Santa Claus’ Supply Chain

Last week we looked at the leading logistics and supply chain issues that companies face during the Christmas period.

However, Christmas provides us with an incredible opportunity and a great example to let everyone out there (yes, children, parents, aunties and uncles included) understand the logistics problems: Santa’s supply chain!

Santa Claus faces the most significant logistical problems of all time, and there has been much debate over the years as to how he can meet such a great, global, time-concentrated demand with such restrictive constraints. All deliveries must be completed on the night of the 24th (although some have reported special situations where some deliveries are outsourced to St Nicholas, St Lucia and to the “Befana” during 5th January night). Rumours said that Jeff Bezos has been trying for years to copy Santa’s business model and management of deliveries, going so far as to try to snatch Rudolph the reindeer from his competitor. But these are just rumours.

From scdigest
Supply Chain Cartoon Caption Contest

Below are some of the typical logistical problems that Santa faces (we also tried to talk to Santa and his staff to get some more details):

  • Optimal warehouse management: as we all know, Santa has the central hub in Rovaniemi in Lapland. This choice is undoubted because Santa had to locate the central warehouse and toy production centre as close as possible to the workforce: Santa’s elves. Rumour has it that the warehouse occupies several floors underground and is fully automated following the implementation of some 4.0 technologies. The main problem is the saturation of the warehouse in the run-up to the night of the 24th. It seems that here, too, the preferred solution is a partnership with the company Befana 3PL, which reserves some of its warehouse slots for the storage of Santa’s goods.
  • Order planning: Order planning is perhaps the area that Santa has always paid the most attention to and invested the most in over the years. The elf in charge of the order office told us: “The system has been tried and tested over the years and there are very few improvements that can be made”. Santa has, in fact, for years opted for a highly sophisticated “delivery to order” system in which children start making wish lists months in advance, which are then transformed into letters of request, enveloped and sent to one of the many letter collection points. The leading national postal services and couriers have for years ensured that the mail is received in full and then sorted by the elves. I was told by a reliable source (my cousin Vanna) that this year the elves have also been collecting letters on request directly from the homes of children living in a lockdown area so that the orders can be received in full even during the pandemic. For some years now, the e-mail service has also been available. As mentioned in the previous article, planning is one of the best tools for getting through peak demand unscathed. For more details, please visit allthingssupplychain, which has been working on this issue for years.
  • Fleet management: Santa’s primary means of transport is a sleigh pulled by eight reindeers and Rudolph, who lights the way and takes care of risk management during transport. The sleigh is notoriously open and always travels with a full load, so the pack on board has to be carefully placed and secured. The number of trips that are made in a night is unknown. Rudolph the reindeer replies bitterly: “I’m sorry, I would like to be able to make these data public, especially to make them available for research, but we are afraid that it might be sensitive information for our competitors. We have seen several articles online with companies trying to figure out how they could perform the service in our place.”. Next time I will try to enter into a non-disclosure agreement with Rudolph to better understand the sledge’s load and the number of trips. I have reason to suspect that one of the articles Rudolph refers to is this one.
  • Vehicle Routing Problem: However, the main problem that Santa and his associates face is the problem of route planning. Santa has to define not only the number of trips necessary to deliver all the presents but also the optimal routes for each of these trips. Santa seems to find himself in the situation of having to solve several travel salesman problems (TSPs): “Given a list of cities and the distances between each pair of cities, what is the shortest possible route that visits each city exactly once and returns to the origin city?”. If you would like to try solving one of these TSPs for Christmas with your children or friends, a few years ago Professor Laura Albert reported one of them on her blog Punk Rock Operation Research.
Photo by Rocco Dipoppa on Unsplash

In conclusion, after a due thank you to Santa Claus, Rudolph the reindeer and their staff, we would like to say that, given the experience accumulated over the years and the high service level always guaranteed, Santa Claus’ logistics and supply chain organisation is definitely a best practice reference, essential to know for anyone working in this sector.

Albachiara and I are grateful to him for all the insights he has given us over the years.

Merry Christmas to all from Young SCholars!

Alexandra & Albachiara

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