Operations expert Donny Salazar, founder and CEO of fulfillment technology and services provider MasonHub, shares his best practices for managing delays and disruptions while preparing for peak Holiday season.
As life begins to return to a “new normal” and the global economy shifts into recovery mode, there is much for retailers to feel positive about as we head into Holiday peak – from shoppers returning to stores to shrinking unemployment and swelling consumer confidence. But COVID-19’s impact on the supply chain is not going to be over any time soon because it’s going to take a lot of people working in several sectors a long time to adjust to this new normal. I’m seeing three major areas affected: Carriers and shipping times, talent scarcity and workforce shortages, and inbound freight delays. Below, I’ll go into more detail about these trends, and how you can meet challenges head on to make sure you’re well-prepared for the Holiday onslaught.
First and foremost, there has been very little improvement in carrier delivery times because all the major carriers, from FedEx and UPS to DHL and USPS, are still working at capacity. I don’t see an immediate end in sight because it will take time for these large organizations to be able to expand operations to handle the capacity. Next-day air is currently taking two to three days or longer; second-day delivery is taking up to five days; regular ground shipping that normally takes three to four days is taking seven to eight days.
So, what can you do? Continue to monitor performance of your carriers. If you see delivery dates slipping, it’s a signal that you need to be careful about what timeframes you guarantee to your customers for Holiday and manage their expectations. This means carefully considering what your shipping cut-offs are going to be. It’s crucial to determine this before gift-buying begins in earnest, since everyone will be wanting their packages in time for holiday gift-giving.
The next top-of-mind issue is talent. It’s a tough market in which to hire right now, especially in the fulfillment and transportation sectors. Logistics is one of the fastest-growing industries and that means it’s hiring the most people. Companies like Amazon, Wal-Mart and Target are all competing for these workers because of how much shopping has shifted to online. This also impacts customer service teams. What’s clear is that if you need to find labor, you’ll have to pay more for it. This includes incentivizing people to apply for your jobs and giving them reasons to stay, especially though the Holiday season when the retail industry works overtime.
The third thing that you need to watch out for is delays in receiving inbound freight from overseas manufacturers. It’s currently taking upwards of several weeks because of backups at the ports. Even air shipping has been delayed because of the reduction in commercial flights.
This means you’ll have to reset your expectations for inbound delivery timeframes. Traditionally bringing receipts in late October or early November no longer works. Last year, people planned for their freight to arrive in October, but in reality, because of dock issues, goods arrived in December. So, if you tried last year for November, you may want to consider working with your manufacturers to move up delivery dates. Making purchases earlier can have an impact on your working capital needs, so try renegotiating terms with vendors, or take other measures to ensure you don’t experience a cash crunch.
The reason for all the issues with manufacturing and microchip shortages is that a lot of companies cut purchases and production at beginning of pandemic, assuming retail would tank, when in reality it didn’t. There was a blip in shopping activity, then people went back to buying again. Remember that when you cut your production and your demand forecast, it will take a while for the supply chain to catch up. So, make sure you are communicating your Holiday forecast to all departments within your organization that require variable labor and have a solid marketing plan to support it. This forecast will be used to determine how much capacity your partners will require during the crucial months of November to January.
My final piece of advice is probably obvious to anyone working in operations but planning for this time of the year is of the utmost importance. If you haven’t already started planning for Holiday, you’re late. We may be turning a corner with the pandemic, but its effects are still playing out in the supply chain. But knowledge is power, and a proactive approach is the best gift you can give yourself this Holiday season.