Preparing Your Supply Chain for the 2015 Holidays

Stephen DeAngelis

February 26, 2015

You might have heard the term “Christmas Creep” as it applies to retailers who start prepping their stores with Christmas merchandise and holiday decorations well in advance of Thanksgiving. “Add to that,” writes Carrie Mantey, “the flurry of online holiday shopping and the bottleneck those items can cause logistically when competing with coast-to-coast gift-giving. That means retailers are preparing earlier and earlier for the onslaught of consumers, and to compete, so must you.” [“‘Tis the Season of Retail,” Supply & Demand Chain Executive, 3 December 2013] Before merchandise ever reaches those holiday shelves, a lot of pre-holiday preparation needs to take place. John J. Boucher, President & CEO of ModusLink, insists that if you haven’t already begun your preparations for the 2015 holiday season you’re already behind. [“Why You Should be Planning For the 2015 Holiday Season Now,” SupplyChainBrain, 9 February 2015] Consumers seem to be of two minds when it comes to holiday shopping. There are those who like to get their shopping done early and there are those who wait until the very last minute. Retailers have to be prepared for both kinds of shoppers.

The rise of omnichannel shopping has complicated holiday order fulfillment and logistics. Being prepared to deal with these complications is essential because the holiday season is important for profitability. “Depending on the industry,” reports Karolina Maziliauskaite, “companies might be making between 10 to 20% of their annual profit during this period. However, it simply cannot be done without the precision, preparedness and hard work of supply chain (SC) management professionals.” [“The Supply Chain Manager’s Christmas Wish List,” Inventory & Supply Chain Optimization, 8 December 2014] That’s why Boucher insists that holiday preparations need to begin right after the last holiday season ends.

“With consumers procrastinating less,” Boucher writes, “companies that want their products wrapped and ready for the holidays need to start earlier as well — even as early as 12 months ahead of time. In actuality, in a well-performing supply chain, when the consumer clicks buy, the product is already nearing the end of its journey. To do this successfully and not return an ‘out-of-stock’ message to consumer searches, a visible supply chain is necessary.” There are two logistic scenarios with which omnichannel retailers must deal. First, as Boucher notes, they must order merchandise that is going to be sold in stores or online early enough to ensure that out-of-stock situations don’t occur. Second, with regards to merchandise sold online, retailers must also ensure that they don’t over-promise and under-deliver as happened during the 2013 holiday season. For more about how to deal with that, read my article entitled “Avoiding a 2014 Holiday Supply Chain Meltdown Requires Managing Customer Expectations.”

Here’s the rub. This early in the year, many retailers don’t yet know what items are going to be hot during the upcoming holiday season; this lack of certainty makes planning and preparation difficult. Manufacturers can assist by helping retailers understand what products are going to be available this year and which they think will be their big sellers. Manufacturers can also let retailers know what kind of promotional campaigns they intend on conducting and when they will be in effect. Boucher notes that manufacturers should already have “considered volume forecast and [should be] exploring market demand. They [should be] determining capacity at factories and working with vendors of long-lead-time materials to decide if they have product ready and can commit to the timeline.” On the retail side, Scott Humphrey, director of technical service and risk control for Travelers, writes, “Having the coveted gifts available is key to success for most small businesses during the busy holiday season. To help ensure that proper inventory is on the shelves or in the warehouse, small business owners need to carefully manage every part of their supply chain and create a contingency plan for when an interruption occurs. Part of the plan should include arrangements with secondary suppliers and options for customers should a product become unavailable.” [“Don’t Underestimate the Power of Preparedness This Holiday Season,” smallbizdaily, 28 November 2014] Of course, Humphrey’s advice is just as valid for large businesses as it is for small businesses. Boucher provides other actions manufacturers should take into consideration as they prepare for the 2015 holiday season and reading his article is well worth the few minutes it takes.

In addition to ordering merchandise, retailers need to decide how many seasonal workers they are likely to need, when they should be brought on, and how they are going to train them. Melanie Nuce, vice president of apparel and general merchandise at GS1 US, told Mantey, “Most retailers need a 15-day ramp-up when bringing on holiday help. Since it takes a couple of weeks to onboard someone and train them, you have to have a strategy to account for the slowdown in volume and operations to bring on those new team members. Have that plan in place well ahead of the time you actually see the increase in demand. Staffing is critical, so know when your busiest time is coming and have those people hired. For the holidays, it should be before Nov. 1.”

Both retailers and manufacturers need to have contingency plans in place for possible supply chain disruptions. Anything from storms, like Sandy in 2012, or port problems, like those on the West Coast in 2014, can put a crimp in holiday plans. To keep on top things, manufacturers and retailers need good supply chain visibility and well-exercised risk management plans. Last year, Doug Pasquale, senior vice president of supply chain solutions for Ingram Micro Mobility, shared with Apparel magazine his insights on supply-chain strategies ahead of the crucial holiday season. [“Is Your Supply Chain Ready for the Holidays?Apparel, 25 August 2014] Like Boucher, Pasquale insists that companies need to start planning for the next holiday season right after the last one ends. He states:

“First and foremost, have a dedicated holiday supply chain strategy put in place at least six months before the holidays. It’s always a good idea to begin planning immediately following the previous year’s season and engage manufacturers and logistics partners as soon as possible. Second, embrace the idea of using your supply chain as a competitive differentiator. A fine-tuned supply chain can be the holiday hero for any retailer as it allows for easier adaptation to volatile swings in demand and faster, guaranteed product delivery to reduce stock-outs. Finally, don’t cut corners with the returns process. Not only will this improve customer experiences and, ultimately, customer satisfaction and loyalty, but a well-designed returns process can also better support the bottom line.”

Pasquale also had a few things to say about supply chain risk management.

“There will always be situations that arise causing disruptions in a supply chain — you cannot plan for every possible scenario. I am a big advocate for sophisticated demand forecasting and planning, but retailers should also bear in mind they don’t have a crystal ball. Big data and analytics tools to help with data visualization and inventory management can help to solve some of this guesswork, but I would place equal weight on running an adaptable supply chain strategy. First build a foundation that is flexible and then layer on predictive analytics on top of that in order to prepare for the ideal situations, but then have your safety net in place should something go awry and you need a Plan B quickly.”

Mantey concludes, “The earlier you begin to plan your holiday sales season, the smoother it generally goes.” At the very least, Nuce told Mantey, “you should start about six to eight months out from the holiday season from a supply chain planning perspective.” Christmas Creep has resulted in the holiday season starting right after Halloween which means that holiday supply chain planning should probably start no later than March. Happy holidays!