Expert Tips to Get Your Online Retail Supply Chain Christmas Ready
Christmas has come again for eCommerce – for consumers, and especially for retailers who achieve peak, sometimes unprecedented levels of demand. During this period sales volumes spike. A positive customer experience plays a vital role in a retailer’s’ success, both during the peak period and well into the New Year.
As this period is so important to eCommerce and omni-channel retailers, it is imperative that their logistics operations are run to a level that ensures that customers receive the same or better service than during regular periods.
Online Retailers must ensure that they have a clear plan to manage the peak period which will see an increase in business volumes including website traffic, customer emails, calls,enquiries, and sales orders.
Without a clear, considered plan, online retailers can find themselves in a position where they are inevitably reactive to operational issues as they arise. Putting out spot fires can disrupt staff productivity and may result in poor customer service. The last thing any retailer needs is to miss a Christmas delivery deadline for a loyal customer.
When online retailers experience a spike in sales order volume, their warehousing and order fulfillment operations are put to the test. A period of increased sales orders will see an increase in each critical component of the typical fulfilment cycle;
- Warehouse staff required to receipt stock received from suppliers to inventory;
- Storage (number of pallet / shelf / bin locations) to hold additional stock; and
- Warehouse staff required to fulfill sales orders for customers quickly.
Business volume forecast
It’s best practice to prepare a detailed warehouse operations volume forecast which considers increased warehousing volumes for the peak period. The three keys areas of interest are;
1) Inbound handling;
2) Storage; and
3) Outbound handling volumes.
Starting with the volume and profile of inbound supplier shipments, be clear on the number of full container load’s (FCL’s), pallet and carton deliveries expected. You should also understand the number of SKU’s and total units per inbound supplier shipment, alongside any special rework requirements.
An increase in inbound supplier shipments will typically result in an increased storage requirement. Using the inbound forecast, your logistics function should be able to forecast increased pallet and storage requirements, taking into account historical storage attrition rates combined with peak period attrition rates.
Online retailers should use historical sales order data combined with forecast demand to estimate daily sales order volume throughout the Christmas peak, boxing day sales and New Year sales.
Many online retailers shut their warehouse on weekends and public holidays to avoid costly penalty rates. When this occurs, Monday order fulfillment volumes will spike, as will the days following public holidays. There are three public holidays during the peak period to consider, on top of typical weekends.
If multiple pick and pack processes are used for varying sales order and stock profiles, then volumes should be forecasted per pick and pack process flow.
Staff and equipment forecast
Using warehouse operational volume forecasts, online retailers can calculate the additional staff and equipment required to fulfill inbound and outbound handling requirements. These calculations will be underpinned by benchmarked work rates for known work profiles.
Various equipment is used in online retail warehouses including RF scanners, packing benches, fork lifts, pallets, pallet jacks, pick trolleys etc. Online retailers needs to ensure that there is enough equipment on hand to meet the peak volume days.
Establish a strategy
Once business volume forecasts have been locked away and the business has a clear understanding of the additional resources required to meet the peak, the business must now establish a strategy for closing the resource gap.
Getting access to additional warehouse staff for the Christmas peak can be difficult. Typically, the labour market dries up during this period, due to the retail sales uplift. To attract talent, online retailers may need to increase their hourly rate for seasonal staff. Labour hire agencies are usually the go to for additional staff and by having multiple agencies in play you will always have a back up. University students are often looking for extra work during the break so consider advertising jobs on University job boards.
Increased staffing requires additional leadership and training. Ensure a strong warehouse leadership team and training program are in place to support your growing workforce.
For some online retailers the Christmas peak represents a 100% to 200% increase on regular volumes. With this in mind, it often does not make sense for online retailers to invest in additional equipment which will only be used for a few weeks, or until the business grows. Renting equipment can be an attractive option as it ensures that additional equipment will not be idle after the peak. This also enables the online retailer to use the cash for inventory purchasing.
Online retailers often find that warehouses are under utilised during regular periods and over capacity during peak periods.
By fully utilising a warehouse and running it at capacity, online retailers realise full value from the rent they are paying to their landlord. It doesn’t often make sense to build 100% to 200% storage volume increase buffers into warehouses, as this results in underutilised assets.
This makes managing storage challenging. The online retailer needs to consider whether they will;
- Rent a warehouse which will meet the demands of the Christmas peak;
- Rent additional short term warehouse space as required for each peak; or
- Outsource part of the operation to a third party logistics provider (3PL).
Renting additional warehouse space introduces challenges with managing multiple sites including; staff supervision, additional fit out, capital requirements and duplication of expenses such as internet, electricity, cleaning etc.
When performing cost analysis online retailers should consider outsourcing their warehousing and order fulfillment requirements. 3PL’s can provide online retailers with access to the latest fulfillment technology, a scaleable solution that meets demands and enables the business to share cost and execution risks with experts.
Execute and monitor, be proactive
Ensure that your strategy is implemented well before the peak begins. When volume increases, monitor operations and make changes as required. Be proactive, not reactive.
Words by: Leigh Williams, MD, eStore Logistics