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Is Your Supply Chain Ready For The Festive Season?

November 15, 2017

Advice for Online and Retail Businesses

Christmas is around the corner! eCommerce and omni-channel retail businesses wanting to maximise sales and manage unprecedented levels of demand during this year’s festive season, need to ensure their operational processes and logistics are ready. Both must be optimised to deliver the ultimate customer experience.

Throughout the festive season, your customers are on the lookout for gifts and they want them delivered fast without any issues. A positive hassle-free experience for your customers will assist with your success and help improve your reputation in the market. During this important period, it is imperative that your business is setup to deliver the right products to the customers on time.

eCommerce and retail businesses need to have a clear plan to manage order fulfillment, deliveries and returns during this peak period. Many retailers will see an increase in website traffic, customer enquiries and sales orders. Without a clear, detailed and considered plan, you might find your business in a position that cannot cope with the demand. This would be a terrible way to service loyal customers.

Here are a few tips to consider as you prepare for the upcoming festive season.

Reviewing your Fulfillment Cycle for Peak Periods

The festive season will cause your business to experience an increase in sales order volume. Consequently, your warehousing, order fulfillment and delivery operations will be put to the test. You will need to review each critical component of your fulfilment cycle to ensure that your business has the capacity to cope with greater sales.

Here are a few things to consider:

  • Warehouse staff will be required to receipt stock received from suppliers to the inventory system;
  • Your storage facilities will need to accommodate and hold additional stock; and
  • Warehouse staff will be required to fulfill sales orders for customers quickly without errors.

Warehouse Operations Volume Forecasts

Planning for the festive season is essential. Using detailed warehouse operations volume forecasts will assist you to plan for normal operation and contingencies. The three keys areas you must consider are:

  • Inbound handling;
  • Storage; and
  • Outbound handling volumes.

Firstly, review the volume and profile of inbound supplier shipments. Understand the number of full container loads (FCL), pallet and carton deliveries that you will expect in a typical period of time. You should also calculate the number of stock keeping units (SKU) and total units per inbound supplier shipment, alongside any special rework requirements.

An increase in inbound supplier shipments will lead to the need to increase storage. Using the inbound forecast that you have prepared, your logistics function should be able to leverage this data. This will help you forecast your increased storage requirements. You should also use historical storage attrition rates combined with peak period attrition rates to forecast your storage requirements.

eCommerce and retail businesses should use their historical sales data, combined with forecasted sales numbers, to estimate daily sales order volume throughout the festive season and New Year period. Note that if multiple pick and pack processes are used for varying sales order and stock profiles, then volumes should be forecasted per pick and pack process flow according to your fulfillment capabilities.

Remember to forecast business activity following weekends and public holidays. Many online retailers shut their warehouse on weekends and public holidays due to penalty wage costs. Following the weekend closure, order fulfillment volumes will spike on Monday, and on the day following a public holiday. Additional resources may be required to accommodate the spike.

Resourcing Forecasts

The operational volume assist online retailers to determine the additional staff and equipment required to fulfill inbound and outbound handling requirements. After you have a clear understanding of the additional resources that you may need, your business must now establish a strategy for closing the resource gap.

Staffing Strategy

Since many of your employees wish to enjoy the festive season by taking a break, you may have limited access to additional warehouse staff for the Christmas break.

To attract talented and dedicated staff, online retailers need to think strategically about recruitment and rostering. Here are a few things to consider:

  • You may need to increase your hourly rate to compensate employees for forgoing their holiday.
  • Employment agencies can help you to build a network of back-up and on-demand employees.
  • University students are often looking for extra work during the break so consider advertising your opportunities to them.
  • Additional time might be required to organise rosters to ensure great efficiency.

Following an increase in staff numbers, you will need to train them and manage them effectively. Make sure that you have a strong warehouse leadership team and training program in place to support your growing workforce. Clear processes and procedures are critical to ensure smooth operations with minimal errors.

Equipment Strategy

Various equipment is used in online retail warehouses including RF scanners, packing benches, fork lifts, pallets, pallet jacks, pick trolleys, etc. Online retailers need to ensure that there is enough equipment on hand to meet increased demand. The equipment should be in good working order that complies with the necessary safety and operational standards.

For some online retailers, the Christmas period represents a 100% to 200% increase in sales volumes. Due to the seasonal nature of this demand, investing in additional equipment might not be feasible as it will not be used constantly throughout the year. It might be wise to rent equipment to prevent items sitting idle during the off-season. This will assist with your cash flow so that more funds can be put towards purchasing inventory.

Storage Strategy

Online retailers often find that warehouses are underutilised during regular periods and experience over capacity during peak periods. During the off-season, any unused space is a sunk cost that achieves no return for the business. This makes managing storage requirements challenging.

The online retailer needs to consider whether they will:

  1. Rent a warehouse which will meet the demands during peak periods (i.e. the festive season);
  2. Rent additional short term warehouse space as required for each peak period encountered; or
  3. Outsource part of their operations to a third-party logistics provider (3PL).

Renting additional warehouse space can be a quick and easy solution for online retailers however it can introduce resourcing and management challenges including: staff supervision, additional fit-out costs, capital outlay requirements, and duplication of overhead expenses such as phone/internet, electricity, cleaning, etc.

Instead, online retailers should consider outsourcing their warehousing and order fulfillment requirements to an expert 3PL provider. 3PL providers can provide online retailers with access to the latest fulfillment technology, a scaleable solution with existing infrastructure that meets demands every time and enables the business to share cost and execution risks with logistic experts.

Be Proactive and Realistic

Ensure that your strategy is implemented now, well before the festive season starts. When sales volume increases, monitor operations and make changes as required without delay. Be proactive and realistic about your operations. This will help you to plan a successful strategy that will maximise your profit.

If all this is too much for you to handle as you see the festive season approaching fast, consider engaging a 3PL provider. Have any queries? Feel free to call a friendly team member at eStore Logistics on 1300 735 133 to have a no-obligation and confidential discussion.