Get Ready for the Holiday 2005 Sales Season
Facilitated largely by the Internet, consumers have been ordering gifts later in the holiday season. Indeed, 20 percent of consumers reported they started their online shopping later in 2004 than in 2003, according to the 2004 Shop.org/BizRate.com Online Holiday Mood Study.
Shop.org also reported that 46 percent of online retailers offered express shipping promotions the week of Dec. 19, no doubt adding more pressure to their already full holiday workloads.
These trends can cause some rather drastic spikes and accompanying problems in any catalog business. During the past several years, we’ve heard horror stories of poorly planned operations resulting in excessive order backlogs, unfulfilled promises to customers, unmet expectations and higher than expected costs. Some of these miscues nearly put successful companies out of business. Many, but not all, of these problems can be minimized or eliminated with early planning, especially in your distribution center.
Smart marketers start preparing for the next holiday immediately after the prior year’s holiday celebrations have passed. Here’s a four-step strategy to help you get a jump on the holiday 2005 season.
Step #1: Assess Results, Gather Data
Review the overall past selling season for key issues or concerns to be addressed before this year’s holiday selling season arrives. Answer the following questions:
* How were overall season sales?
* When were the peak sales times?
* Were there any shifts in ordering patterns?
Examine any customer service issues from last holiday, and correct problematic areas.
* How fast were orders turned around?
* How did order accuracy compare to expectations?
* Did receiving keep pace with shipping?
Next, get as much information as possible about the upcoming season from your marketing and merchandising personnel. Many warehouse problems during the holiday result from a less-than-effective partnership between operations and marketing/merchandising. Among the areas to discuss:
* projected order volume by week;
* number of active SKUs;
* expected arrival dates for purchase orders in your warehouse;
* any changes to product mix;
* any special programs or offerings being planned; and
* planned inventory levels.
Use the data you’ve gathered to devise a plan that includes facility usage, manpower and updated systems for the upcoming holiday season. Of course, when you plan way ahead like this, some things are bound to change. For example, you may find that planned inventory levels or order shipments must be altered by summer, or even later, to accommodate new information from marketing and merchandising. Stay in frequent contact with the other departments in your company to inform one another of any such changes.
Step #2: Plan Facility Usage
* To prepare for the busiest time of year in your distribution center, plan in advance the use of your warehouse space. For instance, determine if you should make changes now in terms of: shelf-storage space and/or picking and packing space allocations; how you handle incoming vendor deliveries; or how you handle outbound package shipments.
* Develop a slotting strategy and space-allocation plan for picking slots. Optimize product placement for the hottest holiday items in prime picking locations. Store enough products in the picking location so they’re readily available when needed.
* Calculate the number of packing stations you’ll need, and compare that to packing capacity available. If you’re coming up short, you still have time now to make adjustments.
* Compare storage capacity for reserve inventory to your warehouse’s capacity. If necessary, make plans for storing excess inventory by better utilizing the cube or using off-site storage.
* Be sure shipping/manifesting capacity can meet peak demands. Functions such as printing packing slips and carton content labels, the ability to estimate shipment cube/weight, rate shopping and freight labeling all should keep pace during your busiest sales times.
Step #3: Plan Manpower
Here are some ways to make the process of hiring seasonal help go more smoothly:
* Determine the number of employees required for each functional area. Consider your year-round staff and the number of seasonal workers you’ve hired in recent years as a baseline. Also consider any internal changes that would impact whether more or fewer personnel may be needed for that particular function this coming season.
* Review training programs as to their effectiveness and timing in relation to your hiring plan. Hire and train seasonal help well in advance of when you’ll need them. While you don’t want workers sitting around idle, you also don’t want to be caught short when the holiday orders start pouring in. Start the hiring process early enough so there’s also reasonable time for adequate training.
* Develop a plan for managing and supervising the seasonal increase in staff. Have trained supervisors ready to control the staff increase. The supervisors should integrate seasonal workers as much as possible into their full-time staffs. For example, you can boost productivity of seasonal employees by offering them the same incentive programs you give regular staffers, and by making them eligible for flexible hours, special discounts and other perks.
Step #4: Plan Your Systems
* Review your warehouse computer system’s effectiveness from last season, and plan for necessary changes before the holiday season.
* Maximize your system’s ability to direct warehouse activities efficiently. Warehouse management systems (WMS) integrate scheduling, resource planning, logistics, and even transportation and light manufacturing functions into one package. If you have any or all of these systems functions, reap the benefits of them during your peak operating times. But even if you have a more basic WMS package, be sure you’re using all of the capabilities your system affords.
* Be sure any procedures/systems that are volume sensitive can handle your projected holiday activity volume. Go through marketing’s and merchandising’s projections to see where the volume levels are expected to rise during the coming season. This will help you anticipate peak activity levels. Be sure your system can process peak volume levels without slowing down.
* Test the flexibility of your systems. If you plan to add new merchandise or a whole new category, or if you’ll change the way you process orders, test now how this change will respond in the system. If your system requires alteration, you still have time to do that. Remember, a systems change could take a day or months, depending on the complexity. The good news is, most operations systems are underutilized, and so there likely still is room within the confines of your current system to accommodate additional functionality.
Of course, the best holiday planning is just that: planning. Until holiday sales are in full swing and it’s all happening in real-time, you can’t be sure how much product you’re going to move or how much staff you’ll need.
The key: Plan for some tolerance — perhaps up to 10 percent more or less than your planned budget allocations. If your operations team and managers are comfortable in that tolerance zone, there will be less of the last-minute surprise when the numbers aren’t exactly on target. You’ll know it’s all right because you’re within your zone.
Then when things settle down after the holidays, compare your sales, budgets and customer service figures against expectations. With actual numbers in hand, you’ll be able to better budget and plan across all areas for the 2006 holiday season.
Curt Barry is president of F. Curtis Barry & Co., a Richmond, Va.-based firm that specializes in operations and fulfillment consulting for catalog and e-commerce companies. Contact him at (804) 740-8743 or by e-mail at email@example.com. Or visit the company Web site at www.fcbco.com.