Transforming food banks’ warehouse operations to improve critical performance

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Across the country, COVID-19 has put unusual and extraordinary strain on communities and social safety nets—and this applies equally to food banks.

Feeding America, a nonprofit organization whose mission is to address food insecurity in the US, has seen demand across its 200 food banks surge by almost 50 percent since the COVID-19 pandemic began. Simultaneously, like many other charitable organizations, it is being flooded with donations. This has engendered new logistical problems with transportation and storage space, while exacerbating existing ones, such as the ability to hire and retain talent.

All of these factors add to the anguish of the human stories behind the nonprofit’s challenges. The stories are wrenching: the hours some families spend driving from one food bank to another; the shame felt by many at not being able to provide for themselves; the distress of a mother now on the other side of the table at the food bank where not long before she had been a volunteer.

If ever there was a time for optimizing efficiency in food banks’ operations, it is now.

Warehousing optimization as a high-impact solution

Nonprofits face a variety of unique challenges, compared to the private sector. Many lack the funding to provide competitive salaries, contributing to unusually high turnover. Many are also regularly understaffed and oversubscribed—even in normal times—so it can be tough for their executives and management teams to allot time for strategic planning. And many nonprofits are heavily dependent on volunteer labor, which can fluctuate, especially by the season.

However, one powerful lever available to food banks is warehouse optimization. McKinsey estimates that food banks can improve throughput by at least 20 percent to 30 percent by streamlining their warehousing—a huge step toward meeting the soaring needs of the communities they serve. Moreover, it does not require either additional staff or costly expansions of facilities.

Up close with the real challenges

Feeding South Florida (FSF)—one of Feeding America’s largest affiliates—provides a good example of the difficulties faced by food banks, and shows what the upside of more efficient warehousing can look like. These takeaways are applicable to food banks across North America.

FSF is the south Florida region’s leading domestic hunger-relief organization, serving 25% of Florida’s food-insecure population. Last year, FSF served almost 100 million meals to more than 1 million individuals. Nearly half of those individuals are children or older adults. It is the largest nonprofit provider of produce in Florida. FSF provides nine meals for every $1 donated; more than 98 percent of its donations go right back into the communities it serves.

When the COVID-19 pandemic hit, demand went through the roof, rapidly reaching twice the 2019 levels, which was already 50 percent higher than demand in 2018. At the same time, challenges arose on the supply side. By May 2020, FSF was receiving twice as much inbound volume as the previous year, thanks to the team’s local activity and the enormous supplies of emergency relief from the US Department of Agriculture (USDA) in the form of produce. But the organization was not structured in a way to sort, store, pick, and ship fast enough to keep up. The warehouse infrastructure and operations were simply not designed for such high demand.

While FSF is all too familiar with natural disasters such as hurricanes, COVID-19 was very different. “It definitely felt like it happened from one day to the next,” says Paco Velez, the organization’s President and CEO. “Once our elected officials made the shutdown official, we immediately began to coordinate our distributions. We were able to distribute enough food for 700 families, but we were still short by 3,000 families. We needed to figure out something quickly.”

Velez and his team did just that. His distribution team members stepped up to increase support to all counties served in South Florida. In parallel, his food industry team set out to find new sources of food, partnering with dairy farms, growers, stores—anyone and any organization that might have some surplus. And on the logistics side, FSF ramped up shifts for its warehouse personnel, drivers’ schedules, truck utilization, and much more.

It still wasn’t enough. FSF didn’t need to do a strategic analysis to realize it lacked the storage space to handle the volumes. “You could see that an incoming pallet was blocking an aisle, but there was nowhere to move it,” recalls Velez. By April and May 2020, space became extremely scarce, mostly as a result of large deliveries of USDA produce. Soon, inventory holding times had ratcheted up from four to six days.

Toward a whole new approach to warehousing

In June 2020, FSF decided to overhaul its warehouse operations to try to address these challenges. The challenge was formidable, as the warehouse would have to keep running at unprecedented levels at the same time. So, partnering with McKinsey, Velez and his top team quickly settled on a phased overhaul plan that would supercharge short-term performance, and at the same time start weaving in new ways of working to ensure the changes would stick.

The team’s approach involved three overlapping and more or less concurrent efforts: streamlining the warehouse operating systems; clarifying and improving the management infrastructure; and shifting the workforce’s mindsets, behaviors, and capabilities. Shifting mindsets was key, as FSF workers were almost always in “firefighting” mode, leaving little time to focus on how to work in new ways (Exhibit 1).

Overhauling warehouse operations focus on three drivers of excellence.

Overhauling warehouse operations focus on three drivers of excellence. Velez and Sari Vatske, his executive vice president, understood that they didn’t have to reinvent the wheel to do any of this. Partnering with McKinsey, they drew upon lean warehousing, inventory management, governance, and performance management, and capability-building techniques. And early on, they involved warehouse managers and workers in ideating, designing, and implementing the necessary changes.

The FSF leaders started by building a fact base on their operating systems from which specific actions could evolve. The baselining effort quickly exposed a number of areas that invited immediate improvement. For instance, inbound volumes were highly concentrated, meaning that the pacing of throughput was hard for FSF to control. About three-quarters of all input was coming from ten suppliers. Of those suppliers, the USDA was by far the largest, accounting for more than half of total input—eight times more than their second largest supplier, a regional supermarket chain.

Those findings led to an immediate insight: given that FSF had visibility into USDA shipments, it could use that information to better plan purchases, review the capacity of the warehouse, and collaborate with the department to spread deliveries more evenly across the week.

The diagnostic also uncovered some of the causes of congestion at the FSF facility. A prime example: hurricane relief supplies like bottled water and meals ready-to-eat (MREs) took up valuable storage space that displaced fast-moving, in-demand items like perishable foods. That insight quickly turned into action. FSF relocated relief supplies to offsite storage and grouped the fast-moving items in one area closer to the loading docks. In turn, this sparked better communication between the warehouse team and the distribution team, the latter of which had a pulse on the products likely to move fastest.

Improving management infrastructure

After fact finding and identifying root causes, the team moved quickly into rapid implementation planning, concentrating on the nonprofit’s management infrastructure. Velez and his executive team involved their front-line warehouse workers in collaborative ideation sessions not only to ensure that FSF went forward with the best ideas, but to also ensure their buy-in of the warehouse’s transformation. “They’re the ones really doing the work—they see what’s going on,” says Velez.

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The workshops were a huge success. Two weeks later, more than 35 initiatives had been identified, prioritized, and sequenced. For example, the team saw how individual productivity could be boosted by training workers in new capabilities, using software tools, and applying time-tested performance-management techniques. It also became clear that staffing levels could be rebalanced to better align with the flows of materials and to further improve productivity.

The ideation sessions also showed FSF leaders how they could improve efficiency by standardizing their loading and unloading processes based on truck type and product mix. The sessions highlighted the value of expanding direct-to-agency shipments in order to bypass the warehouse and consequently reduce congestion and the risk of inventory waste.

With regular collaboration now recognized as an invaluable management practice, FSF began holding daily shift huddles to review performance, communicate key messages, discuss plans and priorities for the day, identify risks, and escalate any issues that needed greater attention. Crucially, senior managers stepped forward to drive these meetings. Deploying collaboration tools like whiteboards made it easier for everyone to give and to see feedback in real-time, and for FSF’s managers to provide “in-the-moment” coaching opportunities that could boost productivity.

In parallel, FSF leadership identified and quickly launched a new governance structure to create cross-functional forums that could more easily remove bottlenecks, accelerate implementation, and hold teams accountable for results (Exhibit 2).

Cross-functional forums accelerate implementation and increase accountability.

These meetings started immediately, allowing FSF management to role-model desired behaviors, track progress, and mobilize the organization toward action. The meetings involved crafting “initiative charters” with detailed plans about what each initiative required and who would be accountable for it over time.

Two quick wins emerged. First, the team adopted the use of “shift sheets.” Shift supervisors complete these written reports on the status of various products and processes before handing them off to his or her counterpart on the next shift, so no information is lost. Previously, such communication had been ad hoc at best; now, shift sheets are the norm. Second, the team added a daily cross-functional meeting, led by executive vice president Vatske. “These meetings cover our work all the way from the food coming in to the food going out,” says Velez.

The FSF leaders also looked to shifting workers’ mindsets and behaviors to enact grassroots change. That began with training sessions to help them expand their capabilities and enable managers to properly train existing staff and onboard new hires.

The training sessions were well-attended; key topics included lean warehousing, performance management, and inventory management. They led to renewed engagement from the warehouse workers, who started providing new ideas for quick implementation. Most of the suggestions required no capital, while others, such as using scanners to speed up processing and put-away, are now being implemented.

Although FSF still faces headwinds—for instance, donation shipments are down from 150 truckloads a week to as few as 49, as government support has leveled off—Velez believes, overall, the organization is better positioned than ever to serve South Florida’s food-insecure population. “We’re in a much better place in terms of inventory,” he says. “And there’s a lot more training happening. For some of our team, it’s more formal training as opposed to everyday training.”

Velez also points to the less-tangible improvements, such as the subtle behavioral changes he sees on the receiving bays. “Now those folks understand that it may take just 30 minutes to offload a truck but it takes an hour to put away the product,” he says. “They’re understanding resources, they’re understanding efficiency. They’re understanding what a supervisor pays attention to—and maybe they see how they could take on leadership roles themselves. That’s what I take pride in.”

Gearing up for effectiveness over the long term.

There is much more to FSF’s approach than responding to the immediacies of COVID-19. The Florida non-profit is now planning how to handle a future of heightened demand and other external shocks. The lease on FSF’s current facilities expires in three years, so the organization is actively sizing and designing a larger, all-new facility. The plan calls for a 150,000 square-foot space that could manage about five times more throughput than its current facilities.

Concurrently, FSF is revisiting its management approaches—not only to ensure that the gains made in warehouse efficiency can be sustained, but to also set up the organization for continuous improvement as it faces new challenges. For one thing, the larger facility will likely require more personnel, adding a layer of complexity. For another, the COVID-19 crisis has surfaced an array of supply-chain issues that will inevitably show up again, from demand spikes to shortfalls in supplier communication.

COVID-19 will not be the last catastrophe to force families into hard times. Food banks, already stretched beyond capacity in many aspects, may face more challenges if they do not adapt business processes and practices to meet these new realities.

FSF shows what can be achieved with a wholehearted commitment to an overhaul of warehousing. It is a lever that can make a big difference relatively quickly. However, simply improving operations alone is not enough. FSF’s actions to rework its management structure, introduce and refine performance management, and routinize robust capability-building programs were—and remain critical—to the outcome as well. Focusing on both will contribute to lasting impact well into the future.

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