Now we are into October, Autumn is well and truly entrenched and the UK transport and warehousing industry is ramping up for the retail driven Autumn to Christmas peak.
Seasons are the bane of retailers’ lives, and with it those running the supporting vehicles and warehouses in the supply chain. A well run seasonal campaign can ride on the crest of a big wave and – if a retailer’s tactics beat its competitors – bring market leading sales growth. But seasons bring forecasting issues, resource challenges and the risk of more downside from under-performance than upside from over-performance. Under-performance is a double whammy for retailers: not only disappointing sales but often the need to sell remaining stock at lower margins.
So what are the seasons in the UK supply chain?
Back in the day, clothes retailers had two seasons; now any successful clothes retailer is refreshing its range every 6 weeks or so. The run into Christmas remains a ‘season’, albeit has changed shape in recent years; and Easter is still key for DIY retailers. But largely seasons have been replaced by ‘events’, and there is virtually one a month: January sales, Valentine’s Day, Mother’s Day, Easter, Father’s Day, barbeque season, summer sporting tournaments, back to school, Halloween, Black Friday and Cyber Monday.
Unsurprisingly, for most retailers Christmas remains the most important event (73% of retailers, according to Dunnhumby), for most of the rest, Easter is the most important (16%). The ‘second most important event’ is more revealing: back to school (32% of retailers), Easter (23%) and Mother’s Day (20%). Third most important are Halloween, Valentine’s Day and even Dads get a look in with Father’s Day.
The complexity rises when the inter-relationship of events is considered. The shape of the Christmas sales curve has been fundamentally changed by the widespread adoption of the US ‘Black Friday’ in 2013 and 2014, so much so that some UK retailers were forced to moderate their Black Friday activity in 2015, not least to give their warehouses and transport networks a chance of coping at commercially acceptable cost. There’s even the phenomenon of Black Friday Hangover – an increase in returns, just when the supply chain is stretched with Cyber Monday and Christmas.
Furthermore, for those retailers for whom Easter is key, there is the two-fold problem of variable timing and British weather. The two together make a forecasting challenge to match that of the Black Friday/ Christmas conundrum. Easter can be late March and snowing; or late April with sunshine; or vice versa. Or neither. An early cold or wet Easter has decorating and DIY written all over it; a late warm one is gardening. Garden furniture is particularly challenging – early sun means stock sold at full price (and angst for the retailer of whether to re-order or not); if the sun doesn’t come out in style till mid-June, stocks remain high but consumers become minded to put off a purchase for another year. Bargain time!
The UK is busy at Easter – if not decorating or gardening, it’s also the biggest cleaning season of the year. It’s a wonder anybody finds time for an Easter service; or even an Easter egg!
So how do retailers and their supply chain’s cope with this seasonal complexity?
Planning is at the heart of an effective strategy for seasonal peaks. The next most important element is forecasting – the more confidence in the accuracy of a forecast, the tighter the planning can afford to be, without losing sight of the need to plan for contingencies.
So the best place to start is immediately after the previous year’s season – how accurate was the forecast? Are there identifiable factors and causes for variances from the forecast? And when sales were different to forecast – or even if not – where were the bottlenecks and what were the knock-on effects?
These lessons enable the construction of a preliminary forecast for the following year. From this, assessments can be made of how much warehouse space is needed; how that splits across front-line stock and back up pallet stock; whether third party temporary warehousing may be required; and what the in-bound and out-bound transport loading at each warehouse unit might look like. Once the core stock cover is modelled in this way, the warehouse and distribution implications of covering some forecast risk – by carrying more stock – can be assessed.
However, coping with peaks is more than just a spreadsheet calculation of forecasts, forecast risk, stock cover, warehouse space and vehicle movements. Almost certainly, both in retail and the supply chain that underpins it, it requires extra staff, particularly in warehouses and distribution centres. Planning for this involves building relationships with agencies over time rather than at the last minute when temporary staff are hard to come by. Training programs for short term employees need to have a high impact in a short time, particularly in the area of warehouse health and safety. Significant increases in temporary labour may also have implications for car parking, toilets and security.
Once the macro of the lead-in to a season or event has been considered, the nature of e-commerce means that peak months or weeks have been replaced with peak days or hours. This puts particular pressure on a warehouse with many fixed parameters and resources. Again, this can be modelled on a spreadsheet, but is best tested in a dry run trial before the peak arrives, sometimes flushing out over-looked bottlenecks.
A key pressure point is the amount of stock needed to cover the forecast risk. This is particularly intense for retailers or other businesses with bulk inbound stock on long lead-times (e.g., containers from China) and smaller outbound deliveries on short lead-times. Here, even accurate changes to the forecast as the peak approaches will be too late to get the stock to the end of the supply chain in time. To cover this, significant back up stock is required, sometimes brought in earlier than needed in case of supplier delays. It is usually not cost effective to occupy the warehousing space for this seasonal peak for the rest of the year.
Hence, many companies are increasingly looking for short term seasonal back up warehouse space for pallet storage, managed by a third party and feeding the required pallets regularly into their prime warehouse(s). Zupplychain’s live warehouse search facility , which shows available warehousing around a searched geography is perfect for satisfying this need quickly and effectively.