This article is brought to you courtesy of NEXT Trucking
The holiday shopping season is well underway even before Black Friday, as stores roll out promotions and shoppers look to get a head start on deals. For the logistics industry, this means a shorter period than ever to meet the challenge of surging volumes.
A survey from the National Retail Federation (NRF) found that 56% of consumers started their holiday shopping the first week of November. Only about 18% plan to start in December, after Black Friday.
Part of the reason for that is the shorter time between Thanksgiving and Christmas this year: only 26 days. That is down six days from last year, the NRF noted. In addition, fewer shoppers are holding out for Black Friday deals.
“Consumers don’t wait for Thanksgiving or Black Friday anymore, and neither do retailers,” Prosper Executive Vice President of Strategy Phil Rist said. “Retailers responded this year by offering promotions earlier than ever, with some rolling out holiday deals even before Halloween.”
Still, Black Friday symbolizes the traditional start of holiday shopping, and the three-month period leading up to that day is the busiest time in logistics.
Robert Lilja, chief operating officer of California-based Weber Logistics, said the velocity of goods coming through their warehouses is the big change over the lead-up to holiday shopping as orders have to be filled faster than ever.
The increased speed means Weber has to double its warehouse staff, and customers need to accept that their logistics costs will increase due to extra staffing and extra shifts.
“We are pushing a fair amount of retail goods through our facilities,” Lilja said. “That means you are going to need an army to pick orders.”
The season also demands a higher level of communication with customers, Lilja said. Orders that need to be picked and shipped need to come in every day, and even weekends, despite some customers not having order systems that work on weekends.
It’s important to know what specials or promotions customers might be running, Lilja said. That allows Weber to deploy staff on lines with those particular stock-keeping units (SKUs) or other otherwise configure pick lines for particularly hot items.
Third-party logistics providers also need to have a high level of coordination with their outbound transportation provider, whether it be less-than-truckload or parcel. That includes steps such as making sure that drop trailers are being turned over quickly.
The Navy Exchange Service Command, a self funded agency of the Department of Defense, is in charge of getting consumer and home goods to about 300 stores located at domestic and international U.S. Navy bases and other outposts, such as embassies, along with micro-stores on board vessels at sea. It runs as a quasi-nonprofit enterprise, with most profits returned to the Navy’s morale and welfare programs.
A big portion of the $2.5 billion in sales at the Navy Exchange, otherwise known as NEXCOM, flows through a 410,000-square-foot distribution center in Suffolk, Virginia, in addition to distribution centers in Florida and California.
The Suffolk site alone handles over 13,000 SKUs, which can range from large-screen TVs, alcohol and children’s toys to home appliances, furniture and other consumer goods, amounting to $32 million in inventory.
The site’s general manager, Scott Ellis, said NEXCOM’s mission “is to bring a little piece of home” to the 58,000 of 337,000 Navy members who are deployed overseas.
NEXCOM brings that little piece of home with their own Black Friday doorbusters. Ellis said NEXCOM’s inbound freight for Black Friday has already arrived at its distribution centers by the end of August.
The next two months are spent palletizing and packaging the goods and “flushing them out” to NEXCOM stores, said Ellis, who was previously with Target. All the goods that are available at the stores have to be there at least two week ahead of Black Friday, if not the start of November.
“Last week and this week, a lot of stuff is being forced out and flushed out,” Ellis said. “Our stores are busting at the seams right now.”
That lead time to get to stores is further compressed due to NEXCOM’s overseas locations, which need to get inventory by at least the first of October. That allows extra time for overseas sales managers to restock inventory damaged in transit, as well as top off supply of hot items.
Ellis estimates the Suffolk location is shipping out about four outbound ocean containers per week over September and October in order to meet Black Friday holiday shopping needs. NEXCOM will also tap air forwarders to move goods in a hurry.
“The lead time from here to Bahrain might be 45 to 60 days,” Ellis said. “It’s a slow boat.”
On the land side, NEXCOM has brought in over 1,300 drop trailers and handles about 10 live unloads per day. The Suffolk facility has also installed a flexible conveyor system to floor load trucks, instead of only loading pallets, so “we had a significant reduction in transportation costs.”
“You can get 2,500 to 3,000 boxes on one truck,” Ellis said. “Last year, it would have taken three trucks.”
Ellis realizes that NEXCOM has something of a captive audience at certain locations. But service members are free to shop online and receive goods from family members. Besides, “Amazon is not in Djibouti or in Bahrain,” he added.
Jack Sandbach, chief executive of Edison, New Jersey-based Packaging Distribution Resources, faces a similar rush. PDR’s 200,000 square feet of space handles about 40,000 SKUs — beauty products, cosmetics, candles and home items — distributing to retailers and fulfilling orders for QVC and the Home Shopping Network.
“During the ramp-up, we are getting two to three containers every day non-stop for two months,” Sandbach said. “Everything changes over this period.”
In addition to dealing with seasonal items, PDR is still distributing non-seasonal goods. It is also doing more assembling of items such as gift baskets. PDR is building up to 400 pallets daily during the period.
To deal with the seasonal rush, PDR added four warehouses on short-term lease to supplement its four long-term lease warehouses in New Jersey. PDR’s 200-plus full-time employees also get supplemented with an additional 50 to 200 temporary workers to work on production lines and assemble gift baskets.
“When our customers bring in more volume than expected,” Sandbach said, “it’s our job to figure that out.”
The advent of Cyber Monday sales puts additional pressure on the supply chain. Sandbach says PDR remains open the four days from Black Friday through Cyber Monday to assemble online orders. Likewise, in-store promotions starting in October further compress the shipping cycle.
But the additional volume does not necessarily translate into more profit. Sandbach estimates that PDR has lost $60,000 over the past three months due to higher seasonal costs. But he chalks that up to the cost of retaining the customer’s business through the rest of the year.
“It’s a partnership,” Sandbach said. “Almost 10 out of 10 times when they have extra stuff, it’s good for me. We just need to do it as efficiently as possible.”