Temporary Retail and Supply Chain Measures Become an Industry Standard

Reading Time: 7 minutes Updated: Nov 23, 2020
Reading Time: 7 minutes

Even though precautionary measures against the Covid-19 virus in the retail and supply chain were put in place abruptly, it seems that they will turn into an integral part of compliance and corporate standards for these industries. It is possible that these practices against contamination and spread of the disease will even become a prerequisite for international cooperation and a facet of future due diligence investigations. The pandemic required instant reaction that would stop the spread of infection without disrupting short-term business operations. It forced retailers and companies in the supply chain to redefine their procedures in order to continue supporting essential industry branches. As the industry is gradually returning to its previous mode of operation, certain practices developed amid the crisis remain in force.

After the World Health Organization reported that the coronavirus spreads quickest through interpersonal contact and touching contaminated objects, the protection of personnel and goods became a priority in these industries. Governments also indicated that any physical contact between individuals and goods that are present in public space should be reduced to a minimum. However, numerous companies and industries were compelled to carry on their activities despite the pandemic, as their business is based on serving consumers’ essential needs. These companies are the ones that provide food, medication, and consumer goods that are indispensable at all times.

Costly Steps Towards Safety
Multinational retailers such as Ahold Delhaize and Lidl, as well as their logistics partners, are committed to protecting their employees and operations by introducing new measures. The most common ones revolved around remote work or limiting the number of employees in the same office space, while those operations that cannot be carried out remotely were altered in order to meet safety standards. For instance, fast-moving consumer goods (FMCG) companies reduced their productivity due to complying with the new standards, which include smaller workforce, more extensive preparation and protection procedures, as well as disinfection of its premises and goods. One of these companies is Nestle, which reportedly resorted to more expensive business practices in the name of security, health, and environment. They include safer and pricier air freight solutions and short-staffing, both of which affected the mark-ups of their products.

Other examples pertain to routines in goods handling, which allow only select employees to receive, pack, and unpack the goods. In particular, one leading European retailer changed its common procedure, where the truck driver was obliged to unload the goods at the delivery dock while the warehouse staff was filling in the delivery forms. In normal circumstances, it takes about 30 minutes for the driver to unload a truck with 33 pallets, whereas the time needed to do so now is up to an hour. Currently, this retailer does not allow delivery drivers to handle any goods coming to the warehouse, nor are they permitted to enter the offices or warehouses. Instead, the warehouse employee unloads the truck, checks if the quantities are completely in accord with the order document, verifies the condition of goods, and once finished, the employee signs the delivery form and clears the truck driver. Having in mind that many warehouses are short-staffed, the whole receipt of goods procedure now takes more time, as there are no simultaneous tasks going on. This single modification led to a significant change in the cost-effectiveness and raised the question about the duration of this practice.

Although they do not seem sustainable and are certainly expensive, the aforesaid measures have been effective and provided an additional advantage for the market as a whole. As retailers and distributors adopted these standards, they ensured that the virus could not contaminate the goods and reach the store itself. The benefit was a protected shop, which ultimately leads to protected customers. According to certain experts, one of the important aspects of choosing a store would be trust in the retailer’s safety procedures, which ensure hygiene and health in the workplace. What is more, the companies that implement these procedures boosted their industry standing, as they have proven to be responsible entities that think of the aftermath of their activities. Examples can be found in retail, as well as in other industries, such as technology and fashion, where customers believe a company’s socially responsible approach would become as important as the price of its products.

Ad-Hoc Procedures Are Here to Stay
As lockdown measures are becoming more lax in certain countries, it remains to be seen if companies will comply with these procedures after the pandemic is over. According to certain experts from FMCG companies, this change is only temporary, and it does not appear that the new standards will persist in the industry for a long time. However, with the threat of a second wave of the Covid-19, there are speculations that many companies would actively adhere to these practices. There are several instances where lowering the measures caused new Covid-19 cases, which leads to the assumption that the virus will be present for quite a while, and constant caution is necessary.

The continuing risk that the virus poses for business operations implies that the aforesaid seemingly ad-hoc procedures are here to stay. In light of these circumstances, experts have suggested that such practices will likely become an integral part of occupational health policies. It is also probable that certain multinational companies that wish to remain responsible will insist that business partners also apply these measures in their quotidian operations. Some experts have indicated that in the near future, it can be expected that an international standardization be implemented, and similarly to the standards that ISO is in charge of, it would be considered a precondition in the supply chain. The standards would bring a wave of change in business operations worldwide, led by compliance departments, which would be responsible for implementing these measures. It is also likely that these trends would affect other industries, such as hospitality, where cafés and restaurants would reduce the number of guests in order to comply with the newly-adopted safety standards. It is even to be anticipated that virus prevention practices will become as relevant as the environment protection policies that are now compulsory in every industry. In that light, many companies would treat them as part of occupational safety standards, which carry numerous legal implications if breached. Penalties for failing to meet such standards range from USD 7,000 up to several million in certain countries and many experts suggest that virus protection would be included. Consequently, companies need to develop a set of measures to ensure that their premises would be immune to Covid-19 and other virus outbreaks. If a company fails to do so, even a minor issue regarding viral contamination in the workplace could have substantial repercussions for both its financial success and overall industry reputation.

In the long run a new industry niche could emerge as regulatory standards on health and safety become increasingly stringent, specifically compliance monitoring and due diligence services related to these aspects of company operations. It can be expected that vendor screening as well as merger and acquisition evaluations encompass checks into the health and safety practices that an entity has in place. These checks would include analyses of the procedures that companies abide by in protecting their employees from contamination and the extent to which they follow state-defined regulations and recommendations that pertain to operation during a pandemic or similar force majeure situations.

July 14, 2020