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Fedway’s Perfect Storm

Posted on  | January 29, 2013   Bookmark and Share
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Photos by Kevin J. Krapels

After suffering catastrophic damage from Hurricane Sandy, the New Jersey wine & spirits wholesaler rebounds with an equal demonstration of force.

On Monday night, October 29th, Hurricane Sandy hit the U.S.’s northeast coast breaking records and inflicting unimaginable destruction. Coinciding with high tide and the full moon, the storm brought to shore tidal surges of 16 feet in some places. Although the historic water invasion receded after only several hours with the tide, Sandy would cost the state of New Jersey alone a mind-numbing $29.4 billion.

 At Fedway Associates, Inc., one of the Garden State’s largest wine and spirit wholesalers, storm preparations had been taken. After all, with its warehouse and main office in the town of South Kearny nestled between the Passaic River to the west and the Hackensack River to the east, the company was no stranger to storms or flooding, having weathered Irene a year earlier. Trucks had been driven to higher ground, the IT system moved to the office’s second floor and in the warehouse—which rarely saw water enter—a number of pallets had been lifted several feet off the floor.

Yet Sandy proved to be a different animal entirely. “We’ve had storms before, but nothing like this,” says Neil Barnett, Fedway’s President. “We’ve been based here for the last 40 years and never had any reason to worry that our warehouse operation would be in a serious danger zone.”

Security guard David Kengere was on-duty inside the warehouse Monday night. He noticed water seeping in around 8pm, and he began to frantically unplug electrical equipment and move it to the second floor, but he only managed to reach one machine: “I was knee-deep in water, and it was coming in so quickly that I realized I would not make it back to the second floor if I tried for more.” Kengere, who had also been on duty the night Irene struck in August 2011, sat in complete darkness—except for his cell phone flashlight—and watched in helpless astonishment as the destruction began to unfold.

“We’ve been based here for the last 40 years. We’ve never had any reason to worry that our warehouse operation would be in a serious danger zone.”— Neil Barnett, President

 

 Sandy’s tidal surge hit hard, blowing off many of Fedway’s warehouse doors as 10 feet of water forced its way in. The cardboard in stacked pallets was quickly soaked through, and the massive towers began to collapse, each creating tsunami-like waves that caused more destruction. Kengere recalls the first pallet to go down was Castello Banfi, followed by a tower of Cavit Pinot Grigio. By 6am the next morning, the water had receded by several feet, but much of it still stuck inside the building behind closed doors. It was surreal: “When I opened the doors to release the water, I saw fish swimming out,” recalls Kengere. 

Shock & Devastation

Fedway Chairman & CEO, Richard Leventhal, was the first on the scene Tuesday morning, somehow managing to drive to the warehouse from his home in Tenafly. Today, over two months later, he is still unable to fully describe the devastation—“It is impossible to put into words,” he explains. When Leventhal entered the office, he saw the water and debris line at 6 feet along the walls—the entire first floor of the company’s headquarters had been destroyed. With the help of a maintenance worker, Leventhal got into the warehouse and saw the full scale of the wreckage. His first call, from a gas station down the road at 9:30am, was to Barnett, who was unable to leave his neighborhood due to dozens of downed trees and power lines.

“I asked for a meeting of the entire company. I made the decision to go forward with a very well-defined goal in mind: We were going to reconstitute the company… And we were going to do it in two weeks.”— Richard Leventhal, Chairman & CEO

 “Essentially, Richard told me we were screwed,” Barnett recalls. “He told me that we had basically lost our entire inventory and infrastructure and he did not know what we were going to do.” Yet Leventhal, who does recall allowing himself “about an hour of self-pity,” soon called Barnett back. “On that second call, only an hour later, he told me we were going to get through this and we would be back in action before anyone would think it was possible,” Barnett describes. “Right then, he essentially eliminated the mourning period.”

 

 

 

 

 

 

 

 “I knew that decisions had to be made quickly—the next 24 to 48 hours at the best,” Leventhal emphasizes. “We’re going to put Humpty Dumpty back together, and I asked for a meeting of the entire company the next morning. I made the decision to go forward with a very well-defined goal in mind: We were going to reconstitute the company and continue as an independent entity. And we were going to do it in two weeks.”

Picking Up the Pieces

On the morning of Wednesday, October 31st—not yet 48 hours after the storm—600 Fedway employees came to work. “The sight of the warehouse made you sick—many people described feeling physically nauseous—and there were a lot of tears,” says Barnett. IT Director Chris Kelly recalls almost a state of shock: “Nothing could prepare you—the photos do not do it justice. I don’t know how you could look at that devastation and even conceive of moving forward.”

“We brought in heavy construction machinery – big front loaders – and pushed out all the bad inventory onto the loading docks where it was crushed and carted away. This went on for almost two weeks.”— John Longa, VP Warehousing & Administration

At the meeting, Richard stood on top of a pile of pallets and addressed the company. Assuring everyone that there would be no layoffs—that every single person in the company was going to have a job—he “explained that people may not be able to do the jobs that they had been doing,” says Barnett. “They may be doing clean-up or taking orders; the sales force, which had nothing to sell, might be triaging cases, but we would all be working towards a single goal of getting back in business.” Invoking Kennedy’s famous decision to commit the country to getting a man on the moon although he did not yet realize what exactly it would take to get there, Leventhal pledged to be back in business by November 19th—a seemingly impossible feat.

“I’ve had only two jobs in my life—working for my father in his retail store, and working for Neil Barnett—and when I saw the warehouse on Wednesday morning, I started to cry,” describes Michael McNulty, VP Brand Management, who has worked at Fedway for 22 years. “I was sure I was out of a job, and for about 10 minutes, I had no hope. But as soon as Richard spoke to us, I had hope again; the whole experience was extraordinarily personal because we really are a family.”

Clean Up, The Hard Work Begins

What happened next was a flurry of action, beginning with the clean-up on November 1st. “You short-circuit all of the discussions and you focus only on decisions,” says Leventhal. “For example, we needed all new air compressors to run the conveyors. The only supplier I was interested in doing business with was the one who could get them here the fastest; it was all about compressing time.” (In retrospect, Leventhal admits without any remorse that he was extraordinarily rude during those first few days: “If you could not assist me in putting this company together in some fashion I had no time to say hello to you. I did not want to know you felt sorry for me. That would not save this company.”)

 

 

 

 

 

While there’s never a good time for a warehouse flood, Sandy could not have come at a worse moment in the company’s history. “It was the beginning of the holiday season and there was a port strike contemplated for the end of December, so we had scrambled to accelerate purchases and have as much product on hand as possible, so our inventory was at an all-time high—we had one million cases,” says Robert Sansone, executive VP, Finance & Operations, “and half of it was destroyed.”

Barnett challenges people to imagine what 500,000 cases of wine and spirits looks like: “One massive delivery truck holds 400 cases—try to visualize how many truck loads and deliveries that represents. It’s more than one month’s worth of deliveries, and we send out 100 trucks each day.”

“We brought in heavy construction machinery – big front loaders – and pushed out all the bad inventory onto the loading docks where it was crushed and carted away. This went on for almost two weeks.” — John Longa, VP Warehousing & Administration

Then picture all those cases collapsed and on the floor. “Every square inch of the warehouse floor had cases so there was no room to work—it took several days just to create space,” Barnett explains. Along with the insurance adjusters who were on the scene from the beginning, the company attempted to triage the sea of merchandise. “We went bottle by bottle and developed piles of good product and piles of questionable product,” describes John Longa, VP Warehousing & Administration. This process—carried out by 50 teams of four to five Fedway employees each, working around the clock separating good bottles from bad—was not moving very fast. Not only was precious time being lost—it turned out that even bottles which appeared salvageable might later be deemed contaminated anyway, if they were at all touched by water. So, the sorting was now down to two piles—just good and bad.

 

 

 

 

 

 

 

“We met again with the insurance adjusters two days later, and they gave us the OK to start moving stuff out and get rid of it,” says Longa. “We brought in heavy construction machinery—big front loaders—and pushed out all the bad inventory outside onto loading docks where it was crushed and carted away. This process went on for almost two weeks.”

During the clean up phase, each day began the same way, with employees reporting to the 2nd floor of the office, and McNulty assigning jobs for the day. “Those who couldn’t lift heavy boxes or operate machinery would build cardboard boxes, get pizza, run for coffee,” says McNulty.

 Looking back, the clean-up did more than ready the warehouse to receive new inventory—it brought the company together. “I remember one very late night in the warehouse we formed an assembly line to triage cases of product,” says Sean Weinerman, VP Senior Wine Director. “One of the guys in the assembly line was Richard Leventhal. Nobody was wearing a tie—we were all standing side by side in jeans and work boots working together with one common goal.”

In the end, the clean-up went faster than expected. “We usually have our Friday meetings at a local hotel, but Richard suggested doing it in the warehouse those first few weeks,” says McNulty. “Everyone could witness how much was already cleaned, and see trucks bringing in new inventory. Our comeback was for real.”

Starting Over, from Scratch

As the clean-up was going on, reconstruction was also taking place. Much like New York’s Mayor Bloomberg, who declared power and a working subway system to be the two most paramount concerns for the city in Sandy’s wake, Leventhal zeroed in on I.T. and temporary space. “We absolutely needed an interim location to salvage goods during the clean-up,” he says. “And second, we had to reconstitute our information database.”

On the first priority, Fedway caught a lucky break. The company’s landlord offered them the keys and license to a brand new, just-completed 200,000 square-foot warehouse space next door that had miraculously suffered no flood damage. This meant Fedway could immediately begin receiving merchandise.

 

 

 

 

 

Regarding Leventhal’s other top priority—I.T.—the company again was fortunate. The good fortune this time was less about luck, however, and the direct result of I.T. Director Chris Kelly. “Chris is a very modest guy,” says Leventhal. “But his decision to physically disassemble our web servers and all other critical hardware on the first floor and move it to the second floor on the Sunday night before the storm essentially saved the infrastructure of this company.” Kelly’s other genius move: “The I.T. department took out their cell phones and took pictures of the wires and where they went; this became their wiring diagram for putting it back together,” marvels Leventhal. “Without that bit of human ingenuity, we would have been dead in the water.”

“We all assumed the water was only going to come up to the front door, similar to Irene,” recalls Kelly. “So the plan I made with Richard was to raise the equipment just several inches off the floor.” Yet at 3pm a gnawing sense of dread led Kelly to make the decision to take apart the servers and main frame and move it all up one floor—a process that kept him and his team at the office until 11pm on Sunday evening.

On Tuesday morning, Kelly attempted to make it to the office, but after 6 hours in his car, he was still unable to get there due to road closures and fires. That evening, Richard called him and informed him the entire first floor was destroyed. “‘What do I have?’ Richard asked me,” says Kelly. “He had no idea that we had moved everything to the second floor and when I told him the I.T. system was still intact, he went silent before he spoke: ‘That is the best news I have heard yet.’ He then had two more questions: ‘was my family safe?’ and ‘how can we get payroll out to the Fedway employees?’ That says a lot about the kind of man Richard is.”

 

 

 

 

 

 

Generators were in short supply—and power didn’t come back on for 18 days—so Kelly couldn’t get the company’s I.T. system up and running for four days. “Our goal from that minute on was to get our first invoice out,” he says. 

With a temporary warehouse and I.T. back in action, the company could then focus on the thousand other things that were required to start operating. Fedway created its own fueling operation in order to keep generators going. At the beginning, that meant hand-pumping diesel fuel out of their our own tanks to get them primed. With gas in short supply, Fedway had drivers coming up on a daily basis from South Jersey with 50 to 200 gallon containers of gas per day.

A big help was a disaster relief organization out of Texas that Fedway’s insurance carrier recommended. “They essentially globe-trot, going where the disasters happen—Katrina, Floyd and Andrew,” explains Sansone. “They bring a command center with them and an army of resources, many of which we never thought of, such as a huge power washing company which cleaned our warehouse. They also had access to a second wave of generators when they were in scarce supply.”

Fedway was fortunate that a just-completed 200,000 square foot warehouse space next door was available for temporary use. Fedway could immediately begin receiving new merchandise and have a place to store salvaged goods.

 

In addition to the laundry list of equipment that had to be replaced, Fedway had lost every single one of its 100 trucks. “When you looked at the trucks, they looked fine,” says Sansone. “But because brackish water corrodes immediately, the damage was irreparable. We spent a lot of time changing out the transmissions, making them road-worthy, only to have the computers and transmissions fail the next day.” Fedway was able to buy 21 trucks coming off a lease to Southern Wine & Spirits and quickly arranged to rent 80 additional vehicles until new trucks could arrive.

Replacing Half a Million Cases

Half a million cases were destroyed in a matter of hours, but getting them back wouldn’t happen quite as fast. “You don’t just say I need 10,000 cases of Grey Goose or Captain Morgan here tomorrow,” explains Barnett. “First we had to get our suppliers to change the way they take orders from us and where they ship. We needed them to put our orders at the top of the priority list and get us product as fast as humanly possible—and virtually every one of them did just that. Whether it meant taking goods that were on the way to other wholesalers, or goods that were moving into their own warehouses, they really helped us speed the process.”

Chris Kelly (center) with Bon Zaunczkowski and Kirk Wolthouse

 

Steve Kissel, Bobby Brundage, John Longa and Don Brundage

 

 

 

 

 

 

 

Operating in a franchise state, Fedway has many brands that are carried by other wholesalers in the market. But there are many that the company represents exclusively, and it was to these suppliers that Barnett felt particular responsibility: “We were laser-focused on getting up and running not just for our own sake, but for our customers and the suppliers who we represent who were out of the market.”

True Test of Character

“We always thought we had a unique culture at this company,” Barnett confides. “People rarely leave here and we consider ourselves the Fedway family. Our doors are never closed and any senior manager is approachable at any time day or night. The way our people feel about this company is a huge source of pride for us and when it came time to ask our employees to roll up their sleeves and help us get through this, the response was overwhelming.”

At a time when employees were dealing with personal struggles—damaged homes, lack of power, school closures—it is a true testament to the loyalty Fedway inspires that they were there day after day, rebuilding the company. “We had sales people working the night shift; truck drivers, sales managers and clerical staff all working side by side in jeans and sweatshirts,” Barnett recalls. “It created a bond and camaraderie that was really rewarding.”

 

 

 

 

 

 

 

“One of the most difficult jobs I had during this time was refusing people’s help,” says McNulty. “There are only so many people who can be put to work before they start getting in people’s way or risk getting hurt. We had 248 sales people calling wanting to come to work, begging to help with the clean-up.”

It is rare that a company’s character is truly tested, says Sansone: “People often talk about the core values of a company, and the aftermath of Sandy was an opportunity to demonstrate that. Everybody gets knocked down, but you define yourself by how you get back up. We proved that this is indeed a very special place to work.”

Back to Business

On Friday, November 16th, Fedway’s warehouse was open for SPU’s (Salesmen’s Pick-Ups), a weekly occurrence when the sales force can collect emergency goods for customers. “This was literally 15 days from when we started the clean-up, and we had our first batch for salesmen to come and pick-up; it was a great way to test our system and to get back up and running,” says Barnett. “We told the salespeople you can put in orders, we’re going to pick them and pack them overnight. Instead of putting it on trucks, we put it on the floor. I think we took 6,000 cases and we laid it out by company and by salesperson because we needed to test the conveyers, the loaders, the sorters.”

Sunday was the first day of truck deliveries—one day ahead of Leventhal’s ambitious goal. It was far from a cake walk. “We had conveyor issues, electrical issues, mechanical issues,” describes Barnett. “Every breakdown we fixed at night and each day things got a little better and by mid-December we were in full service. We started the first two weeks by selling only 300 products, so we were picking from areas in the warehouse close to the main line. We slowly expanded outward until we were picking from farther and farther away in the warehouse and now we’re shipping all 15,000 SKUs.” Concentrating first on making the highest volume cases available for order, Fedway eventually added back bottle service—the ability for bars and restaurants to order single bottles of anything in inventory—10 days after resuming business.

“I will never forget my first order of replacement inventory just days after the storm,” says Weinerman. “Without power or computers, I had to hand-write an order request for tens of thousands of cases for our purchasing agent who had to call it in with their cell phone. We rely so heavily on computers and software programs now but you never forget how we used to do it—pad and pencil.”

Fedway lost all 100 of its trucks, but quickly arranged to buy 21 trucks from Southern Wine & Spirits and rented 80 more vehicles until the new trucks could arrive.

 Friends in Need are Friends Indeed

 One of Barnett’s most meaningful take-away’s from the experience was the crucial role of partnerships: “Our customer base was truly unbelievable—so supportive and concerned. Many of them wanted to come in and help with the clean-up; same with our suppliers. Without our partners we would not be here today.” Longa fielded countless calls from Fedway’s suppliers: “We had suppliers calling us and asking when they could come and help. I had to turn them away, so they sent food and did whatever they could. The way people pulled together was unbelievable.”

Vendors also rallied around, Sansone describes:  “From the fleet company who increased and advanced our truck order in the queue, to the warehouse equipment company who immediately brought in 34 fork lifts and sourced hard-to-find order pickers, to Cisco, our communications provider, who dedicated their time to us almost exclusively to recreate and reprogram our two destroyed main switches—we have such a supportive group of core vendors.”

Every piece of equipment needed to be replaced and tested before Fedway could become fully operational again, from sorting stations to conveyor belts.

 

 The Road Ahead

While Fedway’s story is one of rebirth and new beginnings (particularly as they prepare to move into brand new offices in Basking Ridge in April 2013), it’s impossible to ignore that the New Jersey retailer landscape is permanently altered. “There are at least 200 accounts who are still out of business and might be out for good,” says McNulty. “Take Jenkins, one of our biggest on-premise accounts in the state. Though they are primarily a summer account, they still get 2,000 people on Friday and Saturday nights. They aren’t even going to open until March, and their other restaurant, Spicy’s in Seaside Heights, will likely not open again, so yes, it changes the economics of our business.”

Chairman & CEO Richard Leventhal addresses the Fedway sales team days after the storm.

Fedway does business with virtually every licensee in the state of New Jersey—the sales force has very close relationships with customers. “Every account that closes is meaningful and personal for us,” says Barnett. “If there are things we can do to help them get back in business, we will do it. We’re just a subset of what New Jersey and the entire Northeast has gone through. People’s lives will never be the same. That’s a human story.”

 

Stronger and Better

It’s a point of pride at Fedway that the company has posted growth every year for the last 34 consecutive years. Thanks to Sandy, 2012 will be the year with an asterisk by it—there was just too much business lost at the most critical time of the year, and Fedway’s business fell behind. Yet no one seems to dwell on that—there was simply too much other growth to be proud of. “Crisis can bring out the best in people. In our case, crisis created a company that is much better, much stronger going forward,” says Barnett.

“I look at this as the perfect storm from both sides,” says Sansone. “Sandy hit at the worst possible time, but the fierce alignment of character, loyalty and core values that our company demonstrated during our recovery was equally powerful.” 


Comments

  1. Liquor Industry News 1-25-13 « Franklin Liquors
    January 25th, 2013 @ 11:46 am
  2. debbie lane
    January 25th, 2013 @ 12:31 pm

    Richard
    I can only say that you are truly amazing. I had heard that our warehouse was severely impacted and our trucks gone and i thought of you , across the street. I called Sean and he told me what happened. It kept things in perspective for me, that so many had it so much worse.
    I, too, wanted to rush out and help you, but, i had my hands full trying to keep things running here.
    It is a true testament to you and your team that you were able to survive this with such grace and come back ever stronger.
    I am so happy to see that you are back in action and I wish you only the best.
    Great work, great team, great family….
    Warmest regards
    Debbie

 
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