Main logistics and supply chain issues during Christmas time

Author: Alexandra Lagorio

The holiday season has always been a peak period for logistics activities. The opportunity to exchange gifts (Christmas, Thanksgiving) and the immediately ensuing increase in discounts and rebates (Black Friday, Cyber Monday, winter sales) always lead to a rise in demand for goods. Not to mention the reverse logistics caused by returns and replacements as an aftermath of the festive period.

The subject of the difficulties encountered in logistics and supply chain management during the holidays period is of great interest and, every year, fill the pages of the national and international mainstream press. However, very few scientific articles on the subject exist, while there are many in the so-called “grey literature” (i.e., consultancy websites, reports, white papers).

From 2000 to 2019, holiday retails sales in the US rose from around 400 to 730 billion dollars (https://www.statista.com/statistics/243439/holiday-retail-sales-in-the-united-states/). The trend would appear to be growing, despite the pandemic (https://www.forbes.com/sites/joanverdon/2020/10/28/adobe-predicts-record-holiday-season-for-online-sales-expects-33-growth/?sh=64e9065230b9). The creation of these “peaks” dramatically increases the complexity of logistical operations (both in warehouses and distribution) and not a few companies are facing challenging times during this period. But what is the primary logistical problem created by this Christmas peak demand?  Fulfilling customer orders quickly, correctly and efficiently. This problem can become very complicated as the volume of orders increases and given the time constraint: most customers want to receive their ordered products by Christmas.

Satisfying all customers according to these criteria and satisfying these constraints generates, in turn, other critical issues that usually only the largest players manage to solve without loosing money, customers and image. In particular, the main problems that may arise are:

– The need to estimate the season’s demand both well in advance and accurately.

– The need to manage orders from multiple sales channels (i.e. shops, e-commerce, online platforms)

– The presence of long lead-times due to the saturation of production and distribution centres by the increase in demand

– The need to plan well in advance inventory and warehouse capacity to face huge volumes

– The need to have visibility on both inventory levels and shipment status.

As mentioned above, these are not new problems in logistics, but what makes the holiday period particularly critical is the simultaneous presence of these elements. Consequently, to cope with these issues, management strategies and technologies are increasingly used in supply chain management that can be particularly useful in a very critical context.

Among the many technological solutions possible, the most useful are:

– Data analysis strategies to collect data and build databases containing time series of the orders received in the same period the previous years, so that accurate demand forecasting strategies can be applied.

– The implementation of a transportation management system (TMS) that can be integrated with warehouse management systems (WMS) or enterprise resource planning (ERP) software.

– Effective tracking systems based on barcodes, RFID, beacons, which in turn can be integrated with the TMS or more advanced Internet of Things (IoT) systems to ensure full visibility of the supply chain and traceability of shipments.

But as mentioned above, technology alone is not enough. Management strategies must also be implemented to limit the criticalities that can arise during the holidays. In particular:

– It is necessary to plan precisely the additional resources needed to meet the peak demand generated by the holiday period in terms of man-hours so that strategies such as hiring more seasonal manpower, working overtime or balancing shifts can be adopted.

– One of the most frequently adopted strategies, especially by small or craft enterprises, is to set a deadline for accepting orders that can be fulfilled by Christmas. In this way, the aim is to fully satisfy the demands of those customers who are most interested in buying (and therefore will not be late for their order) without the risk of not delivering by the deadline.

– Plan the activities of the festive period as a single process that starts in the run-up to the holidays and ends with the sales to clear stock. In this respect, I suggest the following fascinating article (https://www.relexsolutions.com/resources/managing-the-christmas-supply-chain/)

– Develop a partnership with a third-party logistics company so that you can easily decide on contracts, frequencies and targets for distribution in advance and have guaranteed booking of transport services.

And what we, as customers, can actually do to help reducing the challenges that all the companies along the supply chain, and logistic providers at most, face during the holidays period?

First, we could learn to buy presents along the year; when we see a product that would be a perfect gift for a beloved person, why waiting for Christmas time? A second strategy is buying purely online either experiences, better if shared, or gift cards/vouchers that the receiver can autonomously decide when to use. The third choice, always available when you run out of any idea, is to choose a contribution to a solidarity cause, such as Emergency,  Save the children, Médecins Sans Frontières and many others. In advanced economies, where we all seem to own too much, contributing to someone else’s wellbeing is by far the best gift one could get.