It’s that time of year when supply chains that support the retail sector are tested. Planning, Procurement, Inventory Management and Logistics teams all have to work together to be successful. It all starts with placing bets on what, where and when consumers are going to buy during the holiday season months in advance. Some of the questions that have to be answered are: What will be the hot items for the holiday season? Will consumers purchase in-store or on-line? When during the period between November 1st and December 31st will consumers make their purchases?
As an example companies that have manufacturing capacity constraints in the fall, the Demand Planners have to lock in their forecasts in May or June. Once the demand plan is locked in, then the downstream supply chain teams can make their plans and weigh options to fulfill the forecast. Supply Planners weigh In-House versus Contract Manufacturing. Securing contract manufacturing early is less expensive and can be the difference between being in-stock and out of stock. In addition, if there are any long lead time raw materials needed to produce the final products they have to be bought by the Procurement team as early as summer time. You can increase the lead times needed if any raw materials or finished products have to be imported from overseas.
Once the products are produced, they have to be stored in warehouses until they need to be delivered to your local store shelf or your doorstep. Sometimes the standard warehouse that a producer uses runs out of capacity during peak season, so overflow warehouses have to be contracted. Determining where to stage inventory is one challenge that Logistics professionals have to handle in an evolving environment with on-line shopping continuing to increase in comparison to in-store shopping. Cyber Monday sales this year hit a record of $3.45B and is almost on par with in-store purchases made on Black Friday. The analysis can get murky because some consumers purchase on-line and pick-up in-store.
When you shop this holiday season either in-store or on-line, think of the Supply Chain “elves” behind the scenes making your products available at your local store or delivering them to your doorstep. The products don’t get to you by accident, it takes months of work to make every purchase possible. Happy Holiday Shopping!!