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Will Your Supply Chain Survive The Holiday Season?

August 11, 2016 by Kai Goerlich

Vacation and summertime. Just hearing these two words evokes the sensation of a warm breeze on my face and “Summertime” on the radio while I’m driving a convertible Cabriolet on a long, winding road in the countryside. There’s a hitch, however: I have never owned a Cabriolet.

But this vision is firmly embedded in my head thanks to VW’s latest commercial. Not only is the ad visually stunning, but it’s also giving the company summer sales revenue quite a boost at a time when car shopping tends to be at the bottom of consumers’ to-do lists.

Is the same kind of campaign necessary during the holiday season? Quite possibly, according to eMarketer. Although consumers shop more during the holidays, sales growth rates appear to have stagnated over the last five years.

united states retail and retail ecommerce holiday season sales growth 2010-2016

More Demand, More Products, More Problems

Holidays – particularly during the Christmas and summer seasons – offer a significant opportunity for retailers to increase sales. Interesting stats from Brafton show that holiday shoppers spend 4% more than any other time of the year, while online leaders earn up to 50% more revenues.

But there’s also considerable risk. The same Brafton study cites that roughly 4 out of 10 businesses are still unprepared to deliver on holiday shopping needs. Meanwhile, weather plays a crucial role in supply-chain performance as snow, rain, and sun influence buying behavior. Certainly, retailers and consumer products companies should learn how to adjust inventory and ramp up demand by analyzing weather patterns, especially in this era of climate change.

The modern supply chain is also facing increased consumer demand – or more precisely, the expectation of delivering more products and greater variety. Research from Terra Technology revealed that the number of SKUs in the retail industry has increased 32% over the last five years, while sales rose only 4%. To make matters worse, most new products fail with a frequency of one for every 1,000 produced.

When you consider the research, adding seasonal-specific products to the supply chain may seem counterintuitive. However, companies may feel compelled to offer them to enhance consumer loyalty and to avoid losing sales to the competition.

Shop Everywhere, Anytime, Later

Another trend that cannot be ignored is the rise of the digitally connected consumer. Just think for a moment about the items you will ship this holiday season.

In the past, consumers primarily focused on creating a complete order list to avoid forgetting an item, but they are now more likely to order items on the fly with the ease of a mobile device and credit card. An eMarketer study recently found that consumers are more apt to choose same-day delivery wherever they are. Moreover, and not surprisingly, the younger the digital buyer, the more they demand same-day delivery.

Not Just a Seasonal Problem

While the Christmas season may be the exception to the norm, the realities of digital shopping are creating a future where the exception will become the norm. Consumer behavior will inevitably become increasingly unpredictable.

Here are seven ways you can season-proof your supply chain:

  1. Analyze historical shopping behavior and monitor consumer trends – seasonal, calendar-based, and monthly patterns – to improve demand forecasts.
  2. Enhance the resilience of your supply chain by creating a live, operating supplier network.
  3. Widen your supplier network with seasonal-specific providers and partners such as hotels, restaurants, travel agencies, and theme parks.
  4. Use historical weather and sales data to learn from past disruptions and recurring consumer demands.
  5. Time the market entry of new products and seasonal trade promotions according to the available supplier network, sales performance, and environmental factors.
  6. Think mobile and create a seamless shopping experience across all channels.
  7. Improve logistics and secure a same-day or short-time delivery to even the most remote locations.

Will your supply chain survive this holiday season? It all depends on whether you prepare your supply chain now to accommodate for the unpredictable trinity: consumer demand, buying behavior, and weather.

For more supply chain strategies that drive efficiency, see How To Lay The Groundwork For Real-Time Supply Chain Collaboration.

Kai Goerlich is the Idea Director of Thought Leadership at SAP.

This story originally appeared on The Digitalist Magazine as part of the 10 Weeks of Live Business series.

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