Important Lessons from the 2013 Holiday Buying Surge

January 14, 2014

By Bob Ferrari (Guest Blogger)

In a previous blog posting, I noted that Retail and B2C supply chains are in a state of rapid change and that organizations need to have comprehensive plans directed at specific capabilities for omnichannel fulfillment. I also echoed views that the battle for consumer loyalty was critically dependent upon the combination of logistics and supply chain network efficiencies.

As the dust settles from the all-important 2013 holiday buying surge period, and indeed all 2013 supply chain fulfillment activities, two critical areas have now emerged as the most visible weak points. The first is information systems and financial transaction security practices and the second is logistics and transportation capacity management. Each will and should drive critical agenda in 2014.

By now, I’m sure you have already noted the numerous business headlines. Target Corporation was the victim of a massive information security data breach exposing customer related credit card transactional data. What was initially believed to be a compromise of over 40 million consumer credit card accounts involving a period from just after the Thanksgiving holiday to just before the Christmas holiday has now been nearly doubled to now be believed as exposure to data involving over 70 million consumers. That incident has prompted the Chairmen, President and CEO of Target to issue a public apology as well as adopting extraordinary measures to both protect consumer liability and avoid future data breaches. The business and customer loyalty implications for Target are a continuing work-in-progress. There is also news of another data breach involving a retailer, that being Neiman Marcus. Both of these high visibility incidents are renewed awareness to how sophisticated hackers and organized crime elements have become in breaking through information security firewalls and depositing malware programs that can tap critical or sensitive information.

There is little doubt that information security will become an all-consuming effort for many business executives and their respective IT teams during 2014 and the spillover has ramifications for supply chain management teams as well. All points of potential systems vulnerability will be subject to examination and supply chain teams are well advised to dedicate resources to information security as an ongoing 2014 initiative. Supply chain technology providers, especially those offering cloud-based applications will also have to demonstrate a heightened sensitivity to information security practices and teams evaluating cloud-based offerings should insure that this area is clearly articulated and addressed in service level contracts.

The second area, logistics and transportation capacity management will have the most impact to traditional and online retail along with consumer goods and electronics focused supply chains. We all have read how UPS and other logistics carriers were thrust into media headlines for failing to meet delivery guarantees just prior to the 2013 Christmas holiday. Logistics networks were overwhelmed the weekend just prior, and the combination of overly aggressive last-minute retail marketing promotions and severe winter weather in certain geographic areas of the U.S. all combined in swamping the world’s most advanced logistics system. Retailers, under the threat of lackluster year-to-date holiday sales initiated all forms of last-minute promotions and shipment guarantees to move inventory. While many organizational supply chains rallied to the task, the proverb that the chain is only as strong as its weakest link again proved itself.

On Supply Chain Matters just prior to Christmas, we highlighted how UPS and FedEx spend the entire year planning for all conceivable contingencies related to logistics network capacity. Yet, 2013 was the brutal reminder that capacity is indeed finite, especially when the best formulated plans are overridden by uncontrolled external factors.

In the year 2014, supply chain teams should renew the emphasis for more frequent integration of supply chain network design with supply chain fulfillment and operational plans. Omnichannel strategies for building new dedicated and highly automated online fulfillment centers while turning retail stores into physical shipment locations are all part of a holistic logistics network, but they become marginalized without information exchange among real-time planning and fulfillment channels that include your critical external logistics and fulfillment partners. Rest assured, UPS and other carriers will learn what led to the failure of the logistics network on the last days of the holiday surge, and will have plans to avoid this type of situation. Those plans may well include an insistence that shippers perform timely and accurate network resource planning.

Guaranteed delivery is no longer a single carrier but rather a joint network responsibility. Insure that your supply chain teams are prepared with proper intelligence and planning capabilities.

Bob Ferrari is the Founder and Executive Editor of the Supply Chain Matters blog and is a recognized thought leader in B2B fulfillment and supply chain management.

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