Now get ready for the holiday: make it boring (from a supply chain perspective)!

The holiday season has recently come to an end. And the next holiday season seems far away. But in the ecommerce fulfillment space, it’s there in no time. Now it’s time to start implementing the improvements and strategies you need to make the upcoming holiday season more successful than last year.

After going through the ups, downs and stress of several retail holidays myself, I passed this direction on to my team one January. For the upcoming holiday our theme was that we would have a boring holiday season… from a supply chain perspective.

By BORING, I didn’t mean that we would experience a lack of growth or a decline in sales. I hoped and expected that the company would experience unprecedented double-digit growth. And we would deliver a great customer experience.

but through BORING from a supply chain perspective, I meant that we would do all the necessary planning. And we would make any necessary changes to ensure the supply chain is fully prepared for the overwhelming demands and pressures that come during the heat of the holiday season. As such, in the midst of the holiday season, the supply chain was able to respond efficiently to anything that came our way.

If we had planned and executed properly, we would have been able to handle unprecedented revenue and volume growth without breaking a sweat. We would be able to handle the inevitable growth that always outstrips the already aggressive plans. And during Black Friday/Cyber ​​Monday we would be able to respond immediately to merch promotions and amazingly high volumes.

To create one BORING Supply Chain Christmas time we had to start planning right after the last holiday. These are many of the key initiatives we have taken:

Perform a HOLIDAY post mortem

Taking the time to meet with your retailers, merchandisers, buyers, distribution center teams, human resources, finance and leadership of your e-commerce channel is critical. The autopsy should be a forum for everyone to share their experiences from the previous Christmas season. What worked and what didn’t, or not as well as it should have worked? This should form the basis for defining what needs to be fixed. Implement the necessary changes to ensure that problems do not recur.

Above all, listen to your customers’ feedback. In e-commerce, a disappointed customer takes their business elsewhere. And they will tell others not to trust you with their business. Focus on your most important cost, quality, and delivery metrics. Raise the bar for your future performance.

Plan beyond your growth goals

E-commerce is one of the fastest growing channels worldwide. Double-digit growth is the order of the day. Every year there are plans for huge year-to-year growth. And there is skepticism as to whether that growth will materialize. But without exception, we still see demand higher than these high-flying growth plans. The message is: Set your capacity and throughput plans even HIGHER than your official business plan. By designing a highly flexible and variable supply chain, you can do it without adding additional costs.

Even more acutely, Black Friday/Cyber ​​Monday demand is exponentially higher than any other time of year. At least 30% of annual retail demand falls in the 4-5 week period between Black Friday and Christmas. Your distribution center management will ask you to smooth this need. The reality is that the supply chain needs to be designed to handle the demand from this holiday-and-action marriage.

Synchronization of dealer strategy

By January, your retailers will have or are about to complete product selection for the year-end holiday season. You know which products and categories performed well or poorly in the previous period. And they adjust their merchandising plans accordingly. There may be product categories that are discontinued or launched.

Whatever these changes, it’s important to maintain a close relationship with your dealer team. The supply chain team needs to know the number of skus planned and the expected volumes. You must understand the physical size of these SKUs, the promotional strategy, and the supplier’s sourcing, supply, and replenishment plan. This allows you to create the resource, capacity, and business process plans you need.

I have seen many examples where the distribution center was surprised at not being notified of a promotion. You have not been informed of the physical size or volume of a set of skus. Or they received planning figures that did not match the quantity of products ordered from the suppliers. This miscommunication affects the company’s ability to respond to customer demand, which will only hurt future growth.

Business process optimization in the distribution center

Post-mortem analysis helps identify areas where the distribution center process needs improvement. Catalysts will be the need to improve service levels, reduce delivery times, improve quality and reduce costs. In our previous eCommerce posts, we have discussed how to improve warehouse placement (Ecommerce Fulfillment First Principles (Part 1) – Optimizing Warehouse Locations) and how to improve process flow and speed (Ecommerce Fulfillment First Principles (Part 2) – Move the material to the people, not the other way around!).

You should run Lean Kaizen events and redesign your business processes to support the goals of improved service at lower costs and higher volumes. There are countless automated and semi-automated solutions available on the market to enable your improvements.

In addition, changes in your IT systems or your warehouse management system (WMS) may be required. These will all take time to change and you need to have them implemented and tested before the holidays start.

resource planning

In general, the biggest resource constraint you will experience during the holiday season is that of work. Keep in mind that most other retailers, distributors, and competitors want to hire dramatically large numbers of employees at the same time of year. Your ability to attract, hire, train, motivate and retain this new workforce among all these competing companies will likely be the key factor in whether or not you succeed.

Certainly, any work you can do to redesign your distribution center business processes to reduce your reliance on labor to support growth will increase your capacity and flexibility. Always remember the Theory of Constraints. You need to minimize, if not eliminate, the gates in your process.

Work with your HR team to ensure you have a people management strategy in place. Otherwise, trying to respond at the last minute when you’re in the middle of the holiday season and struggling to get the product shipped means higher costs, disappointed customers, and disappointed stakeholders.

You may have other capacity limitations. All of this needs to be addressed, tested and emphasized before the actual holiday season begins. And as you run these process flow simulations, make sure you stress test the various variables affecting your ability to fulfill customer orders.

Manage your logistics network

The transparency of the end-to-end supply chain is crucial!

With your suppliers, you need to know exactly when products will arrive at your receiving docks. Trailers parked and not received outside of your receiving docks mean that this product is not showing as inventory and is therefore not available for purchase by your customers.

You need to know the pick-up times of your shipping partners so that you can optimally plan your picking tasks in order to pick, pack and ship goods to all regions as quickly as possible.

And you want to show your customers where their orders are. If it’s a few days before Christmas and a customer is still waiting for their order, it’s much more reassuring for them to know when they’ll receive their product.

Learn from your competition

E-commerce customers want fast, error-free delivery at the lowest possible cost. You want to get a great customer experience. Even if you sell unique products online, there are still other ecommerce companies competing for a share of your customers’ wallets that do slightly better in terms of cost, quality, and delivery.

Customer surveys, market research, social media connections, and other forms of data collection are great sources to learn what others are doing in ecommerce fulfillment. You don’t necessarily need to be at the forefront of new industry skills, but you do need to have an excellent offering. Learn from your competition!

Consider your omnichannel fulfillment options

Depending on your circumstances, you may be with a retailer that has both physical stores and an online channel, or you may be with a retailer that only has an online channel. Regardless, there are several considerations for your ecommerce fulfillment service offering.

Even if you have your own distribution center, at some point your product demand may exceed that of your facility. There are many possibilities, some of them are:

  • Expand your existing operation. But if you can’t grow into contiguous space, partitioning your facilities leads to some sub-optimization.
  • outsourcing. Many logistics and distribution companies offer an e-commerce service, including Fulfillment by Amazon
  • Implement store to/from store functionality. If you have brick-and-mortar stores, there are pros and cons to allowing them to fulfill ecommerce orders directly from their locations.
  • Implement drop shipping with suppliers. You may find that either geographic proximity or physical product size makes it more cost-effective and customer-friendly to route orders to your suppliers to fulfill directly.

Implementing all of these strategies takes time, so NOW is the time to get ready for the 2017 holiday. During the busiest time of the year it is far more productive to have a well running operation handling the enormous volume of orders efficiently and effectively with as little stress as possible.

In short, it will be busy though BORING!

Originally published February 2, 2017.

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