads to panic buying. You tend to buy and stock much more than what you need. The stores are not prepared for such panic buying and as a result, there are more chances of stock-outs thus disrupting the entire supply chain.

Crowding of Stores: As described earlier, stores get more crowded, thus increased the chances of infection transmission. This defeats the whole purpose of a lockdown. Remember the saying “The road to hell is paved with good intentions”.

Stressed Stores leads to unnecessary buying: When consumers enter crowded stores in a stressed environment, there is a tendency to buy whatever you can get your hands on. This leads to artificial demand that causes high variability, eventually masking the real demand.

Replenishment Challenge: Essential Commodities need to be replenished regularly due to their shelf life and surge in demand. With just a 4 hour window, it will be difficult for stores to replenish and restock products which will cause Supply Constraints. In fact, in my visits to the stores, I have run into so many instances where the store staff is in the aisle with big carts replenishing the shelves thus disturbing the movement of customers.

Mental Stress: With a complete break in the supply chain, consumers will go through more mental stress as they will not be sure about their day-to-day requirements, and shop employees will have the stress of trying to service the customers. During a pandemic, it is advised to be as stress-free as possible, but this will create another dimension of stress that could be avoided.

In Summary, the entire value chain is strained:

More people in the store with less time means – per person exposure rate is high compared to normally distributed movement.
Stores are stressed; hence they will not have the right products at the right place at the right time.
Because stores do not give the right picture to the distributors, there is artificial demand and supply at distributors as well.
This also leads to stress on the manufacturer’s side and affects their effectiveness.

A Different View – Demand is low, so shorter shopping times do not matter.

I understand that there are arguments that during such a pandemic time, demand for online grocery services and door grocery delivery has increased many folds, so most people do not go to grocery stores in any case. While I do agree that the demand for online services and door delivery has picked up sharply, I am not surprised that the grocery stores are still as crowded as it was pre-pandemic times. In my understanding it is again attributed to shorter buying periods as Customer per time Period will still be like how it was before. Also, for door delivery of groceries, the pickers and delivery team still must source from the same store shelves.

Also, there is another argument that due to lockdowns, the demand for goods is anyways less; so that means people are not buying stuff. But results from the companies have shown that even during lockdown and pandemic times, the food industry has not seen as many dips as compared to other industries. In fact, the retail sales of food products have seen a lot more momentum as more people are cooking and eating at home while staying home.

I spoke to a few food products manufacturers in the area. A leading manufacturer of spices and masalas told me that during lockdown his sales went down by about 10% to 15% due to restricted shop timings. In my opinion with the scale of lockdown, the consumption should have been a lot less and should have affected the sales a lot more. Though consumption was minimum, consumers still bought stuff. I spoke to another friend who manufactures healthy snacks and sells his products through different channels. For him, the growth has been about 10% even in the lockdown and pandemic times. This is mostly attributed to people still eating what they love to eat and healthy snacking habits in their home offices.

There is a joke here that lockdowns and work from home have given birth to a lot of new chefs. In fact, if you go to the baking aisle in some of the grocery stores here, you will see a lot more crowds compared to pre-pandemic time. More people are cooking and baking at home.

So, in summary, demand for essentials and food items are still in the range of the pre-pandemic era. We need to give the benefit of the doubt to administration because these are rarely encountered scenarios; but I also hope that they have learned from the past 15 months and future lockdowns (if any, I hope not) will be planned much better, especially regarding essential commodity shopping to not strain its supply chain but at the same time stop the Supply Chain of a virus.

PS: The administration here also imposed a complete shutdown on weekends, thus straining the supply chain once again. While working on this blog, I got this WhatsApp message that beautifully shows the effect of such weekend closure of essential services. I thought it was interesting to share here.

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