With the upcoming holiday season, many businesses are preparing for the surge in demand as consumers shop some of the biggest sales of the year. While peak season can improve a company’s profitability, it can be make or break depending on their operation’s capability to handle peak demands.
There is no doubt that the pandemic in 2020 changed peak season with an increased presence of e-commerce causing unpredictable consumer behavior and a significant increase in demand. In 2021, demand for products continued to rise while the world experienced logistical interruptions including higher transportation costs, shipping delays, and difficulty acquiring and retaining labor. These supply chain challenges have a direct impact within the four walls of distribution centers. Businesses face the risk of over or under-ordering inventory, not hiring enough seasonal staff, backlogs of orders, difficulty securing shipping capacity, and more. Only 65% of businesses met their fulfilment goals during the 2021 holiday season while those who did meet their goals did it at a much higher cost.
As these supply chain challenges continue, it is important to prepare for peak season by finding strategies that optimize your operations and proactively plan for disruptions. The goal is to have a responsive supply chain that is flexible and can efficiently handle the ebbs and flows of demand. You can use strategies such as inventory planning, transportation planning, labor planning, system and process optimization, and automation.
Preparing for peak season starts with understanding the length of your peak and expected volume. Successful supply chains account for their upcoming sales and use data analysis and forecasting to predict demand. Your distribution center leaders should start inventory planning as early as possible by using forecasts to order the appropriate amount of inventory from your vendors. Inventory leaders should create a plan to store seasonal inventory in preparation for the surge. For example, it might make sense to re-slot the storage or picking locations for better access to products that are expected to sell quickly during the peak season. Understanding your inventory and its trends is vital to setting up your warehouse for a successful peak.
Although some transportation delays may be unavoidable this upcoming peak, your supply chain leaders ought to begin transportation planning by choosing multiple carriers and booking freight capacity early to reduce disruptions. Being in constant communication with your shipping partner will ensure sure you have carriers available for the holidays that fit your timeline and budget. Successful supply chains use transportation management systems to streamline their transportation operations to guarantee they get their inventory to the warehouse and to the customer in a timely manner.
To prepare for labor challenges, your human resources teams should have a plan to increase your work force by hiring seasonal employees. Labor planning needs to include training the entire staff, including cross-training everyone on standard operations. Leadership can utilize labor management systems to effectively manage their teams and understand how to improve their performance. Leaders should be aware that peak season requires an estimated 25% increase in overtime hours, so it is important that you incentivize your workers and encourage productivity while making sure they get adequate rest or breaks. Preparing and motivating your team can be valuable for the realization of peak season.
To ensure a successful peak season, the warehouse operations must be able to fulfill the increased volume of orders accurately and effectively. Your distribution center leaders should assess their current inbound and outbound processes and warehouse management systems to determine opportunities for improvement. Leaders may discover inefficiencies such as extra travel time or reactive processes that make significant differences in completion times with higher volumes. Engineers and Operations teams can work towards solutions that improve the processes to prepare for peak. For example, your warehouse could implement a proactive, robust replenishment strategy that fills up pick locations early based on expected demand or rearrange stations to package orders faster. Distribution center leaders can rely on the use of data analysis and tracking of KPIs to understand the impacts of these process changes and be ready for future improvements.
Another way to improve processes and combat labor shortages is through automation. New technologies can help manage some of the increased workload as well as provide better visibility to management. There are automated systems for scheduling, picking, packing, inspecting, payments, training, and more. In 2021, 43% of employers had some type of automation in their processes with 46% planning to increase their automation for the future according to Supply Chain Quarterly. Automation can lead to significant advancements in productivity as well as a reduction in errors. Understanding what technology is available that fits your business needs and having an actionable plan for integrating these before peak is crucial to success.
It is obvious that there are many moving parts and multiple teams working together needed to properly prepare your company for the new reality of peak season and its potential impact on your business. Planning for peak season and taking precautions avoids unnecessary costs and unexpected disruptions while trying to maximize customer satisfaction and maintain profitability. Preparation can lead to reduced inventory and labor costs, decreased risk of mistakes, and improved processes and customer service. You can utilize these strategies and data analysis from peak season for even better preparation for your next peak.
Bricz, a leading global supply chain solutions provider, provides services in Strategy, Implementation, Robotics, and Optimization. Interested in learning more about our services and how we can help elevate your supply chain and prepare for peak season? Reach out today at firstname.lastname@example.org to connect with one of our subject matter experts to get started.
Contributor: Gabi Falcone, Supply Chain Consultant at Bricz