Delivering Christmas Just In Time
Almost as miraculous as St. Nicholas flying through the sky on Christmas Eve are the smart supply chain decisions that will enable Christmas gifts to arrive just in time this year. To maintain holiday cheer, we won’t dwell too long on Christmases past…but everyone remembers when Covid made it impossible to score the Playstation that your kid REALLY wanted…or that heat lamp that we all suddenly needed for outdoor gatherings.
The good news is that the forecast is looking bright for Christmas morning this year. In a Supply Chain Holiday Forecast, Colorado State University Associate Professor of Operations and Supply Chain Management Zac Rogers said: “The sort of wild swings that we’ve had for the last three years should mostly be pressed out of the system, and it should be a ‘normal-ish’ holiday shopping season.”
Here are some of the factors that are contributing to a ‘normal-ish’ situation:
Retailers Have Improved JIT Inventory Strategies
According to the November 2023 Logistics Manager Index, “Several large retailers including Dick’s, Walmart, and Target have purposely kept inventories low…This seems to be further evidence for the move towards JIT strategies…” A low inventory helps retailers reduce their expenses, but it also can cause customer frustration when stock runs out in December. Just imagine if you can’t lock down that Iris-colored Stanley tumber — or another coveted gift of 2023!
Over many years of experimentation with JIT inventory, companies have learned that if raw materials, manufacturing, and delivery get the slightest bit out out of sync, the shelves go empty. There is little leeway for error given that today’s customers don’t have much patience for out-of-stock merchandise — or even items that take more than a few days to ship.
Project44 reports from its 2023 Peak Season Consumer Survey: “On-time delivery remains the expectation for consumers, but they’re not willing to shell out more for it. 65% of consumers aren’t willing to pay extra for guaranteed on-time delivery, leaving eCommerce companies responsible for balancing customer satisfaction with their own inflationary costs.”
Given customers’ growing expectations, how will the supply chain keep the holiday magic churning this season? Here are some of the major developments that will push the gifts beneath your Christmas tree:
Micro-Fulfillment Centers Can Ship Faster
Key to getting product to customers just in time, is a fast delivery system. A huge game changer is companies’ use of mico-fulfillment centers. Located in urban areas, these centers stock popular items and deliver them rapidly to customers. This helps companies cut down on both the time and costs associated with delivery from warehouses that are located farther away from customers.
As usual, Amazon is helping to fuel speedy delivery. A recent video by Wall Street Journal about fast shipping detailed how Amazon used a same-day delivery center to deliver a package 54 minutes after it was ordered on Prime Big Deals day.
AI Offers Better Demand Planning Tools
Artificial intelligence (AI) is reducing the risks previously associated with JIT inventory. With AI-powered demand planning tools, companies are able to more accurately forecast inventory needs. A 2023 MHI Solutions article that profiles how companies use AI for Demand Planning cites that one of the many benefits of these tools is “planners’ newfound ability to review automated calculation of optimal safety stock levels according to the quality of the forecast. This results in inventory optimization to reduce overstocks and maintain compliance with target product rotations.”
Advance Shopping Days Help Reduce Inventory Woes
Not all inventory improvements are high tech; some just boil down to smart marketing. To better manage holiday stock, companies have leaned into advanced sales events. This year, the National Retail Federation reports that “A record 200.4 million consumers shopped over the five-day holiday weekend from Thanksgiving Day through Cyber Monday…The figures surpassed NRF’s initial expectations of 182 million shoppers by more than 18 million.”
In the previously mentioned Supply Chain Holiday forecast from Colorado State University, Rogers stated that early shopping events “have created a long peak to the holiday shopping season and changed the seasonality for supply chains.” By reducing the demand in December, the supply chain is better able to keep up with the holidays.
