The winter holidays often prove to be a trying yet lucrative period for companies in the retail industry, as well as their partners and vendors. One weak link in the supply chain can bring down an executive’s carefully laid plans like a house of cards, rendering items out of stock and on back order at the most inconvenient time for consumers. Conversely, executives who are overly optimistic about demand may find themselves exiting the holiday season with surplus stock and disappointing revenues.
A recent survey conducted by Riverwood Solutions revealed 600 supply chain executives’ holiday season pain points, which included:
- A dearth of vendor communication and visibility (38 percent)
- Overestimation of an item’s popularity (14 percent)
- Underestimation of an item’s popularity (also 14 percent)
- Failure to prepare early enough (10 percent)
- Failure to process orders quickly enough (10 percent)
Bracing for the rush
For many executives, preparations for 2015’s end-of-year shopping frenzy have been a long time in the making.
“Supply chains operate best 12 months out. If the 2015 holiday rush isn’t top of mind, you’re already behind,” asserted John J. Boucher, president and CEO of ModusLink, in an article he wrote for Supply Chain Brain back in February.
“The average consumer is projected to spend $805.65 celebrating the holidays this year.”
As time went on, a clearer picture of consumers’ projected holiday spending habits developed, further informing executives’ seasonal strategies. By October, when the National Retail Federation released its annual Holiday Consumer Spending Survey, it was clear that the forecast for the last quarter of 2015 was looking very promising indeed. According to the survey, consumers were set to spend an average of $805.65 on decorations, food, gifts and other items as part of their Christmas-, Hanukkah- and Kwanzaa-related festivities. An all-time high in the 14-year history of the survey, 2015’s spending average edged out the previous year’s by $4.20.
“We expect consumers will tackle their holiday shopping lists with a healthy dose of optimism, tempered by a hint of caution as they look for ways to find the perfect, practical gift,” said Matthew Shay, president and CEO of the NRF, in a statement. “We continue to see positive momentum in retail sales growth, giving us reason to believe consumers will show up this holiday season as they look to take advantage of all of retailers’ promotional offerings. In an effort to attract all shoppers, from the extremely price-sensitive to the online millennial, retailers will be offering exclusive incentives, low prices, price-matching, top toys and everyone’s favorite – free shipping and ‘buy online, pick up in store’ offers.”
Laying the groundwork
Of course, retailers shouldn’t offer free shipping without first putting the supply chain framework in place to deal with the rise in purchases that complimentary delivery brings, and the same can be said of the other perks Shay mentioned. For instance, low prices shouldn’t be so low that the company can’t make a profit, and a “buy online, pick up in store” model requires extensive omnichannel coordination behind the scenes in order for gifts purchased online to actually be waiting for consumers at a pre-appointed time and particular brick-and-mortar location.
With e-commerce booming and customer expectations high, an “evolve or die” approach has emerged as the only realistic way forward for not only retailers, but also the carriers, shippers and third-party logistics providers involved in getting products from the warehouse to the shelf, and ultimately in the hands of the consumer. Writing for Logistics Management, contributor Jeff Berman listed a range of preparatory approaches that ran the gamut from simple tweaks to more complicated endeavors. Berman highlighted what he called “basic blocking and tackling” in the form of distribution, fulfillment and inventory management strategy changes, as well as complex undertakings such as establishing regional distribution centers to ensure shoppers in certain areas don’t miss out.
In his Supply Chain Brain piece, Boucher added that disaster recovery plans are another important component of weathering the holiday shopping rush. At this time of year, some areas of the world are at risk of flooding, others of tropical storms, others of blizzards. Moreover, there are always acts of God such as earthquakes and tsunamis to worry about, although some companies may be more at risk than others in this regard depending on the nature of their global operations.
“The principles behind delivering a positive seasonal shopping experience for customers haven’t changed.”
Going back to basics
Given the increasing popularity of shopping online – even for last-minute gifts – as well as buyers’ expanding reliance on the practice of mixing and matching delivery channels, it could be said that executives have more on their plates than ever in terms of making sure the holiday shopping season goes as smoothly and profitably as possible. However, as Berman asserted, the core principles behind delivering a positive seasonal shopping experience for customers remain the same, even though many of the methods are different.
“While things are constantly changing in this new era of e-commerce and omni-channel supply chains a few tried and true things remain consistent: every peak demand situation requires planning and people first, with everything else seeming to fall in place behind those two things to ensure a successful holiday shopping season,” he wrote.
However, mixed signals and crossed wires do happen, which is why the best executives ensure a strong customer service presence in the run-up to and aftermath of the holidays. After all, a package may arrive in the right place at the right time, but if call center staff are busy, representatives on the shop floor are uninformed or the company’s return and exchange policies are unnecessarily complicated, the consumer will still walk away having had an overall negative experience.
The jury’s still out on whether this holiday shopping season will live up to analysts’ great expectations, but while the number-crunching continues, executives can take a look at how their supply chains held up this year and zero in on any learning or teaching moments. The new year will soon be in full swing and it will be time to start planning for the 2016 holiday shopping season sooner rather than later.
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