Logistics Management Group News Editor Jeff Berman recently had an opportunity to speak with Jim Gehr, President, Retail, DHL Supply Chain, North America, talk about the 2019 holiday rush, as it relates to Peak Season, from a planning, preparation, and operations perspective. A transcript of their conversation follows below.
Logistics Management (LM): What is your take on the 2019 holiday season, in terms of delivery and service expectations and helping customers achieve their objectives?
Gehr: We anticipate having a good holiday season, both for customers having strong volumes and for consumers to receive a high level of service. We have a good process to support the variability and high demand, and all indications are that forecasts are running as planned, and we have sufficient labor lined up for this week and next week. It should be a good season.
LM: When we talk about preparation for the holidays, it seems like the general consensus among logistics services providers is that things kick in soon after the start of the new year, which makes it a core focus. That said, how does it work for DHL, in terms you are prepared and ready for whatever happens?
Gehr: It is true that there is a full 12 months of planning and anticipation for this time of year. We start off by working with our customers’ strategic vision and forecasts and expectations and preparing to have sufficient order capacity. That order capacity is very important, not just on an annual basis, for the holiday season, but also on a daily basis. We work very closely with customers to understand their commitment to their customers for order commitments and things that need to meet a late day cutoff in order to be delivered the next day. That is where most are landing and when you get into some heavy days, that short-term deferral of a commitment can go to a two-day in heavier times. But we are getting so good at this that in many cases we are able to maintain that next-day delivery. It is also worth noting that there are not a lot of high-demand days throughout the year anymore. Sellers are doing a good job of driving volume away from the traditional Black Friday, which is still a big day, but there are many other seasonal peaks during the year that are defined by who the seller is and what their business is. When we look at delivery and handling seasonal capacity for customers, it really is happening at various times of the year as well.
LM: What are some of the challenges that pop up, when it comes to meeting customer expectations while maintaining delivery and service promises, especially at this time of year?
Gehr: I would say that we are very good at understanding what our daily throughput maximums are, and we work very closely with customers to understand how that looks against their anticipated order volume for the day and how that gets rebalanced and how they are going to drop those orders across their fulfillment networks. There is a lot of strategic work that goes on across the U.S. fulfillment networks to understand daily capacities and then it is a matter of executing against those committed capacities. We can forecast that against historical trends and new products and promotional pushes…and once you have those forecasts, then it is a matter of having the fight fulfillment solution in place, the right amount of variable labor, and the right amount of management to support the increase. That requires very effective communication so that everyone involved understands what that requirement looks like for whether the fulfillment and management associates in the warehouse. It becomes a culturally accepted norm, where people rise to the occasion and we don’t experience, even in a tight labor market, any type of labor shortage. We have the right strategies in place to be successful.
LM: With more opportunities for retailers and manufacturers to sell directly to consumers, how does that related data from those opportunities get leveraged, for things like delivery preferences, for example?
Gehr: For us, it is e-commerce fulfillment, whether the seller is a retailer or a manufacturer. We probably play more of a leadership role in guiding a manufacturer, because typically it is new to selling units, as opposed to truckloads, pallets, or full cases. The leadership role comes in establishing the scalability of their supply chain. We offer them the ability to ship from any facility…we do e-commerce order fulfillment wherever inventory is and work with them on stronger inventory deployment insight and capabilities to minimize out of stocks or maximize the efficiencies of not moving inventory a second time.
LM: In terms of managing complexities like you just described, how do you view that, in terms of managing it all?
Gehr: It is really about frank and open communications of factual data that is much more readily available. Technology today does a tremendous amount of data analytics, where we understand what information is the most important to focus on. We pull information from data analytics about very short period and trends by things like velocity and location and work with manufacturers and retailers to keep product moving through their supply chains. There is a lot of work that occurs outside of just the lead times in managing inventory fulfillments throughout the year.
LM: What is your outlook for the 2019 Peak Season? Some executives think that the days of a true peak are over.
Gehr: There is no question that there still is a materially large percentage of sales that occur during the holiday season; that is a fact. That has not gone away, and I don’t see it going away. There are two points driving [the sentiment that peak has gone away]. One is I think is if you go back a decade or more, e-commerce was becoming more heavily used during the season than non-holiday, or peak, season. And today the demand for omnichannel everyday is putting people into the game of doing e-commerce fulfillment on a daily basis so it is not just a seasonal trend or a seasonal item…and does not take away from high volume during this time of year. The second thing is that because there is familiarity and experience of doing these high-demand seasons through e-commerce, before a seller would have a big uptick in retail support in stores. While they still do a little of that, they got used to this high fulfillment need inside of warehouses, too. Peak Season without a doubt drives an X factor of additional labor requirements in any fulfillment operation, and that can range anywhere from three-to-eight times the amount of labor required on a non-seasonal basis. It is still there; people are just getting better at dealing with it.
LM: Shifting away from the holiday rush, how do you view the 2020 outlook from a more general perspective?
Gehr: My perspective would be that we would continue to have another good solid year. There certainly are ebbs and flows and rebalancing. For 2019, I would have a hard time identifying anything that was alarmingly bad. Regardless of all the doomsday projections and such, I don’t see any trends that are, in any way, negatively alarming. I feel that there is a amount of rebalancing that will continue, but I don’t see any major concerns as I see things today.
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