12.21.07

Hope you are having a wonderful holiday season, full of peace and joy — but courtesy of a recent customer visit, I learned it is not at all restful for some elements of the retail supply chain…

Many people don’t realize that much of the supply chain activity (ordering, forecasting, etc) is in the distant past when “Black Friday” hits after Thanksgiving — but it is.  Aside from the understandable need for advance planning, there is the small fact that information may fly around at the speed of light, but goods for store shelves must still be shipped great distances!  But modern supply chain practice goes far beyond just orders, and not every category of good must be shipped thousands of miles.

Some retail goods that are produced (or warehoused significantly) closer to their ultimate markets have the ability to respond do “demand signals” much more rapidly.  This can be because the goods are shipped by air, or manufactured locally (”locally” meaning within reach of high speed transportation), or warehoused in different regions that are capable of supplying one another.  Traditionally the domain of industrial parts that were JIT (just-in-time), it appears that key consumer goods are now capable of rapid response to demand.

This is of particular interest to me because of the role played by rapid information exchange — especially consumption and forecast data.  As goods fly off the shelves, that information is shared back into the supply chain, which then scrambles to refill the void.  This is an especially lucrative practice for goods that experience enhanced value during the first several days they are on sale, like music, books, movies, and video games (software, not the consoles — alas, see Steve’s column for the realities of complex hi-tech gadgets….).

Assuming you buy that such items can be more flexibly resupplied than many other goods — why the surge in demand?  This was the piece I didn’t understand, but GXS is not a consumer goods company.  The recent swelling of gift card sales, combined with retailer skill in attracting shoppers in the post holiday season has made the few days after December 25th some of the biggest shopping days of the year!  The only challenge is that those stores have been heavily shopped right up to Christmas Eve, and need to be replenished as much as possible to capture all that spend.

It seems that Christmas comes both early and late for retailers, and in those categories where the supply chain has the shortest latency, information can maximize profits for businesses, and satisfaction for customers.

Happy Holidays!