Tips for Managing Holiday Season Supply Chain Challenges

Written By
Derek Szopa

As the holiday season wraps, retailers and logistics executives faced a daunting challenge: how to prepare for the added strain that comes with the busiest shopping season of the year. With rising customer expectations, increased competition, and a continually changing retail landscape, it can be difficult to know where to begin. But don’t worry—there are ways to ensure your organization is prepared to meet the challenge. In this post, we’ll explore a few practical steps that retailers and logistics executives can take to a smooth-running holiday supply chain.

Prepare for an Earlier Season

First and foremost, holiday shopping is starting earlier than ever before, with over half of holiday shoppers starting their shopping before Halloween, according to a 2019 survey from the National Retail Federation. 

Online retailers have made it easier for customers to shop for holiday gifts, which in turn has placed retailers under more competitive pressure to offer the best deals and discounts early on in season. Companies have also started advertising their Christmas shopping sales and Black Friday promotions earlier than ever before, another factor that’s lengthened the traditional holiday shopping window.

An earlier holiday season means that retailers and supply chain executives need to be prepared well in advance to meet customer demands. Here are some things they should keep top of mind.

  • Increase inventory: In order to prevent stock shortages during the holiday season, retailers should increase their inventory levels ahead of time, including ordering new stock at least a month before the holiday season starts. This will help ensure that their stores are stocked with the products their customers are looking for. To maximize space, retailers can also look into options for stocking their stores remotely, such as utilizing drop shipping or third-party logistics services. This can help them ensure timely delivery of inventory to their stores, even in the event of an untimely stock shortage.

  • Leverage technology: Retailers should use digital inventory tracking tools to maintain accurate and up-to-date records of their stock levels and locations. This technology will enable them to see at a glance what items are available, what needs reordering, and what needs to be moved from one store to another. Automated order fulfillment systems can be used to streamline and speed up the order processing process, not only increasing order efficiency, but also increasing visibility, allowing retailers to easily keep track of where their products are in the supply chain and how quickly they are reaching their customers. Automated systems can also help reduce errors, improve customer satisfaction, and cut costs associated with manual processes, freeing up resources that can be used in other areas of the business.

Predict Consumer Demand

As the holiday season begins earlier and earlier, the number of variables that can affect consumer behavior increases, making it even more challenging for retailers and supply chain executives to accurately predict demand. These include the current economic climate, the level of competition in the market, the availability of new products, changes in consumer preferences and tastes, changes in the weather, and even changes in the timing of the holiday season itself.

According to a 2018 survey by the National Retail Federation, nearly half of all holiday shoppers made impulse purchases during the holiday season, further complicating retailers’ ability to predict consumer behavior. 

Fortunately, with the introduction of predictive analytics, machine learning, and AI, retailers can now gain more insight into consumer behavior and accurately forecast demand and optimize the holiday supply chain.

  • Use predictive analytics: Predictive analytics can help retailers anticipate customer demand and plan accordingly during the holiday season by analyzing past sales patterns and customer behavior. This data can be used to identify trends, such as which products have sold well in the past, when shoppers are likely to purchase items, and which types of promotions have been the most successful. Predictive analytics can also help retailers better understand how changes in the external environment, such as economic conditions and weather, might affect customer demand. With this information, retailers can anticipate customer demand, adjust their inventory levels and promotional campaigns accordingly, and ensure they have the right products in the right amounts at the right time. 
  • Segment customers: In the past, customer segmentation was a manual process that used simple demographic data such as age and gender to segment customers. Today, advances in technology and AI have enabled more sophisticated customer segmentation. AI-driven customer segmentation tools can use machine learning to create more detailed customer profiles, incorporating data such as purchase history, browsing behavior, and even location data. This data can be used to create more targeted campaigns, such as personalized holiday promotions, tailored to each customer segment. AI can also be used to analyze customer sentiment and predict customer behavior, allowing retailers to better anticipate customer needs and preferences during the holiday season. Additionally, AI can be used to automate the process of customer segmentation, enabling retailers to quickly adjust their segmentation strategies to respond to changing market conditions.

Facilitating Seamless Communication 

Communication is also an important factor in facilitating a headache-free holiday supply chain. Executives need to ensure that all of the players in their supply chain are on the same page when it comes to product availability, quality and delivery times. 

Poor communication can have a major impact on a retailer's holiday season supply chain during. As consumers become more demanding of quick delivery times and a wide variety of products, retailers must make sure that their suppliers are able to meet these demands. Poor communication between the retailer and the supplier can lead to delays in product delivery and a lack of information about availability and stock levels. Without this information, suppliers may not be able to provide the products that the retailer needs in the desired timeframe, leading to further disruptions in the supply chain.

Poor communication can also affect the customer directly. Without adequate customer service, customers may become frustrated and may not return to the retailer in the future. This can have a major impact on the retailer's bottom line during the holiday season and beyond. In order to ensure a successful holiday season, retailers must ensure that good communication is maintained between them and their suppliers, as well as their customers. Here are some pointers:

  • Set clear expectations and deadlines: Once the supply chain is assessed, executives should set clear expectations and deadlines for product availability, quality, and delivery times and ensure that all players in the supply chain are aware of these expectations and deadlines.

  • Establish contingency plans: Executives should also establish contingency plans for any potential disruptions or delays that may occur during the holiday season. This includes having backup suppliers, alternative materials, and other resources in place to ensure that product availability, quality, and delivery times are not compromised.

The holiday season is a critical time for retailers, and the shipping and logistics industry plays a vital role in ensuring that orders are delivered on time and customers are satisfied. While the holiday season presents serious challenges to the shipping and logistics industry, there are ways to mitigate these challenges and ensure that your business is able to meet customer demand.

This year's holiday season has been much different than last year's in terms of supply chain challenges. Whereas last year's pandemic-related issues caused soaring demand and low inventory, this year's problems are labor related. With Amazon workers in Illinois recently staging a walkout during the second Amazon Prime sale of the year, and more than 20,000 union workers who build and maintain railroad tracks rejecting a labor agreement, there is potential for major disruptions in the supply chain. In addition, pilots for FedEx are seeking a federal mediation process involving pension benefits, which could also lead to disruptions. As such, executives in shipping and logistics will need to be prepared for potential delays and disruptions this holiday season.

Executives in shipping and logistics must be prepared for these disruptions and have contingency plans in place. They need to make sure that orders can still be fulfilled even if there are delays in shipments. And they need to be prepared for the possibility of increased costs due to the disruptions. 

The good news is that inventory is high this year and demand has lessened. This should help to offset some of the disruptions caused by labor unrest. But executives in shipping and logistics still need to be prepared for a challenging holiday season.