It’s that time of the year again when the spirits are high and preparations for the festival season have just begun. On the cards are new purchases for home improvements and decorations, clothing, gifting and all those cool gadgets that have been kept waiting until the best time of the year. Customers flock to their neighborhood stores and online marketplaces to find the best and latest deals. They generally end up buying more than originally planned, due to their impulsive urge to make the best purchases available during the festive sales.
For businesses, it’s a great opportunity to cash in on the seasonal spike in customer demand. However, every year it also poses a unique situation with equal challenges along with the opportunities. The real question for your business is – Is your Supply Chain geared-up for this Holiday Season? Fret not, since our 10-point check-list is here to help you evaluate and guide your business preparations for a smooth holiday season. So, let’s get started!
1. Internal Capacity Planning
This is one of the most crucial factors in the successful execution of the Manufacturing Plan for the Holiday Season. Internal Capacities that need to be considered are Production capacity, Raw Material & Finished Goods storage capacity, regular maintenance of equipment and capacities of all other resources that directly or indirectly contribute to the production of Finished Goods. This exercise becomes especially important in a constrained business capacity environment.
Supply Chain professionals need to ensure that all available capacities are judiciously allocated and utilized with bare minimum downtime. This calls for a meticulous review of the short-term manufacturing plan, back-order scenario, and business requirements. Regular meetings and open communication between the concerned stakeholders are required to ensure proactive planning and quick decisions to avoid any production downtime.
2. Supplier Raw Material Delivery Planning
For a successful execution of the finalized short-term Manufacturing Plan, it’s imperative that the Raw Material deliveries are aligned and scheduled accordingly. Here’s where an experienced Purchase Team plays a vital role in not only ensuring the planned deliveries of Raw Material but also coordinates with the Suppliers to ensure that all their resources are aligned.
Expert Purchasers stay one step ahead and keep a close watch on the manufacturing activities of their Suppliers. They have first-hand knowledge of their Raw Material availability, Production Plan and Distribution Plan. Close coordination with the Suppliers ensures that the Raw Material Delivery Plan is adhered to and preemptive steps can be taken in case of any exigencies or unforeseen circumstances.
3. Contract Manufacturing Planning
For businesses with over-booked internal capacities, external short-term contract options like – sub-assembly, labeling, packaging, etc. need to be considered. Though these options are last-minute firefighting at additional costs, they help in alleviating the already constrained environment and improving the customer order fill rate. The internal manufacturing resources can be utilized fully for core activities, whereas the allied and less value-added activities can be offloaded to contract manufacturers.
For businesses with planned contract manufacturing, the existing Contract Manufacturing Plan needs to be revisited and fine-tuned. An organization’s Contract Managers play an important role in coordination between contract manufacturing facilities, internal teams like Finance, Purchase, Manufacturing, and Sales. Successful Contract Managers ensure that the key deliverables are met within budget and required timelines.
4. Special Pack Considerations
During the festive season, special custom packaging is one of the primary attractions for customers and the hallmark of celebrations. However, special packs are designed exclusively for the festive season and require careful considerations due to the limited sale period. Special packs also require unique designing, manufacturing, handling, storage, and transportation. Hence, sufficient lead time needs to be provided to your supplier, manufacturing and distribution teams, so that their resources are tested and aligned to meet the specific requirements of handling special packs.
Any excess special pack finished goods or packaging will remain residual after the festival season and can lead to quick obsolescence. The marketing team needs to ensure meticulous planning to maintain the fine balance between serving customer orders and the risk of obsolescence.
5. Temporary Staffing
For many businesses, there is a huge seasonal spike in demand during the festive season which quickly tapers off towards the end of the season. This temporary gap in demand vs. capacity needs to be filled up by temporary staffing. Functions that typically require temporary staffing are material handling, sub-assembly, packaging, storage, transportation, and distribution. With most of these businesses running cover for additional manpower, it’s vital that your business plans for temporary staffing well in advance so that the desired skills and headcount are satisfactorily available. Temporary workers might also need some basic training and on-boarding which needs to be factored in while calculating the capacities.
6. Distribution Network and 3PL Management
Inflated and accelerated flux in inventories, truly tests the mettle of infrastructure and services of 3rd Party Logistics Service Providers and Distribution Network. It’s during this period that they need to operate on their peak capacities and efficiency. Any minor deviation in their expected standard performance in terms of handling, storage and transit times can lead to major deviations, in the end, customer service levels.
Logistics & Distribution Managers need the advance and detailed planning, to handle the increased inventory flow throughout the Distribution Network. They also need to factor in any adverse weather conditions which might lead to delay in shipments. Strong communication networks and real-time information sharing tools facilitate them to take timely decisions to avert any adverse impact to the Distribution Network.
7. Reverse Logistics and Replacements
Millennial shoppers prefer online purchasing over offline retail purchasing. Most retail businesses offer sales from both their online stores and physical stores. Hence their Supply Chains need to be flexible and responsive to handle customer order returns with prompt replacements. There are many proactive measures to ensure that product return rates are minimized – accurate product description, clear multi-view product photographs, accurate sizing guides, recommendations based on customer profile and past purchases, etc. However, it’s very difficult to totally eliminate product rates; hence, Supply Chains need to be experts in Reverse Logistics and timely replacements. This will help gain customer confidence and loyalty.
8. Proactive Demand Planning
Each festive season throws up many surprises like fast-changing trends and customer preferences. During this period, it’s important that your Demand Planning is done proactively with regular inputs from Sales & Marketing. Feedback from the Retailers and Field Sales Team regarding the performance of newly launched products, improvised products, and special packs need to be incorporated back in the Demand Planning process. More frequent review meetings need to be conducted by Demand Planning Team along with Sales & Marketing, Finance, Purchase, Manufacturing and Logistics.
Your Demand Planning Team also needs to ramp up the communication and coordination with top customers and top regions. This is to ensure that major trend movers are identified in advance and your Supply Chain resources are aligned to cater to the quickly changing Demand.
9. Agile Demand Sensing
Demand Sensing is the technology and capability for improving the accuracy of your short-term forecasts. Short term here can mean a few days or a few hours depending on how dynamic your Supply Chain is. If your Distribution system has access to real-time inventory movement reporting and POS data, you can successfully implement an agile Demand Sensing process. A properly implemented Demand Sensing process can help reduce forecast error by 50 percent and can improve the inventory placement accuracy by 20 percent.
This can be a real competitive advantage for improving customer service levels during the festive season sales. Imagine having a crystal ball in which you can gaze into the near future actual demand – would be really wonderful, wouldn’t it!? Well, a properly implemented Demand Sensing process is the crystal ball you always wanted for your business.
10. Holiday Season-specific Inventories
While we have gone through many factors for a successful holiday season, it’s important not to lose sight of the festive season-specific inventories. These specific inventories include – Raw Material, Sub-assemblies, WIP, Finished Goods, Labeling, Packaging, and Promotional Material. In the Supply Chain rush of the holiday season, a close watch on these specific inventories will help ensure that you don’t end up with obsolete stock.
One of the methods to keep a close watch on these inventories is to properly define and monitor the stocking levels – min, max, re-order level and re-order quantity. Apart from your own inventory, also keep a watch on your supplier’s inventory.
Parting Thoughts & Greetings!
We hope our 10-point checklist is helpful in evaluating and adjusting your Supply Chain Resources for a successful holiday sales season. While each business is unique and different from others, these tried and tested fundamental aspects will either be a refresher for your experienced team or provide a new perspective to your existing planning. Either way, it’s always a great feeling to be proactive and calling the shots during a dynamic season.
On this note, we wish you and your team Happy Thanksgiving & Happy Holidays!