Planning for Peak: How to Overcome Supply Chain Challenges This Holiday Season

Retail Industry Spending

The retail industry has witnessed a wave of holiday spending behaviors over the last few years as just one changing factor that has led to holiday supply chain challenges. While experts report consumer confidence is up and inflation is down, other factors—including the recent overturn of Biden’s student loan forgiveness plan—may impact customers’ budgets and willingness to open their wallets this holiday season. According to the latest CNBC Supply Chain Survey, 43% of respondents are expecting a lower peak season than last year.

Holiday Supply Chain Challenges Ahead

The anticipated lack of demand is prompting many companies to modify their peak period strategies, from retailers scaling back on seasonal hiring plans to transportation providers implementing cost-cutting measures, all of which can result in delays and disruptions this holiday season. Below are five things to consider as you begin planning for holiday supply chain challenges during peak season.

Online Sales, Inventory, Shipping and Automation

• Omnichannel offerings. While the National Retail Federation (NRF) reported a 9.5% increase in online sales during the November–December 2022 holiday season, in-store shopping still plays an important role in retail, with Forrester predicting offline sales will make up 72% of the retail market by 2028. The convergence of physical and digital shopping is being fueled by click-and-collect services, including “buy online pick up in store” (BOPIS) and curbside pickup. While click-and-collect options increase customer satisfaction, they also provide many benefits for retailers, including reduced delivery costs and increased incremental sales.
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• Leftover inventory. Retailers have been grappling with inventory glut since last year, when many were experiencing an excess of up to 30-50% over the previous year. The surplus—much of which was the result of overordering and delays stemming from 2021 supply chain disruptions—is still causing headaches for retailers as we approach the 2023 holiday season, with many forced to either deeply discount the goods or deal with the hefty storage costs and space requirements. As more shoppers seek out bargains this holiday season, retailers can capitalize on the opportunity to give customers what they want while clearing out excess inventory. With an intelligent inventory management system (IMS), retailers can access valuable insights on customer preferences and manage stock across all channels and locations to ensure they have the right products in the right place to meet customer demands and maximize profits.
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• Costly returns. On top of contributing to the inventory glut, processing returns is also costly and complicated for logistics operations, with returned goods accounting for $816 billion in lost sales for U.S. retailers last year, according to the NRF. As a result, retailers are experimenting with everything from shortening return periods to charging fees. While these methods may help streamline the returns process for retailers, many consumers still prioritize free and convenient return policies. According to a recent Salesforce survey, 93% of shoppers review a company’s return policy prior to making a purchase. Implementing a comprehensive reverse logistics strategy will enable retailers to retain customers, minimize costs and streamline the returns process this holiday season.
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• Shipping and delivery. While union contract negotiations threatened to disrupt a variety of transportation modes from ports to trucking over the last several months, shippers are likely to face less hurdles this holiday season than previous years, thanks to lower package volumes and expanded fulfillment and delivery options. In addition to diversifying providers and strategies, companies can gain a competitive advantage by employing a sophisticated transportation management system (TMS). By providing real-time visibility and data analytics, this software enables shippers to select the best routes and carriers to reduce costs and delivery times.
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• Labor and automation. Staffing can be particularly challenging during the holiday season, especially when dealing with unpredictable demand. Warehouse automation like autonomous mobile robots (AMRs) can be quickly deployed and scaled up or down as needed to meet changing requirements. Additionally, utilizing software solutions equipped with artificial intelligence (AI) and machine learning (ML) capabilities can help retailers accurately forecast labor requirements and optimize their operations to increase efficiency and meet customer demand.

Optimize Your Logistics Operations

With so many variables at play, planning for holiday supply chain challenges is always difficult. Contact us today to learn how to optimize your logistics operations to reduce costs and deliver on customer demands during the peak season and beyond.