With a record-setting holiday buying season in its rear view mirror, what has the freight transportation industry learned about the challenges of supporting special sales events such as seasonal demand peaks, product launches, and promotional campaigns?
In this post, we take a look at the pitfalls that shippers and service providers face when planning for these spikes in demand. Next week, we’ll offer some strategies for avoiding missteps that cause lost sales and frustrated customers.
According to the National Retail Federation, retailers achieved record sales of around $52 billion over the four-day weekend following last Thanksgiving. Black Friday is a major sales event, but it’s also one of many such occasions on an increasingly crowded retail calendar. And each one of these special days relies on efficient freight transportation services for its success.
When deliveries fail to show up and selling opportunities are squandered, transportation is frequently cast as the chief culprit. But more often than not the problems revolve around communications – or a lack thereof – on several fronts.
Some companies make sure that all relevant internal stakeholders including marketing, sales, transportation, and procurement, attend key planning meetings in the run up to volume surges. That way, the different disciplines can appreciate potential glitches that are outside of their spheres of influence.
Marketing might have earmarked a date for a sales promotion in a region where the full truckload market is particularly tight at that time, for instance. Moving the date enables procurement to negotiate lower freight rates and secure more capacity.
Also, procurement usually has carriers and rates by lane and region on file. But if, say, a product is being launched in a new region, they might have to identify service providers in unfamiliar lanes. If procurement is not notified of the launch in time, they may not have found the carriers needed to handle the extra volume and are forced to resort to the spot market for capacity.
When transportation is part of the planning discussions, managers can make sure that facilities such as loading docks are prepared for the additional freight. They can check that exception management capabilities are primed, because there are bound to be glitches that have to be addressed quickly when a campaign is underway.
Unfortunately, in many companies these internal communications loops are broken or non-existent and planning is carried out in functional silos.
In the same vein, keeping external service providers in the dark about future sales events invites service breakdowns. Forty-eight hours before a major promotion kicks off, it emerges that the shipper will require 20% more trucks in a specific lane. Or a few days prior to a promotion the service provider gleans from routine conversations with customer contacts that an event is in the pipeline. Instead of initiating preparations for the demand spike, the provider has to do some detective work to find out what volumes are anticipated.
Either way, it is highly unlikely that the carriers involved will have assets positioned in the right place to support the imminent sales campaign. Again, in situations like these the spot market – and associated high freight rates – might be the only viable route to the extra carrying capacity needed.
Operational activities such as load planning can also be affected. If a shipper does not fully communicate how loads are to be stacked, for example, the result can be damaged goods. Another unwanted outcome is higher costs in the form of additional truck capacity. Should it turn out that a new product can’t be double-stacked as originally assumed, more trucks will be required to deliver the shipments.
In addition to becoming more frequent, special promotions and seasonal peaks are gaining in complexity. Take co-marketing campaigns where two manufacturers collaborate to promote complimentary products. Transportation providers have to deliver two waves of shipments within tight windows for these events.
New launches, sales campaigns, and seasonal events, are a vital part of retailers’ efforts to lure customers into their stores. But so is transportation, and companies that recognize this are more likely to hit their revenue targets for these red letter days.
Tune in next week for the 2nd blog in this series that discusses how leveraging open communication and systems can reduce the threat of unplanned costs and added stress to the supply chain.