Retailers call the day after Thanksgiving Black Friday because it is one of the most profitable days of the year (the Philadelphia Police Department originally coined the term because the volume of shoppers on that day caused traffic jams and overcrowded sidewalks). But planning for Black Friday — which marks the start of holiday shopping season and the biggest opportunity of the year — can also cause extreme stress.
The best way to mitigate any pitfalls from an operational perspective is to anticipate and plan. The key to a successful holiday season is to plan, plan and plan some more. But here’ s the reality. We all should have been planning since June, but there are always conflicting priorities, especially at a fast-growing company. Sometimes, you find yourself in a panic a few weeks out. But it’s not too late. Here’s a last-minute checklist to ensure that your bases are covered from Black Friday all the way through Christmas and the January returns rush.
Understand Your Forecasting
Forecasting drives all logistics planning. What do you expect to have in terms of your order and unit volume? Typically, retailers will see three to four times growth over their normal periods from Black Friday to Cyber Monday. Once you forecast your numbers, make sure to align cross-functionally from your merchandising to your marketing to your tech teams and fulfillment centers to make sure you have the right staffing to support your orders, and flex up your teams to handle the increased volume.
Since most people are off for the Thanksgiving holiday, but most fulfillment centers are operating Thursday to Sunday, make sure that you have the proper infrastructure in place to troubleshoot during that period. The last thing you want is a technical issue that you can’t solve because your CTO is not available during the Thanksgiving holiday.
Forecasting also includes determining supplies. Here’s a common pitfall: you get an influx of orders and all of a sudden you’re out of shipping labels, boxes, tape and tissue paper to fulfill them. The last thing you want to do is stop shipping because you’ve run out of packaging. Order for enough inventory to handle your forecasts. I recommend a safety stock of 15 to 20 percent in case you beat your projections (retailers are by nature an optimistic bunch).
Determine Shipping Cutoff and Surcharge Budget
The trend is for retailers to push the limit as much as possible for guaranteed holiday delivery. If the regular ground shipping cutoff for the carriers is Dec. 13 they’re unlikely to say, “Place your order by December 13 to receive free shipping by Christmas” because then peak season ends a full 12 days before the holiday. Most retailers want to extend their peak as much as possible without impacting their gross margin.
From a budgeting perspective, shipping cutoffs – the last day to ship in order for an item to arrive in time for the holiday – impact the bottom line in a big way. For retailers that want to offer free ground shipping, determining cutoff time is critical. All carriers have somewhat different shipping cutoffs, so you need to know each one, then determine with your marketing and merchandising teams whether or not you want to extend past the normal ground cutoff, because there’s an incremental expense involved to upgrade each order. The other piece to remember is that carriers like FedEx and UPS have a holiday surcharge as well. Everyone wants to be able to say, “Order by December 23rd,” but it greatly increases your shipping costs.
The flip side is, if you extend past the normal cutoff, you might be getting more last-minute shoppers, and more sales. But be careful, because you don’t want to upgrade everything to two-day shipping. If your fulfillment center is in Los Angeles, you don’t need to upgrade every order to two-day shipping if most of your customers are on the West Coast. But you would potentially have to upgrade delivery to the East Coast.
A fulfillment center with a dynamic shipping rate system can tell you if something needs to get there in five business days, what the best and cheapest method is. And it saves you from upgrading orders unnecessarily.
Another tip is to work with carriers to get later pull (pickup) times so you can get more orders out the same day. If your typical pull time is 5 p.m., some carriers will extend to 6 p.m. so you get an hour or more of productivity to ship more same-day orders. If you have 50 packing stations and each packing station can do 100 orders an hour, that’s another 5,000 orders you can get out that day. But beware: sometimes carriers miss their own service levels. Think about potentially buffering your delivery dates in the event that there’s a dramatic influx of volume in your fulfillment center or if the carriers are unable to achieve those dates.
Consider this scenario: You decide to offer free next-day shipping. You then potentially have an influx of volume for last-minute orders (which you have to pay expedited shipping for), and now you’re concerned about whether your fulfillment center can handle that volume, and you’re dependent on the carriers to execute. If you think that next-day shipping will bring you significant volume, it’s a potential strategy, but it takes planning. Now let’s say you end up blowing out your forecasts. What’s your backup plan? I can’t say it enough: the key is planning, and contingency planning.
Implement a Code Freeze
You do not want to be implementing new engineering developments during your peak period. Only critical enhancements or bug fixes should be released during that time, because if you release something that breaks your system in peak, you’re basically done for. As a retail consultant, I used to tell clients to implement what’s called a code freeze, to limit their new development and releases to before the holiday or right after.
Everyone forgets about this because they’re rushing, rushing, rushing to hit peak volumes over the holiday, but everyone has to deal with returns in January. Because retailers do a significant amount of volume in November and December, January becomes a very heavy returns month. Returns are already a big pain point in the industry because they take so long and on average, make up about 30 percent of inbound contact volume in your call center.
In January, it’s an exorbitant amount of call-center contact because your orders are lower, but you’re still dealing with the volume of holiday. What ends up happening if you fall behind on returns is you add more calls into your customer service center, accrue increased costs, and have a lot of unsatisfied customers because their returns are delayed.
Again, the best way to mitigate this is to make sure that you’re staffed accordingly from a customer service and fulfillment perspective in order to handle the influx of volume. You don’t want to mar a great fourth quarter because you’re not prepared for returns.
Hold a Postmortem
Finally, bring the cross-functional team together in January or February to go over holiday operations and learn from how you performed this year versus last year, and identify learnings to take into the following year. When I led operations at Gilt Groupe, we always held a postmortem, but when holiday came around again, we had forgotten everything that had potentially gone wrong. But when we went back and reviewed the notes, we remembered. Always keep this documentation in your process so that you can continually improve on your holiday planning, and here’s to a stellar 2020.
Donny Salazar is the founder and chief executive officer of MasonHub Inc., a fulfillment technology and services company that works with Carbon38, 11 Honoré and Floravere.