Towards Fully Connected Retail Supply Chain for the Holiday Season

By Bryan Palma, Industry and Solutions Marketing Director, Kinaxis

Supply chain uncertainty has become the norm for businesses in recent years, and that remains the case for the 2022 holiday shopping season. This year, the specter of an economic recession and sky-high inflation are causing consumers to think twice about where they are spending their money. As the holiday season kicks into high gear, retailers are also still facing supply chain disruptions and dealing with the impact of the bullwhip effect on inventory. With so much uncertainty on the horizon, retailers are increasingly turning to technology that boosts supply chain transparency and agility. Here’s what we can expect to see from consumers and retailers alike this holiday season.

This year’s holiday shopping season will be impacted by changing consumer behaviors thanks to increasing inflation. Consumers will likely shop for lower-ticketed brands and items this year and may wait until later in the season to make purchases to take advantage of holiday sales. Unlike previous years when consumers shopped early to ensure backlogged inventory was delivered by the holiday, this year, retailers will likely need to sell lower-priced, lower-margin items and create deeper discounts to remain competitive. While certain products may still be hard to find, widespread scarcity concerns are largely on the backburner. These changing behaviors will also likely result in fewer holiday returns, since consumers are only buying what they need.

To navigate the new world of supply chain uncertainty, labor shortages and increasing inflation, retailers need to embrace a holistic, integrated technology-based vision of supply chain planning to create a seamless shopping experience for all.

Recently, brands like Walmart and Nike slashed prices to clear a glut of inventory, and that trend will likely continue throughout the season. Unlike last year, when hot toys were hard to find thanks to material shortages, supply chain issues and challenges with forecasting demand, this year retailers are finding themselves flooded with inventory as delayed shipments finally arrive. This situation is a classic example of the bullwhip effect, in which small fluctuations in demand can create massive impacts on supply levels.

This bullwhip effect is putting significant pressure on supply management systems and warehouses. With stock rooms already overflowing, retailers may look to limit the practice of accepting free returns. That trend will likely accelerate in 2023 as higher shipping and labor costs continue to make processing returned goods more costly for companies. Despite the fears of a recession, the tight labor market will also be top of mind for retailers looking to hire seasonal employees. October’s jobs report showed the labor market remained hot, despite the Federal Reserve’s attempts to cool it down, meaning retailers may have a difficult time finding seasonal employees. As another challenging holiday shopping season begins, it will be important for retailers to find the right supply chain technology that can provide visibility and transparency across their network to be agile in the face of disruption.

To overcome the expected challenges of the 2022 holiday season, retailers will need to rely on supply chain technologies that can help them stay ahead of fluctuations in inventory and changing consumer behaviors. The unique technique of concurrent planning offers retailers the tools to do just that, by creating end-to-end transparency across the supply chain and enabling agile and informed decision-making.

With transparency into every part of a supply chain, retailers can anticipate delays and take proactive steps to solve problems before they impact customers. For example, concurrent planning can warn a retailer that there are delays at the plant that produces the packaging used for a new line of high-end sneakers. This transparency into how a disruption impacts the entire supply chain happens in seconds, so that retailers will be able to get a jump on finding a replacement source for the packaging. This will minimize the disruption that this supply issue causes and ultimately meet the needs of the customer, while saving the company money. Even if the retailer can’t replace the packaging in question, being armed with real-time information gives them more time to run alternate scenarios, adjust delay dates and manage customer and partner expectations.