Christmas is a holiday which almost has a magical quality to it, especially for children. A major part of this magical feeling is imparted by the main protagonist, also known as Santa Claus. The elaborated story of him living at the North Pole with a bunch of elves, riding a sleigh pulled by flying reindeer and visiting every household around the globe in just one day, certainly is responsible for the special aura of this man.
Now, if you just think about the things Santa does on Christmas, you will realize that everything has to do with the supply chain. He is – in fact – a kind of supply chain super hero. Some people say that Coca Cola invented this guy, or at least our image of him (which actually proves to be wrong), but Marvel Comics would be more likely.
Let’s sum up what Santa is able to do:
- He knows your Christmas wishes (telepathic demand planning)
- He and his elves manufacture and wrap all presents for Christmas within a year in a secret factory at the North Pole (nearly unlimited production resources and probably access to a time bubble)
- He delivers every Christmas present within two days around the globe and even sometimes finds a moment to talk to children (ultra-fast speed)
We all take these powers for granted and do not really appreciate what he is actually able to do. Let me highlight this for you by making Santa an ordinary guy running a business with an extensive logistics department. If he had no magical powers, what kind of challenges would he face?
Ok, so Santa is no telepath. As a normal demand planner (with a white beard and a red mantle), he would probably rely on historical dispatches and do his forecasts for the current year. The problem is: most people do not receive the same present as in the previous year (socks are sometimes very popular, another exception: my father gets a new sweater every year). So this data is not very solid and probably not very helpful, if you remind yourself that he is not planning for a group of customers, but for each individual customer, and needs a 100% service level. Each year there is a certain trend with regard to gift categories, but this does not help with individual presents either. With regards to the magical Santa, it is also often overlooked that sometimes people return presents after Christmas (this factor increases with the recipients’ age) which seems to be a big business in the non-magical world. So real-world Santa has to incorporate a certain percentage of forecast error from last year. In case of a very small percentage of overall households to be visited, the historical data is complemented by actual wish lists, which mostly children send to special Santa Claus post offices. With regard to global demand planning these lists represent only a drop in the ocean.
So there he is, the demand planning Santa: hardly useful historical data with a relatively high error factor, some high-level trends and – compared to all gift recipients – a very small number of wish lists. Did I say that people tend to change their Christmas wishes over the course of the year? Good luck, Santa.
Procurement and Production
Magical Santa obviously has unlimited resources at his hands and does not need to procure any raw materials for his factory at the North Pole. Real-world Santa would have to have a real serious procurement budget with which he would have to buy the materials or finished products based on his, probably not so precise, demand planning. At least the supply of wool for socks is likely to be stable over the years. It is very difficult to tell how big his procurement budget would be, but it is possible to make an assessment of the total retail costs of Christmas gifts.
Assuming he visits all of the 1.8 billion children in the world, the total cost of Santa’s presents amounts to $244 billion (with certain assumptions). If he has that kind of money, he would have the combined wealth of the top 3 people on the Forbes List of billionaires, leaving a huge gap to Bill Gates. But then he could only hold up his business for one year, since he doesn’t make any revenue. $244 billion a year would mean that he needs the annual budget of a country like Belgium.
And then there is the actual production. For real-world Santa, a not so accurate, but an enormous amount of raw materials and purchased parts would be thrown into a production process with limited capacities. Unless his factory has gargantuan proportions with a myriad of production units, he will be facing more than a small production scheduling problem. And since Industry 4.0 has not evolved to a state where Santa would have a smart factory at his hands, he would need more than an army of elves (probably several million, with a total production cost amounting to trillions of dollars) to work under not so jolly labor conditions.
At this point, we can see that real-world Santa would ruin this Christmas. But for the sake of describing the delivery challenge, we will just assume that he got very lucky and has the right present for each individual recipient. Moreover, he knows exactly where his clients live or even better: celebrate Christmas. The actual problem is much bigger: the clients celebrate in different time zones and have preferred gift giving times and days.
According to some calculations he has to travel 510,000,000 miles on Christmas Eve and has 32 hours to do that (which is actually a traveling-salesman-problem). That would mean that he would be travelling at 10,703,437.5 km per hour or 1,800 miles per second (0.97 percent of speed of light). That number does not include any stops – however sometimes Santa is seen talking to children, so he is probably faster. Another challenge: putting all the presents on his sleigh would amount to 2,363,310.33 metric tons. Which is a problem for real-world Santa (if he solved the speed problem and found a place to sit): accelerating the sledge to the required speed creates enormous air resistance, with the front reindeers needing to absorb an unbelievable amount of energy. Long story short: the reindeer, the sleigh, the presents and Santa would be vaporized in a huge fireball within the fraction of a second. That probably explains Rudolph’s red nose.
All things taken into account, it is safe to say: real-world Santa would suck at Christmas. I don’t mean to be a Scrooge, but the Grinch would probably be a better Santa. Let’s however keep it magical and be happy that the original Superman…uh… magical Santa is running this operation.
Merry Christmas! Happy Holidays! And happy Festivus for the rest of us!