In my 10 years of supply planning experience I have observed that despite being aware of usual holidays seasons we encounter throughout year, we still find ourselves short of supply during the crucial holiday period which damages customer service drastically, adds significant amount to premium freight, contributing to customer frustration, affecting the overall brand image and profit earning opportunity and most importantly loss of sales in crucial months.
Given the fact that we should be thinking of Supply Chain Planning at different levels and different time horizons, we should consider and must put conscious effort to planning for the 3 holiday seasons, and they are:
- Christmas Holidays
- Chinese New Year
- Summer Holidays
Some might say that during the holiday period supply planning disruptions are inescapable. And there will always be situations that arise causing disruptions in a supply chain — you cannot plan for every possible scenario! However, I have almost always counter that argument as I firmly believe that by careful demand forecasting and planned stock build we can avoid these supply disruptions. For a start, we must open early, clear the lines of communication with suppliers and logistics providers for demand forecasting, inventory needs and delivery dates. Timely communication and information flow is absolutely critical to timely material flow.
Christmas Holiday Supply Planning
Ineffective supply chain during the Christmas Holiday period can also lead to many other challenges for your company, not least the pressure it puts on the distribution channels as manufacturers attempt to cope with additional last minute orders, with less capacities which need to be shipped in time. Or, if your company decides to bet on all on its specific product and over-stock in the run up to Christmas, they risk great losses if the stock does not shift!
In the recent past, companies now have a lot more data at their disposal. Thanks to ERP data, big data analytics, they can gather data from a wide variety of sources. These different data sets can then be analysed for any interesting correlations which might help your company predict the big trends of the Christmas season to come. In this period Demand Forecasting is lot more important in terms of sales promotion.
The vital element to a successful Christmas supply planning is in essence about an educated understanding and predicting successfully what will be in demand and delivering on it. Easier said than done for sure, but if you don’t do anything special results could be worse!
Chinese New Year- Supply Planning
Since the rise of outsourcing to China in last 2 to 3 decades, there will be very few companies who don’t depend on supply from China either in the 1st, 2nd or 3rd tier of suppliers. Chinese New Year is long – approximately a 2-week holiday, mostly in the month of February – and as a result your supply chain might be disrupted for a significant amount of time.
During these holidays factories are closed for at least an entire week for which most of the workforces go back to their hometowns. Some businesses typically allow workers to start packing up as much as two weeks before the celebration, they can also take upto a week or more to return so, all in all, factories may not resume production until the third week of February. That may take you to almost four week’s of disruption, compounded with delays in transportation. So if you have not planned for 4 weeks of disruption you could end up with a short of supply!
Another recurring issue is even after factories re-open, it will take a while for them to return to production at full capacity. That’s because up to a third of employees never return to work. The inexperience from new workers can cause longer delays and lower product quality.
So what can be done to avoid that potential disruption?
We should plan ahead and work closely with suppliers and the freight forwarder to have a robust supply planning system. I have asked my planners to have 2-3 weeks of extra stock of the critical 80% items and put in an inventory forecast to make my controllers happy! (We all know financial controllers don’t like surprises!!). Furthermore, we work with the forwarder and with carrier partners to protect allocations or we might be able to get space from another carrier. Forwarders may also have the chance to get allocation space from another shipper providing this advanced planning is taking place.
Lastly, we did considered shipping by air for those Made-to-Order items where we didn’t have any forecast. Don’t leave that decision for the last minute: flights just before the Chinese New Year are often overbooked and carry a higher premium. Consider non-direct flight options and makes sure that your connection is outside of China.
Here’s another issue: Even after factories re-open, it will take a while for them to return to production at full capacity. That’s because up to a third of employees never return to work. The inexperience from new workers can cause longer delays and lower product quality.
A top-tier supply is likely to have all these issues worked out or at least mitigated. So, the entire manufacturing sector is not going to be affected in the same way, but you should be aware of these general effects.
Summer Holidays- Supply Planning
Summer holidays are a very tricky period especially for manufacturers in Europe when almost 1/3 of the employees take a holiday during the last 2 weeks of July and during August. The demand is so high that on at least one occasion I rejected holiday requests for 2 members of my team – it did not go down well! But what could I do? So these holidays will hit you – year in and year out, so it is better to plan for it.
For the last two years we plan a stock build for critical parts and critical customer in June and July, increasing our capacities from May to catch up on the leading up for the June & July stock build. As I’ve said above, we planned the inventory increase and advised our financial controllers via an inventory forecast.
One good thing in this period is that our European customers are on holiday too, making the problems a little less bad than the Chinese New Year and Christmas supply planning.
Here I’ve shown you 3 different holidays’ season, which we all must plan ahead for so as to improve your supply planning and possibly business as a whole for the year. If you actually apply some of them, you will be able to get the same results in half the time.
And now, you know how to use the extra time to get even better results out of it.
If you have any questions about the critical seasons for supply planning or have any experience applying it in your life or business, leave your thoughts in a comment below—I’d love to hear from you.