Retail ‘spikes’ such as Black Friday can seriously affect supply chains – even those not directly involved. The appropriate supply chain and related systems can remove much of the risk, smooth the peaks and ensure continuity of service to your customers.
Black Friday, Manic Monday, Boomerang day – recent additions to the retail lexicon that seem designed to drive supply chains and their managers to distraction. Some players have actively promoted these phenomena; others have followed the herd with heavy promotion and deep discounting. However the spikes (and inevitable troughs) in demand also impact supply chains that have stayed away from the feeding frenzy as available transport, warehousing and other resources become increasingly scarce and stressed. Either way, deploying seamlessly integrated planning and scheduling, supply chain management and warehouse management linked to financials and business intelligence will give an edge to help you sail steadily through such turbulence.
Some definitions. Black Friday is a primarily US phenomenon, where pre-Christmas shoppers flock to the stores on the day after the Thanksgiving holiday – the stores are open, many workers take the extra day’s leave and it coincides with the last pay-check before Christmas. Manic (or Mega, or Cyber) Monday is the online equivalent three days later.
Inevitably, these US events crossed the Atlantic but in the more multi-channel minded UK there is less of a distinction between in-store and online peaks of activity.
From these peaks, other challenges follow. Not all of the sales increase at the end of November is ‘new’ – much is displaced and many retailers find early December significantly quieter than expected. On the other hand, there is the new and growing concept of ‘boomerang days’ – periods when returns peak.
Impacts of course vary across categories, but eCommerce researcher Experian and the UK’s e-retail association, IMRG estimate that Black Friday in the UK was worth £810 million online, the highest ever daily figure for online sales and 17% of ‘Christmas’ sales. But in consequence online sales in December were only up by 5% year on year, much lower than the 13% average growth across the year as a whole. Clearly, with little history and a volatile retail economy, predicting and managing future events is going to be tricky.
Of course, seasonal and event-related peaks and troughs are nothing new. One of the oldest established is in UK automotive sales, coinciding with the change of registration plate date code. Some trades have their own special days – in publishing in the UK, ‘Super Thursday’ (8 October in 2015) sees over 500 hardbacks released to the trade, only one or two of which will become the seasonal blockbusters. Many of the others will be remaindered at best, pulped at worst.
The common theme in all these instances is unpredictability of demand, especially at the line item level, and the decreasing ability of retailers and manufacturers to influence this. The book publishers can launch their tomes, but they have little or no influence on the content, or timing, of reviews that may promote sales. Each Christmas sees a ‘must have’ toy or game emerge, sometimes apparently from nowhere – a few years ago the Thunderbirds ‘Tracy Island’ was relaunched, not with any tie-in to a new film or anything, that came later, and triggered panic buying on, quite literally, a global scale.
And these events are not like the traditional January Sales, where retailers were in total control of how much and of what they were offering and, essentially, ‘when it’s gone it’s gone’. These are readily controllable events for a half competent retail and supply chain team. What we have now is massive concentration, in short time scales, on an unpredictable range of merchandise. Sales concentration may be triggered by discounting, promotion, and media coverage. However, which lines actually fly of the shelves is dictated by more nebulous considerations, often word of mouth – or should that be word of Twitter?
Just because you don’t promote Black Friday, offer deep discounts or do much business direct to consumer, it does not necessarily follow that you will remain immune.
You could be affected if you use transport companies, couriers or the Royal Mail; if you are served by a 3PL or through common user distribution centres; if your operations depend on temporary staff; if critical inputs come from firms who are also supplying volatile and high-pressure retailers; if your website shares servers with companies that may be overwhelmed; if there a chance that your containers are likely to be stacked up on a dockside, or bumped off a ship, to make way for this year’s ‘must have’ toy.
Whether you are directly implicated or not, the proper selection and use of supply chain related systems and solutions can increase your resistance.
Your systems, extending as far as possible from the retail channel back to the supplier or manufacturer, and especially including those critical third parties in logistics and distribution, need to excel in the following areas:
Visibility and granularity. You need to be able to see the current situation, the position and availability of goods and the emerging sales patterns in something like real time. And you need this line by line, store by store, channel by channel, region by region. ‘Sales up 10%’ doesn’t cut it – you need to know sales of what, where and when?
Speed of revision and execution. If facts change, the plan probably has to change. These are by definition short duration events, at most days, possibly just hours. It must be possible to remodel the situation and thus change orders, allocations, routeings, in minutes, not days. Planning and scheduling systems need to be working ‘live’.
Finite capacity. In these situations above all, there is no room for ‘rough cut’ or infinite capacity planning. Resources from transport and drivers to warehouse shelf space and operatives, to the availability of packaging materials or simply the number of available loading bays, are very definitely not infinite.
Flexibility. To cope with these extreme conditions, it may be desirable, or imperative, to change modes of operation. That might mean different pick routines in the warehouse for example; it might mean that ‘milk run’ replenishment isn’t practicable (or alternatively, it might be the only solution). Stocks that are normally managed through separate channels or geographies may need to be unified for the duration. Your systems must be flexible enough to cope with these variations.
Clarity of reporting. In this fast-moving situation, new data is probably coming to hand at the least convenient moment. It would of course be super if all your channels were feeding minute-by-minute EPOS data, but independent retailers are more likely to give end of day reports at best, and even your own website may not be much better. What you need is clear, simple (in the sense that they only display the information needed, albeit there is the ability to drill up or down if you have to) probably largely graphical, reports that enable, for example, warehouse managers to make cogent decisions at 3am – not the best time to be interpreting a spreadsheet.
Returns Management. Returns across retail now run at unprecedented levels – and even more so around Boomerang days. It is imperative to get these goods back into stock in time for what is left of Christmas – such is the level of discounting seen recently around Black Friday, there may be precious little margin left for the traditional January Sales. Systems must cope effectively both with physical returns, through all channels, their reallocation, and of course with the financial settlement with customers – they can’t spend their refund with you if they haven’t received it.
Communication. In these situations you are heavily dependent on your partners, especially though not exclusively in transport and logistics. Your systems need to be able to be in constant contact with those of whoever is managing your transport or warehousing, with constant updates of likely requirements as far out as possible. Remember that this isn’t just a question of physical assets if there are no drivers around with enough hours left. When push comes to shove, hard pressed logistics companies, and indeed other suppliers, will take the line of least resistance – the easier you make it for them to meet your requirements, the more likely they are to favour your needs.
Intelligence. As we have seen, these peak events are by definition not forecastable in detail – we know the wave is coming but we don’t know exactly what it will hit. Nonetheless, applying Business Intelligence to the supply chain can, if not eliminate, at least constrain the levels of uncertainty. There are many forms of business intelligence that can be incorporated into forecasting, planning and execution, depending on the nature of the event and of the business. The sorts of intelligence that can be injected vary enormously but to give some more obvious examples:
There are potentially many more. They are not of course infallible, but by incorporating this sort of intelligence into forecasts, and into ‘what if’ simulations in planning and scheduling, the risk of nasty surprises, and the ability of the supply chain to overcome them, can be much improved.
Of course, we would maintain that the systems attributes we have outlined aren’t just for Christmas – they should be at the core of normal routine supply chain operation, if such a thing still exists.
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