Comment: Handling peak season challenges in e-commerce logistics
Peak seasons such as Ramadan, Christmas and the many popular discount days (Boxing Day, Black Friday,cyber Monday) bring joy to the consumer hunting for bargains, but represent a huge challenge on both the e-tailer and the carriers doing the final mile delivery.
For e-tailers,they have a huge burden to forecast multiple aspects of their business. They must decide which products or items would be most popular and have them in stock, how much growth would be realised based on the marketing efforts and budgets that are allocated and prepare their supply chain, warehouses and fulfilment capabilities accordingly.
As for the carriers in the MENA region, they started to experience what UPS and FedEx faced in the US back in 2013. In some years, the demand was way over capacity. In others, the carriers overcompensated and ended up with unutilized capacity.
What makes the peak season even more challenging is the preparation not only on the operational level, but a huge surge on the customer service demand when handling a vast majority of business shipped with Cost of Goods service and the resource eating process of verifying addresses in non-address-structured countries.
For the carriers, the preparation and forecasting exercise is multi-dimensional and involved the following:
Data collection from customers
Naturally, this needs to be done for each market the carrier operates in and from the large and sizeable customers (e-Tailers) who can seriously affect the capacity allocated for those peak periods. This process includes all domestic e-commerce and cross-border volumes feeding that country.
For short production peaks of one to two days, it is probably easier than extended peaks like Christmas or Ramadan where promotions can be running for a couple of weeks when the volume fluctuates during the period and can seriously affect capacity.
This involves looking at the past spikes and make use of this information to forecast the future. This needs to be taken obviously with caution as the customers’ mix and the marketing activities done by each customer can drastically change, the production of that customer during the year can give signals that affect the peak volumes.
The traditional retailers are retaliating
This has been a very interesting change in the past couple of years where we see both, the key traditional retailers in the malls and the small shops making significant efforts to ride on the same wave of the “Online” ecommerce shopping discounts days. Superdeals on Black Friday or “White” Friday and similar events in markets are having a significant effect on how the consumer spend their money. The efforts by the traditional retail has a serious effect on the potential online business to be generated during those seasons
Rationalising all the factors
This is the most important stage to understand how all the inputs gathered previously add up and how the total business volume expected compare against the overall growth projections in the market.
For example, if we discuss the growth projections of eTailer A , B and C, they expect a 50%,40%,70% increase in their volume during the peak season, we need to think deeply about this. Can the market and the customer buying power really support the cumulative “Projected” real volume of packages produced and pumped into the market?
What is known is the buying power and the expendable money can grow certain percentage points depending on the peak season and the market economic condition, hence it is not a total Zero Sum Game, but the market cannot surely support exaggerated growth rates that might be forecasted.
Considering all the above, it is complicated to account for all above variables ,specially when trying to balance having the etailers accountable for inflated projections that can cost carriers a lot of wasted and costly capacity, and at the same time building sufficient capacity and contingency plans to react faster and clear capacity shortages.