In this interview, moderator Keith Jelinek, co-leader of our Performance Improvement Advisory Practice, discusses part five of a five-part series dedicated to helping retailers excel in the crucial fourth quarter. This segment features Rick Maicki, who shares insights into how retailers can plan their supply chain to meet customer expectations, avoid disruptions and improve profitability in preparation for the upcoming holiday period.
Keith: We're just days away from Black Friday, the official launch of the 2024 holiday shopping season. Retailers have been planning for this critical sales period for months. During 2024 we have witnessed a number of headwinds - geopolitical unrest, inflationary pressures, shipping challenges, the increasing cost of labor, a rocky economy trying to mend itself, and to top it off, a presidential election cycle.
The final two months of the year can be a make-or-break period for businesses. By fine-tuning strategies and tactics, companies can improve their chances of ending the year in the black. This year, with a shortened selling season, these adjustments are even more critical.
As final preparations are underway, our retail expert team has prepared a holiday readiness checklist spanning across five key functional areas: supply chain, marketing, store operations and labor planning, digital commerce, as well as inventory replenishment and allocation.
Blending years of retail experience with shopper feedback from our recent consumer holiday survey, we are excited to share our holiday checklist, which provides a fresh perspective on what is most important to your customers this holiday period.
Today, in part five of our series on the holiday shopping season, I will be talking with Rick Maicki about strategic supply chain planning. Rick is a Senior Managing Director and co-leader of our Performance Improvement Advisory Practice. Rick has deep expertise in distribution and logistics and all aspects of supply chain operations.
Let's jump in …
Keith: Rick, we've seen overall freight costs come down, yet many retailers have just not been able to capitalize and take advantage of this. As we enter the holiday shipping period and what are usually peak surcharges that start to come out for parcel freight, what advice do you have to ensure the lowest cost while still making sure to capture sales to consumers for up to the last-minute opportunities?
Rick: In the last 12 to 24 months, we have seen domestic trucking, and last-mile delivery costs come down after spiking during the pandemic. The capacity for shipping now exceeds demand, which is creating strong competition among carriers. The result is favorable rates and rate negotiations for shippers. Furthermore, the pandemic conditions sparked the creation of numerous alternative last-mile carriers that compete directly with the big players like UPS, FedEx, Amazon, and even USPS. So, now there are more options for retailers and DTC shippers to get products to consumers' homes.
Despite this increased competition, as you mentioned, UPS and FedEx have issued holiday surcharges both for shipments on a per-package basis and shipment threshold volume thresholds on a daily basis that will impact cost. We know from our Holiday Shopper survey that consumers are more focused on the lowest cost rather than speed of delivery like same-day or next-day service. This is a shift from previous years where speed was more important. They do not want to pay more given the state of the economy, but they do want to know that the package will arrive on time.
Given these factors, shippers should focus on making sure they clearly understand their parcel rates, including all peak surcharges and volume thresholds so that they know what they will be charged. They should use rate shopping software and routing guides to reflect the full cost of shipments to avoid any unexpected charges. Additionally, they should work with merchandising and marketing teams to understand upcoming promotions. Based on our survey, promotions with free shipping should have good response rates and would drive higher order volumes, so plan accordingly.
Our survey also shows that online shoppers tend to favor key holiday shopping days like Prime Day and Cyber Monday, so forecasting the order volume is essential to be staffed appropriately, matching labor to the fulfillment needs. Additionally, pre-positioning promotional items and forward pick locations so they have the product ready to pick and pack. Finally, they should monitor their shipping levels to avoid unexpected triggering of the volume threshold surcharges, which can be punitive and cause meaningful unexpected margin loss. If they can, leverage alternative carriers to reduce costs and meet customer service expectations where possible. If not already in place, look to bring on alternative carriers to provide cost-effective shipping options.
Keith: Rick, that's very insightful, but I want to peel the onion back a little bit on something you mentioned several times about alternative carriers. What's the potential for them this holiday season and beyond, and how quickly can retailers engage with them?
Rick: Great question. Alternative shippers, many of which started as part of the gig economy, were propelled by the pandemic and have now stabilized, providing good service and cost-effective pricing, although typically in limited geographic areas. These carriers can play important roles in a retailer's overall shipping ecosystem. In terms of timing, there is some pre-analysis required to identify specific shipments that could be moved to these carriers. But once that is complete, we have seen the ability to bring these partners on within two weeks, and that could be helpful to avoid peak and volume threshold charges. Given that they are a good option, we believe that most retailers and shippers should have them as part of their network.
Keith: The role of supply chain continues to evolve and navigate through all these dramatic changes globally. Your perspective on these challenges to improve profitability and to try and avoid disruptions is going to be critical for retailers these holidays and beyond.
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Keith: We appreciate you joining us today and hope you will find our holiday checklist of benefit. Along with the experiences shared from our team, as a reminder, you'll find a link to our checklist at the bottom of the page, and you can download it for your use.
Our Ankura performance improvement team has a proven track record of executing strategic plans to achieve sustainable performance improvement and targeted operating results to help maximize EBITDA, cash flow, and shareholder value. Our expertise extends to all critical aspects of the retail enterprise. We work alongside clients to reduce costs and improve efficiencies. Ankura leverages its vast internal resources to assemble the perfect team for each client's unique challenges, guaranteeing optimal outcomes for complex problems.
Let us know if we can be helpful to you, and happy holidays.
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To assist retailers in preparing for this crucial holiday sales period, Ankura’s Performance Improvement team has developed the 2024 Holiday Readiness Checklist. This checklist outlines key focus areas to ensure your organization is aligned and ready to deliver on the essential drivers of sales success in the coming weeks. By adhering to the provided guidelines, retailers will be well-prepared to delight shoppers and gain a competitive edge.
Click here to access the 2024 Holiday Readiness Checklist.
© Copyright 2024. The views expressed herein are those of the author(s) and not necessarily the views of Ankura Consulting Group, LLC., its management, its subsidiaries, its affiliates, or its other professionals. Ankura is not a law firm and cannot provide legal advice.
