It is a Christmas story almost as old as Father Christmas himself. Your child – seemingly for months on end – has dropped hints about the toy that they absolutely must have this Christmas. You are left in no uncertain terms that if the said toy should not appear on Christmas Day there will be consequences. But then, of course, you go to the shops to find that they have sold out.
It is a horror that no parent wishes to face – but it is also something that consumer goods companies want to avoid at all costs. The run up to Christmas is, after all, the busiest shopping period of the year and if manufacturers can capitalise on it the rewards are vast. Take the example of the UK where shoppers this year are expected to spend £1bn in just one day. Even considering that particular day is Black Friday this is a mind-boggling sum.
Clearly, if consumer goods companies are to make the most of this huge surge in demand – and ensure there are no tears come Christmas Day – then supply chain management is going to have a very important role to play.
Clearly, if consumer goods companies are to make the most of this huge surge in demand - and ensure there are no tears come Christmas Day - then supply chain management is going to have a very important role to play.
Of course, when it comes to supply chain management, things have never been trickier. Gone are the days where we relied on magazine reviews, TV ads or word-of-mouth to find out about the latest must-have toy or beauty product.
Today, thanks to online forums and social media, we can easily and quickly identify the gifts we want (for others and, let’s face it, for ourselves) months before their respective release dates. And with brands ramping up the advertising push through traditional and digital media in the months prior to the start of the festive season, demand for the product of the moment can grow at an exponential rate.
Without effective supply chain management processes in place, low stock levels are inevitable. As we have seen, running out of a highly sought-after product, especially in the run-up to Christmas leads to low customer satisfaction.
Ineffective stock management processes can also lead to many other challenges for brands, not least the pressure it puts on distribution channels as manufacturers attempt to cope with additional last minute orders, which need to be shipped in time. Or, if a brand decides to bet all on its product and over-stock in the run up to Christmas, they risk great losses if the stock does not shift.
So what can companies do? Well, as with anything – knowledge is the key to success. If brands can identify in advance which of their product lines will be successful and when major peaks in demand will occur, then they can plan accordingly. In the past however, there was little that companies could do in this regard beyond looking at historical sales trends and trying to project from them what will or won’t be hot in the season ahead.
Today companies have a lot more data at their disposal. Thanks to big data analytics, they can gather data from a wide variety of sources. This includes structured business data –such as past sales figures – as well as unstructured data from pretty much any source you can imagine. These different data sets can then be analysed for any interesting correlations which might help brands predict the big trends of the Christmas season to come.
In this respect, social media data is perhaps the most important unstructured data source available to consumer goods companies. If brands can collect tweets, likes, public posts and other social media data they can build an accurate picture of where public taste is heading in the lead up to Christmas.
But predicting what will resonate with customers and when is only one half of the story. Once the season is in full swing, consumer goods companies still need to monitor their supply chains to ensure actual results are matching the predications. This allows them to flex distribution accordingly and keep their customers happy.
This on-the-fly supply chain optimisation demands that brands be able to match supply with demand accurately and change supply flows if required in real-time.
In this regard few trends are as important as omni-channel fulfilment. This allows companies to expand fulfilment options to include stores, inbound supply, manufacturing capacity and supplier availability. This leads to decreased reliance on their customer distribution centres to meet demand – an important way of ensuring profitability during the Christmas peak.
The key to a successful Christmas is therefore simple. It is in essence about understanding what will be in demand and delivering on it. In part this process involves predictive analytics and in part real-time visibility of supply chains and an agile approach to distribution. The result is a profitable peak season where supply matches demand perfectly and no customer is left disappointed.