The Christmas holiday season is in full swing and it’s this time of the year that proves busiest for supply chain managers. Months of planning and preparation goes into ensuring that everything in the run up to the big day is successful. Unfortunately, it doesn’t always go to plan.
Unlike myself, if you are old enough to remember the year 1983, you might know that this was the year that the Cabbage Patch Doll was released. However, what manufacturers didn’t realize was that the Cabbage Patch Doll would become the must have toy that Christmas, and so subsequently didn’t have enough supply to meet demand. This resulted in what are now known as the Cabbage Patch riots.
One person who has never had riot-like problems is Santa Claus. Not only does he know when you are sleeping, but he can also accurately forecast demand to ensure everyone receives the presents they want on Christmas Day (ok, at least with a very good hit rate). This is one of the many reasons that Mr. Claus is considered as a supply chain leader among those in the industry.
So that got me thinking, what lessons can we learn from Santa Claus?
Planning is crucial
We all remember that one child from school, who wouldn’t stop complaining, because they had not received exactly what they had wanted from Santa Claus. They made it seem like it was the end of the world.
While Santa never wants to see disappointed children on Christmas Day, sometimes he makes mistakes – or shall I say his elves (or know-it-all parents) do. However, these are often minimal, and many children receive what they have asked for at Christmas, which is all down to careful demand planning.
It’s not just Santa, who needs to plan carefully in order to be successful. In general, demand planning is a vital part of every supply chain. Accurate forecasting is a must as no supply chain manager wants to be left with empty shelves due to not having enough supply to meet demand. Yet at the same time supply chain managers don’t want to be left with shelves stocked with goods which nobody wants to buy.
Getting this equation right often proves challenging – especially if you try to achieve this manually. The use of historic data alone can often lead to discrepancies between the forecast and actual demand due to new factors that have not been considered. Therefore, many supply chain managers will use forecasting tools based upon intelligent algorithms. By combining Machine Learning with the knowledge and expertise of a demand planner, the most accurate results can be achieved. Having more accurate forecasts not only leads to higher profits, but also more satisfied customers. In the end, this is Santa’s ultimate goal and should also be the dominant principle of every supply chain.
Timing is critical
Let’s imagine you woke up on Christmas Day and there were no presents under the tree. To say that this would not be great is possibly a huge understatement. If you’ve got kids, it would be a complete and utter disaster.
Timing is vital for Santa. For him it’s crucial that everyone’s presents are delivered in time for December 25th. This is also important for logistics companies to ensure that presents arrive in time for Christmas Day (or depending on your cultural background just the day right before the gift giving event). In fact, perfect timing is desirable throughout all elements of the supply chain, but within in the logistics process it is even essential.
In a world where e-commerce sales are growing, it is predicted that 15% of the total worldwide retail spending will be accounted for by e-commerce in 2020. With more and more people shopping online, it means that there’s more focus on delivery and delivery options.
A survey conducted by PwC found that nearly a quarter of those asked listed that fast delivery would sway them towards one retailer as opposed to another. However, consumers’ definition of what “fast delivery” is, is changing. Only 89% of people considered delivery within two days as fast according to an efulfillment service report in 2017 compared to 92% in 2015. If this trend continues, consumers will be more demanding and thus less forgiving when deliveries take longer than 2 days. . This new level of implicitness is due to the increased availability in both next day and same day delivery.
The solution? Well that’s where we can also learn a little something from Santa Claus.
Traditional delivery modes include transporting goods via land, sea and air, but the last mile is often carried out by vehicles on the roads. However, due to delays such as bad weather and traffic jams, making deliveries via roads might not ensure speedy delivery. Therefore, copying Santa’s approach of making last mile deliveries via the air could be the best solution. While flying reindeer may not be a delivery option for logistics providers, drone delivery is a real possibility and it surely would speed up the delivery service – especially in rural areas.
Drone delivery is not yet available for mass use. However, it is making progress. In the U.S. the Federal Aviation Authority has awarded UPS a Part 135 certification to allow it to make drone deliveries between hospitals. Alongside this, the French postal service is also using drones to deliver parcels to remote locations in the Alps.
And we should all believe
There are some rumors that Santa is not real and what he achieves is impossible. I must stress that this is something I don’t agree with (hopefully this keeps me on the nice list). However, even if this is somewhat the case, even imaginative characters can be role models for some people.
Although his supply chain may be a little far-fetched according to some, it sets a standard that the supply chain can strive to achieve – maybe minus the flying reindeer. By having goals and targets to strive for, it pushes supply chain managers to optimize their supply chains and make them better.
However, goals alone won’t improve supply chains and lead to innovations, supply chain managers need to believe they can do this in order to make these changes reality.
Closing Thoughts
Whether you are a believer or a non-believer, you can’t deny that the Christmas supply chain works out for most people. All things considered; this is kind of a minor miracle. However, if you strive for perfection in your supply chain, Santa’s supply chain model is a good one to follow.
Merry Christmas!
