For most people, Christmas is the most reflective time of the year. What comes to mind is the colorfully decorated Christmas tree, the many gifts for happy children's eyes and the mellow light of the flickering fireplace in the background. But for this beautiful vision to become reality, some people experience their most stressful time of the year behind the scenes in the Christmas business with all its logistical challenges. Yet, it does not have to be this way: thorough planning minimizes the stress – even if the year 2021 has its own peculiarities due to the pandemic.
Christmas 2021: a Slightly Different Christmas Business
Global logistics has been in a state of emergency for quite some time. Since the outbreak of the pandemic in early 2020, nothing has been the same: recurring temporary closures of production facilities on the one hand and ports or other reloading points on the other have disrupted global supply chains. The lower demand for many goods caused by shutdowns prompted companies initially to scale back their capacities. When demand eventually increased again, however, capacity could not be re-established at the same pace.
There is a shortage of manpower, containers, and time: the ports are working at full throttle but cannot keep up with the unloading and loading of ships. The railways are completely utilized for the transport of goods, and the roads are at the limit of their capacities. For retailers, this means that if they do not want to fall behind in the Christmas business, they must be quick and deliberate in their actions – and prepared.
The Challenges of Peak Season
In e-commerce, the most successful companies are those focussing on one specific key performance indicator: customer satisfaction. This is even more the case during the peak Christmas season. If a delivery is not on time under the Christmas tree, the disappointment is huge. And if it is obvious in advance that the delivery will not arrive by Christmas or that the products are not in stock, customers will switch to competitors with a clear conscience. Even the most loyal devotees of a particular retailer sometimes tend to become “unfaithful” during the holiday season.
These are the challenges retailers must cope with at Christmas time:
- Orders are increasing: There is no time of year in which more products are sold than in the fall in preparation for Christmas. The larger order volume leads to more logistical expenditure: the warehouses are emptied, and the free capacities of the freight forwarders are steadily decreasing. This results in delivery delays and products being out of stock.
- Susceptibility to errors rises: With growing order volumes and the simultaneous demand to deliver at the usual pace, stress-related errors may occur more frequently. For one thing, this can have a negative impact on logistics costs, and for another, it can lead to a decline in customer satisfaction if customers suffer from these errors.
- More return orders: If more products are being ordered, correspondingly more products are being returned. This is most noticeable in January, when the gifts may not have gone down as well as expected with the presentees. Thus, the logistics effort not only increases in shipping, but also in the processing of returned goods.
- Staff shortage in logistics: In most cases, the additional workload cannot be met by permanent employees alone. Auxiliaries are needed to provide temporary support in the Christmas business. Due to the global logistics crisis, the pressure on retailers is growing and the lack of personnel is also having an impact on them.
- Competition is becoming more intense: Especially at Christmas time, retailers are busy vying for the attention of their target group. For all market participants, this ultimately translates into higher marketing costs. The same applies to personnel and shipping charges. That makes a successful Christmas business all the more necessary to compensate for rising costs. The pressure is growing on everyone involved.
The challenges of the Christmas business are well known and nothing new. This year, however, the situation is special because of the pandemic. In particular, the lack of personnel is hampering stable supply chains.
Logistics Preparation for Holidays: Focus on the Customers
Indeed, the Christmas business presents logistical challenges – fortunately, there are solutions for them. Those in logistics who act early and prepare themselves for Christmas can keep their supply chains stable, avoid cost increases due to spontaneous bailouts, and keep customer satisfaction high.
1. Retail Automation
The increasing volume of orders is a challenge for the entire team. Significantly more orders must be processed in the same working hours and often with the same number of employees.
To minimize stress and consequently the incidence of errors, on-site processes should be automated to the greatest possible extent. This relieves the employees, who can now concentrate on their essential activities: activities, which only human workforce can truly master – and neither machines nor tools. Robots help in order picking, warehousing software helps in managing inventory, and tools for supply chain risk management help to monitor supply chains and respond to potential delays at an early stage.
Automated trading counteracts tight staffing levels during the holiday season. It provides customers with real-time inventory information and avoids potential disappointments. It also reduces costs – not just at Christmas.
2. Order Volume Control
Retailers can actively influence when and how many products are ordered. Admittedly, only to a small extent and primarily with customers intending to order something anyway – but this can make all the difference, specifically during the turbulent Christmas season. But how? A date should be set that is close to Christmas, such as a week before: a day that retailers know all orders received by then can be delivered on time. Several measures can be applied to encourage customers to place their orders by this date.
- Free delivery may be offered until the end of this deadline.
- An alternative is to provide discounts on bestsellers until that date.
- Or on-time delivery by Christmas is promised if orders are received by that day.
Accompanied by advertising, retailers can thus actively address their target group and induce them to order by the deadline. Many customers willing to buy are likely to take advantage of the offers.
3. Expansion of Infrastructure
At no time of year as many items are ordered as during the Christmas season. To satisfy customer demand, capacities must be increased to a corresponding extent. This may involve, for example, the expansion of the warehouse. However, this is difficult in the short term, so it seems appropriate to collaborate with a 3PL service provider. 3PL is short for third-party logistics and represents a means of outsourcing one's own logistics, comprising warehousing, order preparation, and freight transport.
The aim is to continue supplying customers punctually, especially at peak times, so as to ensure a positive shopping experience. Those who expand capacity early on are well prepared for the holiday rush.
4. Giving Customers Control
For high customer satisfaction during the festive season, it is crucial to keep shoppers well informed during all stages of the purchase. When will the shipment reach the customer? Where is the package at this very moment? How can the customer receive the package if he or she is not at home at the time of delivery? Christmas Eve is obviously the deadline by which a package must be delivered at the latest. If this cannot be guaranteed, customers must be notified in good time so that they can find other options for their presents. After all, no retailer wants to spoil the customers' Christmas celebrations.
And because customers themselves know best who delivers most reliably in the area where they live, it makes sense to let them decide which delivery service should bring the goods.
5. Putting Logistics to the Test
There is always potential for optimization in a retailer's logistics. That is why it should be put to the test from time to time – especially in anticipation of the holiday season. Due to the increased parcel volume, some shipping providers often charge seasonal supplements for their different services. Others offer only rudimentary tracking information. Moreover, because of the large number of orders, parcels may be damaged or even lost more frequently. Proper insurance is essential for retailers and customers alike.
And when it comes to the first mile, how quickly do goods actually reach retailers' warehouses when they run out of product? Over the Christmas period, this can happen more quickly than one might expect – and that means customers cannot order. Advanced logistics with an experienced service provider at your side can reduce shortages and enable a rapid response when the occasion demands it.
Christmas business does not start in December, but now at the latest – in November. Early logistical planning allows for delivering gifts on time, having enough goods in stock, and not losing customers to the competition, but, on the contrary, maybe even attracting them. DHL Freight provides reliable logistics support as the Official Partner of Santa Claus.