S&OP and supply chain planning teams within B2C and retail focused supply chains are especially challenged this holiday buying season. The period from the Thanksgiving Holiday in the U.S. through the holidays that extend into January of 2013 are a period of seasonal surge, where profitability for the entire year may be at stake.
In 2011, seven individual shopping days surpassed $1 billion in online consumer orders, with peak volumes experienced on Black Friday weekend, Cyber Monday, and every Monday leading up to December 15th. The implication was that orders came in huge surges, and supply chains that were not prepared, particularly those without robust inventory allocation or tight inventory visibility across their brick-and-mortar retail and online retail systems paid a price in customer loyalty. Response management proved to be a key capability for those that benefitted in the 2011 surge.
According to the latest numbers from marketing analytics firm comScore, Inc., U.S. retail e-commerce spending is up nearly 16 percent in the first 26 days of November. Cyber Monday online sales are now estimated to be nearly $1.5 billion, a corresponding 16 percent increase from last year. The hottest products during Cyber Monday were consumer electronics, computers, video games and consoles. If last year’s online trends hold true, B2C supply chains can expect continued weekly surges.
The 2012 holiday season adds even more challenges. Many consumer electronics supply chains are supply constrained because of either late new product introduction, or new technologies such as LCD displays that are experiencing lower manufacturing yield challenges. There is a fierce battle among electronic tablet providers for market share volume. In the gaming console area, Nintendo has nearly sold-out of its new Wii U console and its supply chain is challenged to fulfill remaining holiday demand.
On the demand side, the state of the global economy adds particular challenges for planning individual country demand. Reports indicate that shopping patterns within the Eurozone countries, currently challenged with high unemployment and a highly uncertain economic outlook is considerably different than previous years. Tighter consumer budgets have motivated online and traditional retailers to promote lower-priced goods. According to a recent article published in The Wall Street Journal, European consumers are refraining from buying presents for each other, impacting demand for electronic gadgets and jewelry. Toy sales, on the other hand, remain stable thus far. Shoppers in Spain and Italy are scaling back as much as 4 percent while 9 out of 10 shoppers in France are seeking special promotions before making a buying decision. Consumers in Germany on the other hand, have shown indicators of a slight increase in holiday sales. Similarly, consumers in China are concerned about the contraction in that economy and are expected to cut-back in holiday buying.
There should therefore be no doubt that consumers will leverage all of the mobile and online technologies at their disposal to find the best deals. That will obviously add to more added tensions among sales and marketing and supply chain teams in what types of promotions and product will be offered in the coming weeks.
In addition to robust response management capabilities, S&OP and supply chain planning teams among B2C supply chains will need to focus on fulfillment plans by individual country, and by individual channel. Inventory balancing will again be a critical capability to insure revenue plans are fulfilled, while not having inventory isolated in a non-performing channel or geographic region. Online retailers will continue to offer aggressive price promotions for the remainder of the holiday surge on inventory that can still be garnered, while combination brick and mortar and online stores will counter with their own promotions to keep people visiting physical stores. All of these activities will no doubt, challenge S&OP teams to near daily planning of activities.
For B2C supply chains, it is going to be interesting remaining few weeks, and we should expect these supply chain teams to be heads-down in response management and pulling off last-minute supply miracles.
It will also be interesting to reflect on the potential winners, when the dust finally settles.
What’s your view?