While the holidays are a boon to retailers and the rest of their supply chain, they put tremendous pressure on the entire ecosystem to meet demands that are in many cases several times the volumes throughout the rest of the year. Many industries are highly seasonal and peak season represents a disproportional percentage of their yearly business. Running the same way all year long doesn’t work for these kinds of supply chains, it’s either too costly or capacity constraints limit the ability to scale. One thing that is for sure is that failure to meet peak season demand results in permanently lost sales and possibly customers. If your business is highly seasonal you need a peak season strategy for your supply chain operations and supporting technology.
A peak season strategy is more than going to “overtime”, it is about altering the dynamics of your supply chain from the way it works during the rest of the year. Outside of peak season there is most likely more capacity than required to serve the market and the strategy is to do it for the lowest cost possible. For the peak season, low cost fulfillment is still important, but responsiveness is paramount and capacity constraints limit flexibility.
Supply chain technology is an important peak season strategy enabler to temporarily create extra capacity without having to result in adding more physical assets like warehouses or trucks. For example, an outdoor recreation retailer implemented a yard management system at their stores to give them increased local inventory capacity. The retailer was able to park trailers at the store with additional inventory and the system was able to tell store management exactly what was in the trailers without having to receive the inventory into the store. In effect, the store ended up with additional “back room” capacity and transportation costs were contained by not having to increase the replenishment frequency.
Another peak season strategy is to unlock capacity by planning more holistically and combining operations. Integrating private/dedicated fleet and commercial carrier planning enables peak seasons to scale to meet demand and contain costs. Being able to evaluate the use of commercial carriers rather than going to overtime or having a commercial carrier rather than the fleet serve remote locations can improve responsiveness, throughput and potentially be more cost effective.
Even companies that are able to build inventory in advance of peak season have to have a peak season strategy for their operations and technology. Given lead times, neither product nor geographic forecasts are accurate causing midcourse changes to minimize stock outs or excess inventory at season end. These companies must move manufacturing to shorter production cycles or faster modes of transportation during peak season. The supporting supply chain technology has to be configured differently to execute the peak season strategy. If you are running the same settings all year, then they will not support the different goals you have in peak season. Leading companies run multiple planning scenarios ranging from customer service maximization to cost minimization to see how far they need to push their operations to meet demand as it rapidly evolves during peak season.
A peak season strategy also has to have a revised set of metrics to support the change in supply chain behavior. The definition of responsiveness has to change – what worked the rest of the year and was measured in days, may require fulfillment in hours for peak season. Costs may be higher for manufacturing or transportation to ensure there are no lost revenue opportunities in this shortened selling period. Without revised metrics individual organizations will claim victory, while the overall company fails to meet its broader goals during the most important selling season of the year.
Peak season performance is what makes or breaks many companies’ yearly financial performance. If your business is highly seasonal and your supply chain strategies, systems and metrics are the same year round, you don’t have a peak season strategy and that is hurting your top and bottom line. So how is your peak season strategy working? Let me know.