Conquering the peak – 4 factors for peak season success

For many of us, the holidays are a busy time. Gifts, gatherings, going on vacation – the “most wonderful time of the year” can be stressful.

It’s a challenging time for retailers, too. And those challenges are mostly related to their supply chains. The short-term surge in demand often leads to higher labor, transport, and warehouse capacity costs, as well as busier passenger and cargo traffic. Inclement weather can cause sudden congestion and delays, and unexpected spikes in consumer demand lead to stockouts of certain products.

Matching inventory in stores and warehouses to customer demand is probably the most important task facing any supply chain manager in the retail industry.

This year, we anticipate even more complications – from armed conflicts and escalating trade wars to strikes and worker shortages. To conquer the peak, many retailers and their supply chain partners will be working to overcome these hurdles, too.

Slow growth in the global economy and elections in countries home to almost half of the world’s population have added to the uncertain business and consumer climate, making it harder than ever to predict demand. So we weren’t super surprised to see retailers maintaining lower inventory levels and spare capacity in their warehouses and on high alert for potential disruption. Ocean freight volumes intended to supply the peak season – which are normally in transit starting around June – moved two months earlier than usual.

For this year’s peak season, the challenge will be ensuring supply chains are flexible and responsive to changes in demand and day-to-day disruptions. Retailers will also have to be smart in applying the right promotions and discounts to move the inventory they have in stock or can ship more readily. 

The good news for retailers is that all of this represents an opportunity – especially in a competitive market. The companies best positioned to profit from peak season and emerge on top – with increased customer loyalty – will be those that can:

• Maximize stock availability
• Time promotions to attract higher demand when they have sufficient capacity to deliver
• Manage costs and disruption during periods when capacity becomes tight

The supply chain can be a genuine differentiator in all of these areas.  

In our experience, peak performance in supply chains is typically about excelling across these four core areas:

1. Planning
It is important to minimize uncertainty to the extent possible – and to optimize inventory levels – by anticipating customer behavior, understanding transport capacity and rate developments, and even forecasting weather and traffic developments. You can create an advantage when planning for peak by applying new technology  – particularly data analysis and machine learning – and increasing open information-sharing between retailers and supply chain partners.

2. Flexibility
Retailers need their supply chain to be as flexible as possible – adaptive and responsive to the sudden changes in customer behavior and operating environment that are typical for the end-of-year period. Effective measures can range from using technology such as mobile robots that can be moved around your network in response to demand surges to using transportation partners who can switch your cargo between different transport modes and routes at short notice. Having real-time visibility on transport and inventory flows is also essential in managing and reacting to changes.

3. Capacity
Securing sufficient transportation, warehousing, and inventory handling capacity is critical to managing peak season surges and capitalizing on consumer demand. This requires proactive measures, such as putting sufficient human resources in place. Third-party logistics providers can play a decisive role in providing additional transportation and warehousing infrastructure and access to qualified people. They often have strong relationships with carriers and get priority access to additional capacity, even at short notice. They can also free up more capacity by consolidating shipments within their networks.

4. Efficiency
Adding capacity and flexibility can come at a premium, which can quickly offset any gains from peak sales. Maximizing efficiency is an essential way of ensuring that costs remain under control even during surges in volume. Increasing productivity through automated warehouse technology and optimizing transportation networks to consolidate deliveries and match more expensive modes of transport to higher value (or higher margin) products are examples of how retailers can preserve profitability while not compromising on service.