Making Your Supply Chain List, Checking It Twice

5 keys to a successful holiday retail season for the supply chain

For retailers, the holiday season can spread great cheer as well as great fear. Cheer in the form of holiday sales that can stuff their stockings with record profits. Fear in the form of out-of-stocks, shipping delays and supplier challenges, all of which can have the feeling of a piece of coal on the bottom line.

No one wants to reserve shelf space for "the hot product" and then not be able to stock it or deliver it quickly and efficiently. Sure, there is a certain distinction that comes with having the "hot" and in-demand product. But unless you can close the logistics gap, shoppers will go right to your competitors if you don't have something in stock. Industry studies find that 40 percent of consumers will leave a store if they can't find the products they want on the shelf.

In September, Nintendo of America President Reggie Fils-Aime said Nintendo may not produce enough Wii's for the holiday season — again. "Every time we put more into the marketplace, we sell more, which says that we are not even close to understanding where the threshold is between supply and demand," he told the San Jose Mercury News.

Understanding that threshold — and adjusting the supply chain in response to those market drivers — is a balancing act that challenges even the most savvy retailers. While retailers may never face a product shortage as long-lasting as the Wii, the threat to the bottom line of not meeting consumer demand is very real.

Digging through Santa's supply chain workshop, here is a checklist of five presents that can help retailers avoid the holiday blues of inefficient supply chain execution.

Integrate Supply Chain and Store Operations

To have a truer sense of consumer demand, store operations solutions, including workforce management and retail task management, must integrate into your supply chain execution (SCE) solution. Demand signaling generated through the point-of-sale (POS) systems back through the warehouse management system (WMS) and transportation management system (TMS) enables the supply chain to more effectively and efficiently keep product flowing to the right stores at the right time.

Advanced-forecasting and demand-smoothing algorithms are used in combination with store-specific information — such as special events, customer demographics and other demand signals — to create the right recipe for holiday supply chain success. Improved market-basket analysis is yet another benefit when retailers have visibility into their store and supply chain data.

To harness, rather than be overwhelmed by, all that data, a Web-based analytic reporting solution can leverage the wealth of existing information and provide extensive performance monitoring and analysis. A performance management solution should create less work, not more — especially during the holiday season. In fact, one retailer recently was able to turn 270 separate reports into one, just by using a performance management tool.

Optimize Warehouse Space

We all know that warehouse space is expensive. Moreover, in a multi-channel environment where holiday store orders are months ahead of the direct-to-consumer online channel, retailers have to relegate holiday items to prime picking locations for longer periods of time.

It is critical to have complete insight to where everything is in your distribution network. If inventory accuracy is less than 99.5 percent, retailers are missing out on a serious efficiency opportunity. The last things they need during the holiday season are misplaced items, incorrect orders shipped to stores and poor visibility into their inventory.

Rethink Your Delivery Strategy

Timing is everything during the holidays — or any busy season. To run a fast and cost-effective transportation network, retailers must plan ahead with their transportation fleet and delivery partners.

Leading retailers use delivery partners — FedEx, DHL and UPS — as profit centers during the holidays. With pre-planning, cheaper shipping provides a higher-than-expected upside to holiday profits.

Also, optimized routing and consolidation provide the "best possible path" through a series of stops, while ensuring drivers spend as little time as possible at each stop. They maximize the use of each trailer load shipped, resulting in fewer loads overall. Companies using a fleet management system (FMS) save 10-15 percent in miles driven from improved routing and consolidation, a significant time and fuel saver during the holiday season.

Finally, "store-friendly shipments" — those where shippers package items and load trucks according to a particular store's needs — save time and labor on the front end when unloading at the store. Holiday displays and planograms are vital to any retailer's holiday marketing strategy. Smart retailers know their supply chain and logistics teams are an essential part of a successful holiday promotion or campaign.

Forecast Labor Requirements

Retailers consistently bemoan the challenges they face in recruiting and ramping up qualified people to meet their holiday distribution needs. Lack of information on how a job should be done, an absence of simple and effective training tools, and poor visibility into planning and productivity information exacerbate the situation.

Workforce management systems (WMS) have been alleviating some of this holiday stress for years. Here are three WMS strategies retailers can implement before any holiday season:

  • Outline preferred methods for how a task should be completed — Preferred methods prescribe the steps — and time — required for individuals to perform their work. If there is a clear template for how someone should be performing a job, retailers are able to train them faster and cheaper.

  • Provide real-time resource planning and productivity information — During the holidays, potential problem areas can be addressed before they adversely affect the operation and service level goals.

  • Practice sound training and coaching practices — Practicing key techniques and lessons ensure that the workforce is ready to handle the holiday rush.

Improve Supplier Collaboration and Sourcing

Supply chains are not really "chains" at all, but rather complex networks of suppliers, carriers, forwarders, transportation modes, distribution channels, etc. In the critical holiday season, retailers need visibility into their entire network.

Many times, retailers can't effectively source their products once they leave the primary distribution center (DC). One key to a successful holiday season — and really, any time — is the ability to find products to meet demand wherever they are in the supply chain. These products may be at multiple DCs and supplier warehouses. Having visibility into the broader network, which includes the supplier network, is a key attribute of an agile supply chain.

Another idea for retailers to implement before the holidays is to ensure they receive standardized EDI advanced shipping notices (ASNs) from suppliers. Getting ASNs from suppliers has a dramatic effect on the rest of the supply chain. They enable product to be received and allocated quicker, reduce labor time spent identifying orders and provide more accurate inventory for outbound orders.

Implementing an ASN program is much easier than its sounds. Smaller suppliers only need Internet access to be able to provide retailers with case-level ASN data.

Auld Lang Syne — After the Rush

After the holiday season is over, retailers should evaluate the supply chain challenges they experienced and act on those challenges before the next busy season.

No retailer wants to be caught without product when customers come through the door. No logistics or supply chain lead wants to be the reason demand was not met. That's why it is so important for them to integrate the supply chain with store operations, optimize warehouses, rethink their delivery strategy, forecast labor models and improve supplier collaboration and sourcing.

If they do all that, they'll be better prepared for the next holiday supply chain season!

Janine Renella About the Author: Janine Renella is the retail sales leader for supply chain execution at RedPrairie, a provider of supply chain execution solutions. She welcomes questions at [email protected], or learn more at