How the Holiday Season Impacts Supply Chain

The holiday season brings joy and festivities to the lot, but it means a whirlwind of chaos for businesses. Over the past few years, the supply chain has been in a constant loop of disruptions during this period, owing to COVID-19, blockage in the Suez Canal, Panama Canal drought, Red-sea turmoil, and more. 2024 festive rush presents time constraint challenge, as it is compact with Thanksgiving falling on Nov 28th, leaving fewer days to move consignments. With the surge in demand, the shipment volume can increase by 50-100%, there’ll be potential delays, longer lead time, and higher shipping costs. This period will be difficult for businesses to ensure seamless operation and customer satisfaction. So, how should organisations prepare to overcome the obstructions and navigate the peak season rush?

Factors Affecting the Seasonal Supply Chain

• Economic Uncertainties: The holiday season has a significant effect on retailers due to Thanksgiving, Black Friday, Cyber Monday, Christmas, and New Year shopping. However, according to recent data, with the continued inflation and rising prices, customers are tightening their belt and scouring for best deals. Nearly 70% of supply chain leaders revealed that they view the economic shift as a larger threat compared to geopolitical instability or infrastructure issues. While retail consumption pattern has remained similar compared to last year, Forbes suggests that consumer spending could decline due to economic uncertainties.
• Changing Consumer Behaviour: Consumption pattern is one of the key aspects to consider among many others during this peak season. This year, purchasers are focusing on deals and discounts, and moving towards budget-friendly options since inflation has remained persistent. A recent study has confirmed that 52% of shoppers will prioritise deals and discounts over other criteria and that 18% of shoppers will cut back on non-essential holiday purchases. This period is likely to bring a shift in brand loyalty since price cuts, limited editions, and sustainability are big determining factors for shoppers.
• Increasing Cost: This year’s shopping season is compressed since there are very few weeks between Thanksgiving and Christmas. This means that the supply chain industry will have a shorter time frame to get all the orders delivered just in time to customers. This condensed schedule will lead to elevated volume and more capacity demand for carriers. As they strive to meet the requirements, it’ll lead to higher surcharges and operating costs.

Common Challenges Faced

• Inventory: During the peak shopping season, effective oversight of stock is key to meeting customer demand. However, it remains a significant challenge for supply chain leaders, despite planning. A recent survey found that 62.4% of leaders and 38.8% of retailers cite that stock shortage is their biggest concern.
• Labour Challenge: Labour shortage reaches a new height during the peak season, affecting the organisation’s ability to meet customer demand. While this year’s holiday season is short, it is critical to ensure that everything is in place, this includes manpower planning. Instead of just scaling the headcount, perhaps it’s time to consider employing AI to navigate this hurdle.
• Predicting Demand Accurately: Holiday demand forecasting is essential to meet customer needs. However, with unpredictable consumer behaviour affected by economic uncertainties, what’s projected to be the most popular item may not be the case.
• Transportation & Last Mile Delivery: The challenge in last-mile delivery continues with the increase in demand along with heightened customer expectations. The influx of orders can strain the existing logistics capabilities leading to delays and negative customer experience. Since this year’s peak season is compact, findings suggest that 82% of businesses are concerned about missing the delivery window.

Harnessing Technology to Tackle the Challenges

The peak season supply chain is complex, and AI is continuously proving to help planners manage risks and ensure uninterrupted flow throughout the period. According to 2024 Supply Chain Confidence survey, 80% of respondents view AI as a key solution for the holiday SC issue. Nearly 61% reported having invested in new technologies to run more efficiently and reduce the overall cost. McKinsey also highlights that AI-powered enablement can improve logistics costs by 15%, inventory levels by 35%, and service levels by 65%. Additionally, an Adobe survey revealed that 58% of customers believe that GenAI has made their shopping experience easier. Here’s how cutting-edge technologies can help navigate the surge.

• Automation driven by AI and advanced analytics can significantly improve inventory management and demand forecasting.
• It enhances visibility, allowing logistics providers to track vehicles in real-time helping them make decisions regarding route disruptions and delays.
• They can equip manufacturers with insights into consumer trends helping make a more informed production decision.
• AI can be used to simulate different disruptive scenarios to help planners prepare for unforeseen circumstances.
• It can address the labour problem by equipping planners with insights to locate understaffed and overstaffed areas and even train new holiday hires.

Prepare for Peak Season Surge with SCAI

The holiday season is the busiest period for many manufacturers, retailers, and value chain planners. It presents challenges, but by preparing ahead with our end-to-end supply chain planning platform, SCAI, organisations can navigate the surge effectively. Our tool can improve the forecast accuracy by 15-25% helping manage the optimum inventory level and identify trends. It can also improve planner productivity by 20-35% enhancing resource allocation and productivity. With real-time data and valuable insights, this innovative technology equips businesses to navigate disruptions swiftly.

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