Holiday and seasonal shopping are the busiest and most stressful times for retailers. With higher demand for products in stores and increased orders online, retailers are challenged to supply enormous volumes of products in just that short peak period.
What’s keeping retailers up at night during Black Friday, Cyber Monday, or Christmas? They worry about ensuring that the website doesn’t crash because of the higher volume of shoppers. They also need to make certain that the retail supply chain fulfills and ships orders on time. As the daily number of orders doubles, even quadruples through peak season, any inconsistencies or lack of organization may result in retailers missing out on a large chunk of their revenue. After all, most Canadian retailers generate as much as 40% of yearly business during the Christmas season, so making mistakes during these critical seasonal peaks can be hard to recover from. To alleviate this risk and avoid the “growing pains” of the peak season, the best strategy is to rely on experienced logistics supply chain partners (3PLs), that take away the stress of distributing your products on time in large volumes, while ensuring the best consumer experience at this busy time.
SCI has managed retail and e-commerce supply chains for decades for many well established retailers, as well as new entrants. Over time the 3PL has developed a deep understanding of the retail supply chain and the unique needs retailers have based on growth and business strategies. SCI’s supply chain solutions guarantee that retailers are meeting their seasonal requirements.
Strategic Supply Chain Planning
Retailers begin intense preparation for peak season sales such as Black Friday, Cyber Monday, Christmas & Boxing Week as early as spring, and there are many crucial steps to ensure a smooth and successful execution during the peak periods. SCI helps its retail clients end to end – providing efficient, prompt entrance into the country, right into our safe, secure bonded warehouse, then over to our national distribution & order fulfillment centers and through to final shipping to the end consumer.
The two examples below show how SCI manages peaks for its two clients: a specialty consumer goods retailer, and a mass merchant retailer. The specialty products retailer is particularly proactive in marketing during the seasonal peak, trying to perform better than the competitors in terms of sales – and an experienced 3PL can contribute to this success. For the mass merchant, the main concern during their peak season is meeting consumers’ delivery expectations while processing double or even triple daily volumes.
Peak Seasonal Periods & Overseas Imports
SCI’s Vancouver facility is a bonded warehouse & distribution centre which mainly deals with imports from Asia for the specialty product retailer, making value added logistics services such as container de-stuffing, cross-docking and transloading particularly useful. Besides receiving goods from overseas, the Vancouver facility also gets products from domestic manufacturers.
SCI goes through a comprehensive planning process early in the year to support the 10-week peak period. All the processes speed up during this period to bring product inventory into the building, specifically, eliminating any container back-logs in the port, reducing and eliminating port demurrage, creating efficiency in off-loading and induction of product into the retail inventory stream.
Coast to Coast Order Fulfillment
Accommodating the specialty product retailer’s double digit year over year growth, SCI now handles the majority of the overall volume for this retail client, fulfilling thousands of e-commerce orders for their customer every day. SCI not only expands operations and storage to efficiently support client’s business growth, but also flexibly scales up to efficiently deal with the volume increase during retail seasonal peaks, while delivering high service levels during the peak as during regular day to day operations.
From the Vancouver facility, the products are largely distributed to the client’s retail stores across western Canada, while the transloaded product goes to the retailer’s Concord, Ontario facility. From there, products are shipped to SCI’s distribution centre in Toronto, Ontario for retail e-commerce order fulfillment.
Aside from getting products out of the warehouse to retail stores and directly to consumers, the Toronto facility must be able to quickly restock during the sequence of retail busy periods, starting with Black Friday, followed by Cyber Monday, Christmas and then Boxing Day/Week. Through a strong client relationship, SCI expertly manages the retailer’s supply chain based on the deep understanding of the needs and the expectations of the retailer and its consumers.
Effective labour management, footprint, storage management, material handling equipment (MHE) management, and scheduling of transportation are the fulfillment strategy elements that, when thoroughly understood and executed, take the headache away from the client during these busy times, letting the retailer focus on selling more product, not worrying about shipping it.
A robust inventory control system also plays a vital role, as it allows the retail locations or end consumers to see the availability of a product and what facility it’s in, whether it can be ordered and shipped to the store or directly to the consumer.
Managing Peaks for Large Retailers
One of SCI’s client’s is a mass merchant who has experienced impressive double digit annual growth, thanks in part to an efficient SCI supply chain. The retailer’s facility in Toronto is a large, dedicated distribution centre. It processes thousands of units per day during the holiday period, double or triple the regular daily volume. As a strategic supply chain solutions partner, SCI works with the client to eliminate any concerns for shipping orders to their consumers on time. SCI understands the volume forecast and is aware of promotional activities & events planned during the busiest retail seasons, and vigorously prepares throughout the year for November, December & January peak periods – which include Black Friday, Cyber Monday, the lead-up to Christmas & Christmas Week as well as Boxing Day and Boxing Week. The outcome of all the preparations for the holiday peak is apparent: in 2016 SCI was able to move the cut-off date for holiday shopping, adding an extra day for consumers to place orders so that they arrive by Christmas, and, respectively, for the mass merchant retailer to sell an extra day worth of products during the holiday season.
The SCI distribution warehouse usually begins the peak planning in March, making sure they are ready to handle double and even triple daily shipment volumes. One of the best ways to test capacity and ensure the SCI facility is prepared for the peak season is through stress testing. To simulate the worst case scenario, the facility holds all orders for 24 hours and doubles the daily volume of fulfilled orders to test the performance of processing two times the volume in one day. This ensures the facility can tolerate increased shipment processing volumes in the peak season, and implement improvements based on any concerns discovered through the stress test.
Some of SCI’s peak order fulfillment strategies include:
- Adjusting shifts to enable better shift management control
- Implementing overtime incentive plans and pre-scheduled overtime, ensuring more reliability and consistency in terms of quality
- A solid management structure that ensures that there are managers covering all 4 shifts, including the nights and weekend nights when the facility is operating 24/7.
- On-site IT support to immediately deal with any technical issues and avoid wasting any time in operations
- A redesigned waving process with a cross functional effort that ensures that waves are put together in a highly efficient way, resulting in less travel around the facility for pickers, increasing the number of units picked at the same time, and increasing the number of orders picked at once
- Optimized use of material handling equipment (MHEs) to efficiently and quickly pick units, e.g. attaching multi-shelved carts to MHEs to increase the number of orders that can be picked by one MHE
- Dedicated racking areas for special sales events, called the “hot pick” zone, that is placed as close as possible to the packing stations for fast moving items based on the sale event (e.g. Black Friday, Halloween, Back to School, etc.)
The Right KPIs for the Job
SCI works with their retail clients to determine the right KPIs for measuring and reporting. Some of the KPIs include dock to stock, order accuracy, on-time fill, fill rate, inventory accuracy and eliminating “floor denial” when the inventory depletes so the order cannot be fulfilled.
The successful execution of peak is a result of many factors, including effective client communication, collaboration, co-planning, operationalization, and working with the internal team to implement the strategy to the floor. Accurate and timely forecasting, as well as corporate support (IT, HR, shared services), should be arranged as early as spring for the holiday season.
Good relationships and planning in advance with various partners including packing box vendors, MHE preventive maintenance, agencies and other suppliers also contribute to a successful peak execution. Lastly, employee training and goal setting are necessary to ensure increased productivity, meeting the quality standards, eliminating rework and avoiding bottlenecks.
Missing out in the peak season could cost a retailer over 40% of their annual business, and choosing the right supply chain partner who can not only adapt to long term business objectives, but also to seasonal peaks is essential for any retailer. The right supply chain management helps eliminate risks for retailers during the key sales periods and alleviate the “growing pains” of seasonal peaks.