Most people are aware that some online orders did not arrive by Christmas as promised this past holiday, but do you know why? To find the answer, Supply Chain Nation talked with Paula Rosenblum, managing director of Retail Systems Research (RSR) as part of our Expert Insights series. Following are her thoughts.
SCN: Many consumers were disappointed when their online packages were not delivered by Christmas as promised. In a nutshell, what happened?
Rosenblum: I think it was two things, one was retailers cutting it too close in terms of a promised delivery dates. Those promises might have worked in a perfect world, but we had a very imperfect snowstorm. The snowstorm did two things: first, it drove customers indoors to buy online—the last weekend of the season eCommerce shopping was up 54 percent; that’s a big number even for eCommerce. At the same time, the snowstorm grounded suppliers’ planes and slowed down delivery trucks. So the net was that they couldn’t deliver for the same reason that consumers couldn’t shop in the stores.
SCN: Did this primarily impact the areas where the snowstorm hit?
Rosenblum: The impact was actually nation-wide, because once airplanes get stranded someplace, it’s hard to move them elsewhere, particularly when you have a large hub like FedEx has in Memphis. Once you damage the hub, then you’ve got a problem for sure.
SCN: What should retailers learn from this experience?
Rosenblum: Don’t cut it so close! I know it sounds ridiculously simple, but things happen, acts of God happen. Some years we’re lucky and things go smoothly, other years we’re not so lucky, and if you haven’t kept expectations down, you’ll be in a lot of trouble keeping your promise to customers. Worst case, people will have to go out to stores; triple worst case, people will have to buy gift cards which don’t require a lot of complex delivery methods. But overall I just think we have to stop cutting it so close. What is theoretically possible and what is practically possible are two different things. Contingency planning is an important exercise for the entire ecosystem.
SCN: What steps should retailers take to prevent similar problems next holiday season?
Rosenblum: They have to bite their tongues when they look at the data and say “I think I can stretch one more day.” It’s a discipline issue from my perspective, and it’s a painful discipline because we are living in an age when there is nothing to stop consumers from ordering whenever they want, and in theory, there is nothing to keep us from delivering whenever they want. The takeaway is next year when you’re planning allow another day, or maybe even two.
There was a time going back a few years when you had to finish your online orders by December 13th or retailers weren’t going to commit to deliver by Christmas. Obviously that’s no longer a good solution, but somewhere between December 13th and December 23rd is the magic date. A lot will depend on the day of the week Christmas falls on, but the weather has been so whacky over the last couple of years, you have to allow for it in every manner, shape and form. I can understand retailers’ enthusiasm and desire to please the customer, but it’s just not practical.
From a technology perspective, you have to be smart and allow for weather in your distributed order management system (DOM). Start to think about weather as a constraint when building your distributed order management system rules. You’re going to want to take into account what the current delivery window is from any specific store given the weather in the area and transportation flows to the destination address.
I think what we are finding is that distributed order management, which theoretically enables us to fulfill from anywhere, is the Holy Grail that we want to get to. But we have to get there in the most effective way possible. It isn’t as simple as just saying, “I have it here so I’m going to ship it to you from here.” There are a number of reasons why I may choose not to do that and there are also a number of reasons why during certain times of year I may choose to do something counter intuitive, like fulfill it from a location I would avoid under ordinary circumstances. If I made a promise, I need to keep it and do whatever it takes. I should also avoid fulfilling it from locations where I know they’re buried in snow.
SCN: Is this situation unique to holiday shipping, or are their other potential areas for delivery failures?
Rosenblum: That’s an interesting question. I think it is unique to any special occasion-related delivery. So if you’re promising something for a birthday gift and you don’t get it there in time, that’s equally painful. Mothers’ Day is another ‘sacred time,’ as are weddings and funerals.
I’ll throw in one more caveat from my own travels—thunderstorms and tornadoes and hurricanes can be just as pernicious as snowstorms. So I don’t think it is just tied to the holiday season. Still, the problem with the holiday season is that it is just so big that it becomes very, very visible and very, very noisy. Whenever you are thinking about satisfying your customers, you have to think about making sure that you can come through on your promise, and next-day delivery is always a bit of a push. Your supply chain has to be built for speed.