SUPPLY CHAIN
The Fallout of Holiday Peak
By Glenn Master Master is a recognized industry expert with over twenty years of experience in loss prevention and security management. He has worked both domestically and internationally specializing in supply chain, transportation, and logistics. Master has held both executive and management positions with companies such as Newgistics, Office Depot, Henry Schein, and Motorola. He is the cofounder and current board director of the International Supply Chain Protection Organization (ISCPO). He is also employed at Texas Christian University as an adjunct professor, teaching undergraduate courses in criminal justice, security, and loss prevention management. He can be reached at GMaster@newgistics.com.
A
s we all are well aware, the holiday shopping season seems to be starting earlier with each passing year. It was October 21 when I saw the first commercial advertising for the 2017 holiday season. To my surprise, however, I didn’t see many stories this year about people camping out for a week in the parking lot of a store waiting for the best Black Friday deals. There could be any number of reasons for this, but what we do know for sure is that retailers are now providing more options to consumers earlier in the shopping season than in previous years. While holiday shopping patterns in retail stores is something we may all notice, there are other areas within the business that may not be as visible to the customer but are just as impactful on the business. The one thing that I have witnessed firsthand is how this new strategy is affecting the supply chain. “Peak,” as it is referred to, is the time leading up to Christmas when holiday order volume increases dramatically. That’s roughly fourteen weeks of what is now becoming pure chaos for logistics providers.
The most common areas where loss occurs during peak are during the morning launch of drivers. This is when the terminal has the most amount of freight on the floor and the least amount of management oversight. The official numbers for the 2017 peak season have yet to be tallied, but based on projections, this is going to be a record season for retail, with a large percentage being attributed to online sales. While overall this may be good for business, this is nonetheless having a profound impact on the domestic supply chain because the infrastructure supporting all these parcels simply cannot keep up with the volume of products being shipped. Here are three key areas where the industry is failing to keep up with the changes in holiday shopping habits and some basic steps that can be taken to solve this growing problem.
Volume Projections: It’s a Guessing Game
Most retailers have analytic models that produce estimated volume projections to determine the number of orders that will
36
MARCH–APRIL 2018
|
be passing through the supply-chain network. This information is passed on to contracted transportation providers, allowing them to plan for the staffing models necessary to handle the anticipated product volume. Despite all the computer analytics being used, the one thing that cannot be easily forecasted is how online ordering can be affected by the unpredictability of human behavior. This is especially true from Thanksgiving Day through Cyber Monday. In talking with my loss prevention peers in both retail and transportation, consumer sentiment was grossly underestimated going into the 2017 holiday season. So regardless of the current political atmosphere, the Federal Reserve raising interest rates, or the potential that North Korea may launch a nuclear bomb, US consumers were ready to spend money this holiday season. This buying atmosphere creates both a positive and negative scenario for businesses in the supply chain. The obvious positive result is an increase in revenue. However, a less-than-ideal result follows when unplanned volume cripples the infrastructure that moves parcels along the supply chain. This would be the equivalent of a dam breaking fifty miles upriver with all the towns downriver flooded as a result—except the flood comes in the form of packages. To avoid this type of catastrophe from occurring again, retailers must do a better job of preparing for a potential spike in online sales and projecting product volumes in real time. This may be challenging since most of these online orders are being placed during the Thanksgiving holiday when the majority of corporate America is out of the office. One solution would be to have retailers streamline the flow of information to logistics providers by providing daily volume-trend monitoring that is communicated immediately to transportation providers.
Transportation, Bottlenecks, and a Tangled Infrastructure
The majority of retailers that do business online don’t have their own transportation infrastructure. This means they have to contract out transportation companies to move freight. One of the most costly services in business is transportation. Therefore, most companies will look for the most cost-effective way to move that box from the warehouse to the client. This cost will vary greatly depending on several factors, which include: ■■ The time it takes to deliver the package,
LOSSPREVENTIONMEDIA.COM
