Ben Balfour, Business Operations Director at Advanced Supply Chain Group, shares top tips about how retailers can prepare their supply chains for a Black Friday and Christmas sales surge.
1) Don’t play the waiting game
There are numerous headlines about shipping delays and stock shortages, and growing concerns about getting goods to the UK in time to satisfy festive sales demand. With this in mind, it seems there’s little need to highlight the importance of early ordering this year – this isn’t the case.
Months and months of rising shipping costs are creating some optimism that the surge in transportation prices is nearing its peak. Some retailers are gambling on this expectation and delaying orders as they aim to capitalise on falling prices, which will help restore margins that have been seriously squeezed over the past 12-18 months.
Unfortunately, rising freight costs show little sign of slowing and playing a waiting game is futile. Retailers would be better placed focusing on ways of addressing margin dilution caused by surging shipping prices. This can be achieved through supply chain strategies that better optimise container space to ship more items per square foot or through utilising quieter ports.
2) Create contingencies
The resourcing challenges of peak sales periods are being intensified by existing skills shortages and Covid self-isolation measures. Supply chains must be agile enough to cope with unexpected gaps in workforces, which involves two levels of contingency planning. The first affects stock inventory management. Favoured just-in-time strategies need to be adapted to ensure products are still readily available, whilst avoiding costly stockpiling. Planning localised levels of stock on a short-term basis can go some way to achieving this, while more accurate inventory forecasting can optimise reordering to reduce replenishment timescales.
The second level of contingency planning involves personnel resourcing strategies. Reorganisation of workforces including adapting shift patterns, introducing training plans to promote upskilling, and recruiting ahead of demand curves can all create opportunity to quickly address labour shortages. The latter point is more challenging, as recruitment is increasingly competitive, and retailers should ask supply chain partners about their approaches to attracting new talent.
3) Scale up scenario planning
The most efficient and effective supply chains embrace uncertainty – something that’s turbocharged during planning for peak. Stocky inventory management data will be analysed to create multiple different models to ensure that spikes in demand can be effectively satisfied and expensive out-of-stock scenarios are avoided.
Scenario planning must be extended further to model for the unpredictability of full or part-closures of ports caused by Covid outbreaks, cross-border delays linked to Brexit reforms and the impacts of rising costs on margins and retail prices. Sales peaks such as Black Friday and the growing trend of pre-Christmas discounts are defined by low prices, which has a huge impact on consumer demand. Retailers need to be able to accurately determine how supply chain costs will influence their ability to remain competitive during flash discounting of retail selling prices, and how this will influence stock inventory forecasting and management.
4) Acid test accuracy
A fundamental starting point for peak-readiness is knowing that your existing supply chain management strategy is working properly. Retailers should interrogate the accuracy of stock inventory management and review levels of errors. Are the correct goods moving to the right places at the right time and at the right cost? What is driving consumer returns? How long does it take to process a returned item? How regularly are retailers achieving optimum selling prices?
All of these can seem complex questions but should be easy enough to answer with the right supply chain management data. We’ve built our own bespoke supply chain software – Vector – to achieve exactly this. It provides a control tower view of supply chains, bringing together stock information from various sales channels, sources of supply, multiple warehousing and fulfilment locations, and tracks freight status. This delivers constantly updating information that shows levels of accuracy. It means retailers can quickly evaluate how optimal performance is and identify how ready they are to service spikes in demand. Any improvements can be made before higher volumes of products are moved through supply chains in a short period.
5) Constantly crunch the data
This year’s peak will be truly omnichannel. Growth in ecommerce has been accelerated by Covid lockdowns – forming new digital shopping habits and swelling the number of online shoppers. At the same time, there’s a renewed appreciation for bricks and mortar shops, with people keen to get out and enjoy the socialisation of retail therapy and even more so after last year’s lack of traditional Christmas shopping.
Retailers need to ensure every channel is integrated into their supply chains as a stand-alone outlet. This must make a distinction between each of the channels, appreciating and understanding the differing functionality of each and how this impacts stock inventory management. Online marketplaces, for example, involve another vendor layer compared to an owned website store, whereas bricks and mortar retail may have a blend of traditional in-store sales and click and collect functionality.
An integrated supply chain will ensure all the channels effectively communicate with a central hub – the control tower view – to provide a stream of information that retailers can use to manage peak. Constantly crunching this data can inform quick and profitable decision making, such as the ability to move stock to the right location to satisfy peak demand being driven through a particular channel.
Ultimately, each of the five steps are informed by supply chain data. Ensuring this information is accurate and accessible will truly help retailers make timely decisions that efficiently and effectively prepare their supply chains for peak demand.