How To Adjust Your Supply Chain With A Peak Logistics Strategy
This is a guest post by Jake Rheude.
Peak season is here, and supply chain management processes for it are already in place. But as every logistics professional has learned, an entire chain can change in an instant. To protect yourself and your blood pressure, it’s time to put a logistics strategy in place for what goes right or wrong during peak.
Every Peak Strategy: It Depends
With the uncertainty created by the past few years, your logistics strategies will all be variable and require flexibility in operations. Plan, stage, prepare to execute, and then let go of a “must-have” outcome so that you can adapt as necessary.
Here are scenarios that can help you tailor a logistics strategy to your reality, customers, and what’s possible. And remember, at this point, your supply chain assessment will focus heavily on the downstream aspect of getting goods to your customers, whether they’re businesses or end consumers.
When Everything Is Running (Mostly) Smoothly
Peak season may start out running well, and your supply chain is moving without issue. If that’s the case, your logistics strategy is about staying the course while reducing costs. This could mean reviewing carrier rate increases that target your products, especially if you ship heavy or large items. Or, you could increase the time operations managers have to track warehouse and carrier activities. Watching for trends can help you spot issues early and have time to avoid the worst of them.
Benchmark your systems now so that you can assess performance. Benchmarks also give you guardrails to see when an issue might occur, so there’s more time to adapt to meet peak demands. Something as simple as reslotting goods in your warehouse may help you avoid pick-and-pack times that lead to delays. It’s not a time to try to reinvent the wheel but an opportunity to look for small gains that minimize disruption to your supply chain.
There’s one caveat here. If you’re still running a lean inventory strategy, consider ramping up to avoid delays. Improve your cushion to minimize disruptions when demand shifts or carriers experience issues.
If Containers Are Slow or Stuck
Due to adverse weather, pandemic outbreaks, and labor disputes, there’s a significant chance of another port slowdown in major manufacturing hubs. When these occur, containers are often stuck for a short time and then delayed on the ocean for much longer. That puts a big strain on peak planning and restocking for those last-minute holiday sales.
If your goods are stuck at the beginning of their transit, it’s time to shift marketing, sales, and other messaging to focus on what’s in stock. Yes, you might be able to use air freight to move some items quickly, but that significantly reduces per-unit margins — especially if you’ve already marked goods down for a year-end sale.
Once Q4 starts, any delay can put a container out of reach for the holidays. Here is where you’ll need robust inventory data across all warehouse and fulfillment locations to leverage what you have on hand.
Delays Hit the Last Mile
It’s time to start talking to your carriers or 3PL partner consistently. Provide updates on expected volume. See where you can negotiate capacity, just in case. And discuss rates or other concerns you may have at this point. There’s not a lot of deal-making that’ll drastically cut your costs. Still, you may realize opportunities to shift volume among carriers to maintain capacity while optimizing for spending and delivery times.
When you’ve handed parcels off to last-mile carriers, there’s not much you can do beyond monitor and adjust for the next order. Is there an affordable alternative if one carrier is starting to miss delivery projections or leading to higher complaints? If expedited services are delayed and reach customers at the same time as standard ground shipments, is paying more upfront worth it if you then spend time trying to recoup that cost?
Don’t neglect regional carriers if you see a flood of orders for any given territory. Trucking companies have been merging and condensing in recent months, so some regional providers may have a larger direct fleet than during peak 2021. There’s potential for you to adjust quickly and reduce either cost or the chance for delays.
The Surge Hits
That communication you’re doing to hedge bets against carrier troubles can also help you when an unexpected surge in orders arrives. There’s still time for a breakaway product of peak season. That may include you or lift some related sales. Someone out there is going to hit a demand curve they never expected — and may or may not be able to handle it successfully.
As soon as you start to experience any dramatic increase in orders, operations and customer success teams should start talking with your carrier and peak fulfillment partners. Yes, your 3PL will be able to see that there’s a spike as orders start hitting its system. But the best partners provide an early heads up when website demand increases significantly, which translates into sales.
Your strategy here also includes communicating with customers. Let them know about the demand you’re facing and that it may lead to potential delays. Pull added costs or expedited shipping options from your website. Look at order management tools to automate notifications about deliveries. Over-communicate and thank people regularly for shaping your success.
Don’t Peak Too Early
Let’s end with an important note about peak season: it doesn’t end with 2022. The true peak season can push well into February because you’ve got returns, replacements, and refunds that hit in January. At the start of 2022, for example, UPS noted that it was close to reaching 60 million returns in its network. Roughly 25% of all Americans planned to make a return during the last holiday season.
This means your peak planning should consider reverse logistics based on volume and activities listed above. If you got stuck with inbound freight delays and prioritized older goods, you may want to make all sales final or simply process refunds without asking for goods to be returned.
If you need those items back, prep your warehouse or 3PL teams now with what they need to manage returns. This includes QA guidelines, additional packaging, SKU data if you track “used” items separately, and more. Provide everything they need to plan for a large volume of returns.
Carriers, 3PLs, and eCommerce businesses are all going to face high levels of returns. Plan now so your sales, marketing, and operations units can all put strategies into place to either minimize returns or streamline workflows to reduce the man-hours required for processing.
This was a guest post by Jake Rheude.
Jake Rheude is the Vice President of Marketing for Red Stag Fulfillment, an eCommerce fulfillment warehouse that was born out of eCommerce. He has years of experience in eCommerce and business development. In his free time, Jake enjoys reading about business and sharing his own experience with others.