With an office in the suburbs of Boston, Supply Chain Matters has observed and experienced an extraordinary event, the power of a workforce that has no real hierarchy and loyalty. Our readers residing in the United States may have already heard or read of the developments concerning Demoulas and Market Basket supermarkets within the New England region. The story has become viral. It is a chain of supermarkets with no equal. Workers decided to express loyalty to a CEO by refusing to work until that CEO was re-instated, which turned out to be a five week long standoff. The Boston Globe described the situation (paid subscription required) as “truly a breakthrough for middle-class workers” and provides a detailed account of the event.
In a capsule, this was about a private company that has an ample share of family focused dysfunction that spilled over in business relationships. It is a story of cousins, Arthur T. Demoulas (Arty T.) and Arthur S. (Arty S.) Demoulas at odds, and years of power struggles for control of the supermarket chain. Arty S. with a philosophy of seeking maximum return of profits and equity, assumed control of the Board of Directors earlier this year. Arty T., the operational CEO, who led with a philosophy that workers should be treated as true equals and share in the benefits of success with paid health benefits and profit-sharing, was removed in June. He was admired by the employees.
Employees, not belonging to any organized labor union, with many having multiple years, some decades, of employment history began figuring what was at stake. They surmised potential moves toward sale may have been in the works and elected to support their fired CEO by refusing to work. Arty S. hired two new co-CEOs who asserted themselves early in the game by dismissing eight organizers of the protests. The move galvanized workers and hardened opposition. Solidarity among both workers and customers was astonishing and again, there was no organized union. The next five weeks bore witness to an extraordinary meltdown of business with revenues reported to be down nearly 90 percent. Many believed, including this author, that the situation would end badly. It was a standoff that ultimately prevailed in favor of Artie T. and his management philosophy.
We often shopped at the local Market Basket store. The prices were far below any other outlets. We were by no means, alone. The shopper loyalty was extraordinary and became a key factor in the past five weeks of standoff. Market Basket employees often demonstrated commitment and caring for what they were hired to do. If you did not find an item, store clerks were more than willing to search the store or seek out a manager. Store managers listened and accommodated requests; including stocking a new item if there was local demand.
From this author’s supply chain management lens, this local chain was extraordinary. Highly competitive pricing fueled remarkable volume inventory turnover per store which translated to buying power directed at food suppliers. At certain times, the physical volume of shoppers in the store made navigation in the aisles a challenge. It often seemed that navigating within the store was of equal peril to navigating through the parking lot. Yet, in spite of this volume, a stock-out of an individual item was not as bad as one would think. Even more extraordinary for today’s retail culture, if you asked the store manager when an item would be back in-stock, he or she had an immediate answer. Managers demonstrated intimate knowledge of their individual stores and were not bashful to lend a hand in bagging or at checkout aisles.
The true scope of Market Basket’s supply chain prowess actually came to be appreciated during the work stoppage. As thousands of shoppers sought alternative competitive chains, it became apparent that many of these chains were ill-equipped and ill-staffed to accommodate shopper volume surges. Check-out lines were slow. Stock-outs were plentiful and replenishment was painfully slow. We speculate that the reason was that other chains were regionally based retailers serviced by distribution centers located in other states. In contrast, the main distribution center for Market Basket was located in the town of Tewksbury, about a 40 minute drive north of Boston, close enough to accommodate same-day deliveries.
Centralized planners and buyers of competitive chains initially seemed not to be aware of a local condition. We speculate that replenishments were pegged to normal shopping volumes, not to the extraordinary opportunity unfolding for competitive chains. As replenished inventory arrived, it was quickly consumed. By our observation it was near the fourth week of the Demoulas shutdown before competitors were able to muster an adequate supply response.
Now that the Market Basket crisis has been resolved, the test will be how many former loyal shoppers return. We visited our local Market Basket on day two of the resolution. While the store lacked a full complement of inventory, a good amount of shoppers were buying and the store was fully staffed. Once more we received multiple personal greeting from store employees, management and clerk alike: “Thanks for supporting our cause and thanks for being a loyal shopper.”
How many times have you experienced that greeting in this era of online mass retailing?