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The High-Stakes Search for Supply Chain Excellence During the Holiday Rush

If your supply chain isn't prepared for uncertainties that arrive with the crowds of shoppers, then you could be in big trouble. Here's why it's so difficult to plan for the holidays and how smart retailers and manufacturers try to avoid a nightmare before Christmas.

By Thomas Wailgum

November 16, 2007 — CIO — Black Friday and Cyber Monday sound nothing like the joyous season that’s supposed to follow. They’re more ominous and scary. And to many retailers and manufacturers those two pivotal days—and the month or so that follows—are just that.

Ominous, because the holiday shopping crush that happens just after Thanksgiving is a make-or-break time for retailers and consumer goods companies looking to bolster their fourth-quarter revenues with loads of sales. And scary because what sells and what doesn’t is just so unpredictable.

Nowhere is that uncertainty and accompanying pressure more intense than inside supply chain departments, where seasonal good cheer is replaced with gut-churning anxiety.

“The holiday season is a completely difficult time for manufacturers and retailers,” says Brian Tomlin, an assistant professor of operations, technology and innovation management the University of North Carolina’s Kenan-Flagler Business School. “They’re making educated guesses and bets on what demand is going to be, and they’re not going to get it right every single time.”

Indeed, the period from just before Thanksgiving all the way into the New Year is usually the “moment of truth” for retail and manufacturing supply chain and e-commerce systems. Other contributing factors are the critical supply and demand decisions made by logistics, marketing and financial personnel. And not all of them succeed.

Already this holiday shopping season, the BBC reported that Nintendo warned of global shortages for its hugely popular Wii game console and admitted “that not everyone who wants a Wii is guaranteed to get one this Christmas.” (How’s that for “bah, humbug!”?) Nintendo claimed that it was "doing everything possible" to keep up with surging consumer demand.

Despite an uncertain U.S. economy, with a housing slump, high fuel costs and troubles in the credit markets, the National Retail Federation predicts that the 2007 holiday sales will rise 4 percent from last year to total nearly $475 billion. Which makes how well your company can identify both positive and negative consumer demand trends and how quickly you can react to those signals all the more critical.

Tomlin says that retailers and manufacturers face a delicate balancing act. “If they’re overly optimistic, they can have too much inventory, have to mark down everything and do fire sale prices,” he says. “If they’re overly pessimistic, they’ll have unsatisfied customers and leave a lot of money on table.”

 

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