The most important supply chain season is here – the holiday season. Sales will increase and you need to make sure that you have enough inventory for the demand. Here are a few major trends that we are keeping our eye on for peak season 2021.
1) Major Carrier Network Capacity
2) USPS service challenges
We are anticipating a repeat of 2020 where many parcel carriers capped the volume they would take from a shipper if that volume was significantly higher than it had been in previous months or years. The carriers have made it clear that they are prioritizing profits and efficiency over revenue growth and they have not shied away from turning down new business or telling shippers to take their business elsewhere. Obviously, they have been hard at work building out their capacity in order to capture more of the pie, but we wouldn’t expect them to deviate from their focus on profits this holiday.
→ We recommend having several other providers in the mix as well.Â
2) USPS service challenges
USPS became the dumping ground for volume last peak season. When UPS & Fedex turned down volume it more often than not ended up at USPS. As a result they were severely backed up and had multiple service problems. Keep in mind that they handle all of their own first class and priority mail but also a majority of the postal consolidation (Smartpost, Surepost, DHL eCommerce) volume as well.
→ We recommend adding in more buffer time when using these services in order to maintain holiday delivery guarantees.
3) Inventory constraints
4) Labor constraints
2021 has been defined in part by extremely tight carrier capacity and the resulting delays in positioning inventory for holiday season. There is a strong likelihood that many retailers and suppliers will have insufficient (or at least reduced) inventory on hand for Black Friday. Those who are in stock may expect higher than expected sales, which may in turn result in inventory issues as well.
→ We recommend carefully reviewing sales forecasts and determining what level of increased sales would merit expedited freight costs.
4) Labor constraints
We expect fulfillment wages and costs to increase in Q4 as major ecommerce companies and warehouses compete for a dwindling pool of workers. The shortage last year was driven more by stimulus checks and social distancing requirements and while those don’t appear to be on the table right now there are many other industries including retail, delivery, and food service that are raising wages in an attempt to shore up their labor needs.
→ We recommend being proactive with your fulfillment providers by sharing a baseline and a highside forecast and understanding what their labor planning looks like.
5) Covid Lockdown Uncertainty
As much as we’d like to believe that we are turning a corner as a country in reopening the economy, the latest trends in variants may slow or reverse that trend. Even if we do not go into explicit lockdowns again, a dramatic change in customer preferences may have the effect of reallocating demand to different channels.
→ We recommend that companies continue to build out their omnichannel channels and have defined strategies for how they can react if demand shifts unexpectedly.
In summary, it’s better to be safe than miss out on sales or get hit hard with unexpected costs – get out the hot chocolate and the holiday ribbon and start planning for things now. We’ve seen our clients succeed by helping them stay ahead of the challenges to make the holiday season bright! If you’re worried about your resiliency this year, reach out and we’ll be happy to help.
