Holiday Supply Chain Preparations: a Year-round Endeavor
Estimated reading time: 4 minutes
Like that neighbor who leaves his or her holiday lights up year-round, it’s never too early to start preparing your supply chain for the biggest shipping season of the year—the winter holiday season. With less than five months until Christmas, retailers and manufacturers all over the world are planning ahead. Below, we’re offering a glimpse into what it takes to ensure retail shelves are stocked in time for holiday shoppers.
Holiday Planning from a Retailer’s Perspective
Retailers plan their budgets for the busy holiday season up to a year in advance. Once budgets are established, retail buyers attend tradeshows, analyze product trends, and track consumer behavior to determine the types and quantities of products they need. Then, purchase orders are submitted to sales reps at manufacturers at least six months ahead of when products are needed in stores. This advanced planning improves sales, reduces the risk of running out of high-demand stock, and ensures customers are satisfied.
At the chain or store level, retail planners and operations personnel also develop distribution and allocation strategies well in advance. This includes planning for in-store stocking levels, promotions, off-site warehousing needs, transportation (whether routed by their vendors or by the retailers themselves), marketing displays, shelf configurations, and more (Monster).
What Does That Mean for a Manufacturer?
To handle the product demand increase that comes with the holiday season, demand planners must analyze volume forecasts and market trends, determine seasonal workforce needs at factories, and make arrangements with inbound suppliers up to a year in advance. The more complex the product—electronics for example, which have several parts from multiple origins—the more time a manufacturer should allow for this stage in the process. Advanced planning tools can help companies put together a “just-in-time” production schedule, which allows them to fluidly adapt to market fluctuations, recalls, and last-minute product changes (Supply Chain Brain).
Three to six months before the holiday rush, which typically runs from before Halloween until New Year’s Day, it’s time for the manufacturer to start assembling products, mapping out product specs to determine capacity needs, and working with their transportation partners on reliable and cost-effective logistics solutions. Between July and November, finished goods begin shipping outbound to retail distribution centers throughout North America. At this stage, visibility and communication are paramount. A manufacturer must constantly be in communication with suppliers, transportation partners, distributors, and retailers to ensure complete visibility into product demand, truck/warehouse capacity, and potential supply chain disruptions. A solid contingency plan in case of weather issues, surges in product demand, port closures, factory strikes, etc. is also extremely important.
What’s at Risk?
It takes more than reindeer to move products through the supply chain and into consumers’ stockings. Without meticulous planning for the holiday season, retailers are at risk of either carrying too much inventory or running out of stock. Carrying too much leads to decreased cash flow and excess warehousing costs, while not carrying enough results in lost sales and dissatisfied customers.
Manufacturers are at risk of getting hit with hefty fines or jeopardizing retail relationships if they aren’t able to produce and deliver products in time for retailers’ holiday schedules, which makes timely and reliable transportation extremely important. Late deliveries can result in chargebacks that range from 5% of the shipment’s total value to the cost of the entire truckload. In these more stringent cases, the manufacturer may lose $250,000 or more. By having a solid plan mapped out with your logistics providers several months in advance, manufacturers can reduce the total cost of transportation and keep customers happy.
Transportation Solutions for Holiday Shipping
A fine-tuned supply chain is a competitive differentiator for both retailers and manufacturers during the holiday season. The right mix of transportation partners will provide innovative solutions to help you navigate the volatile seasonality of the transportation market, ensure on-time delivery into your customers, and avoid stock-outs. Below are some solutions to consider.
- Just-in-Time Logistics. As mentioned above, a just-in-time (JIT) approach to manufacturing and logistics is a way to keep inventories lean while fluidly adapting to market fluctuations during the holiday season.
- Drop Trailer Programming. Drop trailers make pick-up and delivery more efficient for both retailers and manufacturers. Implementing drop trailer solutions can help shippers load trailers at their own convenience, avoid costly accessorial charges, and achieve higher on-time percentages with their customers.
- Direct Store Delivery. For fast-turning, high-demand products, Direct Store Delivery (DSD) can save time and money. Because the product bypasses a retail distribution center and travels directly to the store, operating expenses are reduced, cycle times are improved, and inventories are managed more effectively.
- Project Freight. The right broker can provide temporary, reliable capacity for a static price without long-term commitments (on either all shipments or on overflow freight) to help keep high costs at bay during a surge season.
During the holiday surge, it’s imperative to keep the right mix of partners in your transportation mix. Having between two and five sophisticated brokers in your network yields optimal results when capacity is tight. The right brokers can supplement your asset-based partners by providing flexible capacity and ensuring sufficient coverage through peak times.
Check out our tips for choosing your core 3PLs here, and contact us to learn more about our seasonal capacity services and solutions.