Santa & Rudolph Highlight Importance of Supply Chain Visibility

Stephen DeAngelis

December 8, 2017

Santa Claus is master of the overnight supply chain. His prowess is feted in verse, story, and song. One of those songs — Rudolph the Red-nosed Reindeer — highlights the importance of supply chain visibility. I’ll grant that Rudolph’s contribution to the visibility challenge has limited application, but it’s a good segue to a deeper discussion of the subject. The first thing supply chain professionals need to understand is that the holiday supply chain barely gets any rest. John J. Boucher, President & CEO of ModusLink explains, “With consumers procrastinating less, 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.”[1]

 

The Holidays and Supply Chain Visibility

 

Bashar Nejdawi, Executive Vice President of Ingram Micro, agrees with Boucher that holiday supply chain planning needs to begin well in advance of the holidays. “The best way to prepare for the holiday season is to have a definitive fourth quarter plan established,” he writes. “Some companies get caught waiting until late September before investing the needed time and resources and that’s far too late. Preparations for peak season should be thought through far in advance of the third quarter and well into implementation by the end of September. This time frame might even take longer, as products with special packaging may require more preparation.”[2] The Scottish poet Robert Burns knew, however, “The best laid schemes o’ mice an’ men Gang aft a-gley (i.e., The best-laid plans of mice and men often go awry). Nejdawi insists supply chain visibility can help companies prevent or mitigate plans going awry. He explains:

“Without real-time visibility, a company can carry too much inventory, which leads to decreased cash flow and increased warehousing costs. Worse yet, products could go out of stock at the peak of the holiday season, leading to sales loss and unhappy consumers. Having the ability to see inside the supply chain, including work-in-progress inventories, increases lead time and allows companies to respond to unexpected demand shifts. This can mean pulling surplus stock from a distribution center to quickly feed hungry store shelves.”

A couple of years ago, the staff at Material Handling & Logistics (MH&L) reported, “38% of supply chain executives said they lack proper visibility and communication with their vendors.”[3] That can be a real problem for the holiday supply chain. Those conclusions were drawn from a survey conducted by Riverwood Solutions. The survey also found, “Fourteen percent say they often overestimate how popular an item will be and end up with too much and an equal number say they underestimate how popular an item will be a run out. … Ten percent admit that they don’t prep for the holiday rush early enough, and 10% say they fail to process orders quickly enough.”

 

With arrival of the Digital Age, Alexander Saric, Global Vice President of Business Network Marketing at SAP, believes companies have fewer excuses for why they have poor supply chain visibility. “In the Digital Economy,” he writes, “this risk/anxiety can now be mitigated to a great extent. With cloud-based solutions and business networks, companies can easily connect to their suppliers and collaborate digitally to enable visibility through the entire procure-to-pay process. For direct materials, supply chain collaboration can include electronic notification of order confirmations, ship notices, and much more. This not only reduces risk and anxiety, it also allows optimization of inventory and working capital and improved buyer-supplier relationships. A win-win indeed.”[4] Add the consumer into the mix, and it becomes a win-win-win situation.

 

Ensuring a Holly, Jolly Holiday Season

 

“For the supply chain industry,” explains Rebecca Radford, “a perfect Christmas consists of precise planning and effort to guarantee everything goes to plan without any disastrous mistakes. Without this, people may not get their presents delivered on time or may be stuck in the airport waiting to get home, or go to the store to find its run out of hams. All of these things highly depend on the supply chain and how it operates throughout all processes.”[5] She then asks, “So, what does the supply chain do in order to ensure a holly, jolly Christmas?” Good question. Below are three areas needing to be perfected.

 

Planning

As noted above, planning for next holiday season should begin on the heels of the season just past. Radford notes, “Demand planning is fundamental to supply chain management. Just like parents planning presents for their children, supply chain workers have to vigorously plan as well. The products which will be produced in time for the holiday season depends heavily on historical data covering consumer demand and successful products. This is how supply chain managers determine which products to focus on. This planning starts in January and carries on throughout the year, analyzing new trends that appear.” His last point is important. It’s really hard to predict what is going to be a hot product months in advance. “Without the right amount of planning,” Radford explains, “retailers could see their shelves fully stocked with unwanted toys or completely empty from underestimating demand.” Real-time analytics can help manufacturers and retailers measure consumer buying patterns and sentiments and dramatically improve demand planning. “The truth is,” writes Eric Lamphier, senior director of product management with Manhattan Associates, “excellent peak season execution requires year-round focus — if retailers failed to dive back into planning shortly after the 2016 holiday season wrapped up, they may find themselves struggling to keep up with the competition.”[6]

 

Visibility

I’ve already covered why supply chain visibility is critical for successful holiday supply chain operations. Most of the discussion, however, was focused on the business-facing side of the supply chain. The consumer-facing side of the supply chain is just as important. If customers aren’t happy, there will be no holly, jolly holiday. Rich Weissman (@rich_weissman), past president of the Institute for Supply Management, explains, “In light of the increased importance of e-commerce fulfillment, some retailers are investing in visibility solutions to improve their delivery capacity.”[7]

 

Execution

Keeping the customer happy generally comes down to fulfillment. William Salter, CEO and president of Paragon Software Systems, asserts, “Customer experience needs to sit at the forefront of any last-mile delivery strategy.”[8] He suggests five things to consider in order to improve your fulfillment processes. First, use historical data to plan ahead. Second, make sure you have the right resources in place. Third, only promise what can be achieved. Fourth, offer customers alternatives that remove the pressure on your delivery service. And, finally, Get your returns process in shape. Salter concludes:

“Supply chain and technology innovations are driving the introduction and wider adoption of new services, with greater visibility and control, enabling later cut-off points and timed slots to be provided cost-efficiently. Order fulfillment systems are also allowing retailers to meet consumer demand for alternative delivery locations by bringing together home delivery requirements with click-and-collect, locker and parcel options.”

Summary

 

For most manufacturers and retailers, the holiday season remains important. The last thing they want is a disruption caused by foggy conditions. Take a tip from Santa and Rudolph and let improved visibility light the way to a happier holiday shopping season.

 

Footnotes
[1] John J. Boucher, “Why You Should be Planning For the 2015 Holiday Season Now,” SupplyChainBrain, 9 February 2015.
[2] Bashar Nejdawi, “The Well-Oiled Holiday Supply Chain,” Wireless Week, 4 December 2014.
[3] Staff, “Sleigh Bells and Supply Chains Lack of Visibility During the Holidays,” Material Handling & Logistics, 19 November 2015.
[4] Alexander Saric, “4 Supply Chain Lessons From Rudolph The Red-Nosed Reindeer,” D!gitalist, 18 December 2015.
[5] Rebecca Radford, “Ensuring a Holly, Jolly Supply Chain Christmas,” All Things Supply Chain, 12 December 2016.
[6] Eric Lamphier, “Plan, Prepare and Prosper: How to Master the Busy Holiday Season,” Material Handling & Logistics, 29 September 2017.
[7] Rich Weissman, “Why shipment visibility is critical for retailers, carriers and customers,” Supply Chain Dive, 13 December 2016.
[8] William Salter, “Is Your Fulfillment Operation Ready for the Holidays?Material Handling & Logistics, 13 October 2017.