Preparing Your Supply Chain for the Holidays
Talking Logistics with Adrian Gonzalez
Dan Clark – October 31, 2018
For most companies with supply chains to manage, the holiday season from Halloween through New Year’s Eve is an incredibly busy time. Shoppers stock up on everything from costumes to cranberry sauce to candy canes, and suppliers need to be prepared to meet the peaks and valleys of consumer demand. Unofficial holidays like Black Friday and Cyber Monday add to the huge spike in demand as retailers offer deep discounts to shoppers. Keeping customers happy and operations flowing smoothly is always a challenge during this busy time.
Due in part to the strong economy and job market, retail sales during the 2018 holiday shopping season are projected to increase by 5.0% to 5.6% year over year according to analysts at Deloitte. To meet this increased demand, businesses employ a number of tactics. Some hire additional workers, others rent out warehouse space or fill stores’ back rooms with extra stock.
Shipping companies, in particular, are looking to hire extra workers. Both FedEx and UPS are hiring extra team members to keep up with the increased need for order fulfillment. In fact, UPS is anticipated to add over 100,000 seasonal staffers to support the projected package volume increase from November through January 2019. FedEx is planning to hire close to 55,000 workers for the holiday season.
Three Disruptive Forces Impacting Logistics
To further complicate an already busy time of year, there are three disruptive forces impacting logistics this holiday season:
- The Driver Shortage – A number of factors are combining to create a real, worsening truck driver shortage. The economy is in an upswing, bringing with it a strong job market and opportunities for recent grads. Baby Boomers, people born between 1946 and 1964 and making up 20% of the U.S. population, are retiring at a rapid rate as well. Since Boomers have traditionally made up the majority of truckers, there is a mass exodus of drivers taking place. This means that there are fewer people available to transport goods over-the-road.
- The Capacity Crunch – Not only is there a shortage of drivers, there is also a shortage of truck capacity. Following the Great Recession of 2008, unemployment rates have been steadily decreasing, currently resting at 3.7% in September 2018 according to the U.S. Bureau of Labor Statistics. With fewer people unemployed, more money is circulating around the economy and consumers can purchase more goods. This means that there is an increased need for transportation as shoppers buy more and more items.
- Changing Consumer Habits – Not only are there fewer drivers available to transport an increasing amount of product, the way goods need to be transported is changing. The digital age has altered consumer shopping habits forever. Instead of shopping solely in retail stores, consumers shop online as well. More e-commerce orders mean a big increase in transportation requirements. Everything from inbound shipments coming into a distribution center to last-mile parcel delivery are changing. Consumers are demanding faster shipping, better visibility and excellent customer experience from the places they shop. This means retail stores and e-commerce companies alike must focus on rapid replenishment to their customers.
What can companies do to prepare their logistics operations for this year’s holiday season?
Fewer drivers, a lack of truck capacity and increasingly demanding consumer habits are pain points for companies everywhere. With the holiday season upon us, these challenges are likely to cause major disruptions to supply chains across industries. In order to “weather the storm,” businesses need to plan ahead and anticipate how they will react to unforeseen events like demand spikes.
Leverage a spot marketplace – As capacity continues to shrink, it becomes more and more difficult to find and book rates for truckload shipments. The labor costs associated with calling brokers and carriers to book spot rates for freight are high, and become increasingly difficult during this busy season. To handle the increased demand for spot quotes, companies should be ready to turn to the spot market in case their regular partnerships cannot handle the increased workload. Spot markets for truckload shipments built upon TMS platforms are providing shippers low-cost options for spot quotes on lanes of all types. If a company cannot find enough drivers to transport their freight, turning to the spot market for capacity and drivers can be a smart choice.
Gain visibility to more carrier rates – It’s important that companies expecting large holiday shipping volume cast a wide net when it comes to finding carriers. Many companies only check with one or two carriers before booking a shipment, because the effort involved in going to each carrier’s website it too laborious. If multiple carrier quotes aren’t received, however, it’s likely that money and efficiency are being left on the table. With the help of a transportation management system, companies can easily connect all their negotiated carrier rates then view them side-by side for complete visibility to all their options. Comparing more rates means that the best carrier with the best service type for the load is always selected, leading to substantial cost savings and better customer service.
Companies should prepare their supply chains for this busy holiday season that includes the additional challenges of a driver shortage, capacity crunch, and rising consumer expectations. Leveraging a spot market to find capacity and connecting negotiated carrier rates to a TMS are some ways that shippers can keep their logistics operations running smoothly, and their customers celebrating all season long.
Read the full issue here: https://talkinglogistics.com/2018/10/31/preparing-supply-chain-holidays/