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Why mega sales days are shaping the future of demand-driven value chains

Why mega sales days are shaping the future of demand-driven value chains

Earlier this month, 11 November to be exact, it took eight minutes for shoppers in China to blow one billion dollars during Singles Day, a holiday-cum-shopping celebration created by e-commerce giant, Alibaba.

Singles Day — China’s equivalent of Cyber Monday in the US — was originally a ‘folk holiday’ during which China’s many single people bought gifts for themselves. In 2009, e-commerce leader, Alibaba, began celebrating the day with 27 merchants offering steep discounts aimed at attracting more customers online. This year, an astounding 40 000 merchants offering discounts on millions of products, helped lift Alibaba’s sales to over US$14 billion, a staggering 60% higher than last year.

Similarly, the two largest retail shopping days in the US — Black Friday and its younger sibling, Cyber Monday — are also expected to once again decimate all forecasts. According to Adobe’s Digital Index, US online sales on Cyber Monday will reach US$3 billion for the first time, with online Black Friday sales close on its heels at US$2.7 billion, (excluding bricks-and-mortar sales).

shutterstock_198860867Yet few people realise that these sales days — driven by the increasing global popularity of online shopping — are not just a retail phenomenon; they have a far more profound impact that reaches much further back into the supply chain. The frenzied stampede of bargain hunters (both online and in-store) places immense strain on both supply chains and logistics networks.

The rapid escalation in demand created by sales events like Black Friday can be extremely lucrative, but can also wreak havoc on unprepared supply chains, as demonstrated by last year’s Singles Day event in China. Although the day saw Alibaba rake in sales in excess of US$9 billion, delivery times slowed down from two days to over a week.

So how can you tell if your supply chain is ready for such an onslaught?

With millions of enthusiastic shoppers lining up — or logging on — for deals, retailers know the success of the biggest shopping day of the year rests on a strong supply chain. Preparations for Black Friday begin long before customers get in line, with supply chain managers going over their supply and demand strategies and putting plans in motion to acquire the products they need months before the event.

Peak planning is one of the most critical components of a strong supply chain. Managers begin their preparations by assembling and training a team that is focused on preparing for holiday demand and capacity. Cross-training new team members on multiple skill sets give managers the ability to position new people based on seasonal shifts. 

Cross-docking is a valuable set-up, particularly during holiday shopping times, as retail stores ramp up order volume to keep shelves stocked. High-volume cross-docking operations allow for quick routing of goods from supplier to retailer, while keeping inventory carrying costs at a low level.

With the team in place, managers need to make sure the warehouse or distribution centre is set up for maximum throughput as inventory volumes surge. Fast-moving products, for instance, should be stocked closer to operating areas to reduce travel distance. For products with different order velocities, a slotting plan should be developed to help ramp up fulfilment for seasonal products. 

As volume increases, supply chains will see more full-pallet or full-case replenishment orders. Setting up the DC to support cross-docking will save time, allowing your workforce to move the products through the facility and build orders faster. 

A more recent, yet major trend, is the ability to have flexible order processing capabilities. This relates to packing products in different ways and having a make-to-order supply chain, which is one of the key capabilities in consumer goods and consumer electronics — the two most popular product categories on Black Friday and Cyber Monday. A make-to-order supply chain allows retailers to adjust order patterns quickly to capitalise on changing trends.

The impact on manufacturing

Manufacturing firms too are undergoing radical transformation to speed up order cycle as a direct result of e-commerce. The pressure to move goods to market faster and deliver to promise has a significant impact on how manufacturing companies strategically manage their business. The definition of an acceptable order lead time is changing forever. Gone are the days where order lead times of 8-10 days were considered competitive. A one-to-three day lead time is now the preferred option, so the retailer requires next day order fulfilment for all SKUs being sold through its website, regardless of ABC classification.

Today’s demanding customers expect immediate, superior service, which places greater pressure on manufacturing companies to improve their perfect order index (POI) and provide more on time, in full, accurate and damage-free deliveries. Manufacturers and retailers also have a greater need for just-in-time inventory and to tie supplier performance more closely to POI.

It is clear that business is at a critical crossroads in terms of demand-driven value chains and customer satisfaction. The battle lines are drawn. The new weapon of choice is speed to market, and the victors will be those companies that have engineered the fastest and most responsive logistics capabilities.

 

Download the 40 Supply Chain Optimisation Terms eBook to find out more about the concepts critical to the success of your supply chain strategy.

About TRACC
The TRACC framework helps organisations build standardised and integrated good practice and performance capacity across their Plan, Source, Make and Deliver functions. Simultaneously it accelerates their collaboration and alignment capacity to build world class end-to-end value chains, enabling the organisation itself to become the ultimate source of sustainable competitive advantage.
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