It will surprise no one to learn that the time of year with the biggest impact on supply chains is the year-end holiday season. According to Statista, buying activity during that period surpasses all other seasonal events combined. The National Retail Federation (NRF) reports that retailers rely on the holidays to generate upwards of 30 percent of annual sales.
For many businesses, planning for seasonal demand can make or break their profitability for the year. From an inventory planner’s perspective, any recurring spike in demand represents a seasonal shift. Examples include back-to-school, Mother’s Day, Halloween, and actual seasonal changes during spring, summer, fall, and winter. Even healthcare providers prepare months in advance to have the right supplies in time for the dreaded flu season.
Within the holiday season, Christmas gift-giving generates billions in revenues. According to a survey from NRF and Prosper Insights & Analytics, consumers plan to spend an average of $1,047.83 during the 2019 holiday season, a 4% increase over 2018. Analysts believe this is a result of consumers being in good financial shape, and younger consumers helping to drive this year’s spending increase. However, the study was published in October, 2019, far too late for most businesses to react to the information.
Making sure the right products are in the right place at the right time means new levels of complexity when it comes to planning for huge demand spikes during the holiday season. Demand planning starts early, as retail orders for products are submitted months in advance. Manufacturers and wholesalers engage in requirements planning for goods that will ultimately be delivered within a relatively short timeframe.
Once manufactured, the right amount of product must be delivered to the right place. Most retailers restrict the delivery of products to a short window, by specifying an earliest receipt date as well as a cancel-by date. With online sales reaching new heights, the question of where to deliver the goods becomes paramount.
So what’s the “right” amount of product? And which product lines are likely to be most successful? Looking at historical data is important, but planners must examine other factors as well. There are many tools available to analyze structured data, but what about the goldmine of information contained in unstructured data gathered via social media? What are consumers sharing via Twitter and Facebook? Those platforms contain valuable insights on consumers’ appetite for various products. They’re where artificial intelligence tools can contribute to a logistics plan.
Not only do retailers worry about how much stock to maintain in their brick-and-mortar stores, they must also concern themselves with physically delivering product to online shoppers quickly and at the lowest possible cost. Shoppers who buy across many channels are bigger spenders on average ($326) compared with online-only shoppers ($233) or in-store only shoppers ($248). Modern omnichannel strategies allow retailers to provide a continuous user experience across any device or location. In fact, this has become the new gold standard, with intelligent routing able to determine the fastest and cheapest method of shipment to meet consumer expectations. Here again, AI tools can mine unstructured data to provide real competitive advantage.
Despite the intensity the holidays bring to businesses of all kinds, modern supply-chain practices, from demand planning to distribution and last-mile logistics, have evolved to enable the movement of billions of dollars in goods right to the consumer’s front door — and into those Christmas stockings.
Bill Denbigh is Director of Product Marketing at Tecsys.
