Find out how leading retailers prepare for the holiday season in this interview with our colleague Sander van Lokven.
It’s hard to beat Santa’s supply chain. Who else offers present deliveries to millions of households around the world in a single night? Even our favorite retailers are not there yet! We like to think new methodologies and tools are helping them get a little bit closer, though. In this interview, Districon’s Sander van Lokven shares insight into how retailers prepare for the holiday season. Districon is a supply chain specialty firm and an AIMMS partner with more than 40 years in the business.
Sander, can you start by telling us about yourself and your experience in supply chain optimization?
I have a background in Operations Research and worked as a process consultant for Districon in EMEA, delivering optimization projects for nine years. Two years ago, we started working with Peapod to design their warehouses and we set up a Districon branch in Chicago. I'm now responsible for our North America operations and manage a team of six consultants here in the Chicago area.
Peapod is one of several retailers you have worked with. Can you tell us, based on your experience, how your clients typically prepare for the holiday season?
Yes, we have worked on forecasting models for several e-tailers. Holiday forecasting is an interesting topic. What makes it a difficult period from a supply chain perspective is that you have to deal with peaks in demand, but the exact day in which the peak is highest depends on which day of the week the holiday falls. For example, if Christmas day falls on a Monday, the Friday before will be extremely busy. Planning your logistics and store fulfillment to deal with that peak is important, but so is planning your employees.
When do retailers typically start preparing?
A holiday like Christmas typically impacts 6 weeks of your calendar, 3 weeks before and 3 weeks after.
You need to have your promotional campaign ready weeks ahead of time and you need to make sure your suppliers and their suppliers have availability. The best practice is to start by looking at your forecast and marketing campaign. Then you plan your logistics to ensure you have the required capacity. Sometimes you need to arrange temporary vehicles for that specific period, like extra trucks, or extra workers, like drivers and warehouse staff.
Then there’s the period after Christmas. Retailers start to prepare for next Christmas in January. We have seen companies use up to 14 years' worth of historical data to learn from past experiences and improve their performance year by year.
What role does Sales and Operations Planning play?
The S&OP process is very important. An S&OP application can help you map your needs to the required capacity. Then operationally, you need to deal with the chaos. Things are changing all the time. So it’s important to build in flexibility in your processes and it helps if your S&OP tool is flexible enough to help you deal with changing circumstances too.
Can you tell me how the Apps you have built help companies prepare for the holiday season?
For Peapod, we built an AIMMS-based wareroom slotting tool. The solution has made it really easy to optimize product placements in their warerooms for more streamlined pickings. It ensures fast moving items are slotted at ideal grabbing height, minimizing reaching or crouching. This solution also helps them deal with limited capacity during the holidays. Their warerooms have a very small space to satisfy demand, so it helps to have a tool that will help them optimize the use of that space.
For a fashion retailer, we developed an S&OP application to help them manage their production capacity. With this tool, they are better able to prepare for special seasons, like the upcoming Christmas holidays, and they can respond adequately to events that cause fluctuations in demand.
Another application we recently built for a German retailer optimizes replenishment quantity and the frequency in which each SKU is replenished in stores. The tool automatically changes order settings to keep the picking and transportation process running smoothly. This is incredibly useful during the holiday period.
Furthermore, we are currently working on several applications to reduce congestion within retail warehouses. Using tote cubing, we can reduce totes in congested areas by adjusting the default allocation. With tote release and (re)prioritization, we dynamically optimize the workload spread over workstations and the warehouse’s total throughput.