At present, ecommerce sales are projected to reach approximately $6.9 trillion (with a “T”) in sales worldwide during the course of 2024. According to Forbes Advisor, that figure is expected to rise to $7.9 trillion by the end of 2027. Of course, while ecommerce sales are generally a constant throughout the year, seasonal demand is a massive driver for the bulk of those figures, especially for an ecommerce business. For the companies that can successfully manage it, that is.
Seasonal demand puts a considerable strain on even the most established logistics networks, as high-volume order fulfillment requires a considerable amount of careful planning, especially during peak seasons. In order to keep customers happy while also staying ahead of the competition, companies will need to learn the careful balancing act that comes during the onslaught of high order volumes during demand spikes. This article will explore seasonal demand, its challenges, as well as possible strategies for being successful when things get hectic.
Understanding Seasonal Demand
Seasonal demand refers to the fluctuations in customer demand for certain products or services during specific periods of the year. Understanding seasonal demand is crucial for businesses to optimize their inventory management, supply chain, and logistics to meet customer expectations. By anticipating sales volume fluctuations, businesses can avoid stockouts, overstocking, and other inventory-related issues that can negatively impact customer satisfaction.
During peak seasons, such as the holiday shopping period or back-to-school season, customer expectations are at an all-time high. Businesses that can accurately predict and prepare for these demand spikes are better positioned to fulfill customer orders promptly and efficiently. This not only enhances customer satisfaction but also helps in building brand loyalty and repeat business.
Ultimately, seasonal demand is a clever bit of marketing designed to incentivize customer spending and is usually centered around major holidays or a major sales push. Of course, the most notable yearly seasonal demand spike is the Christmas and New Year holidays as shoppers prepare for the holidays. Historically speaking, this season would kick off with Black Friday, a day when most retailers offer deep discounts to drive sales and finish the year strong.
However, seasonal demand isn’t just limited to the traditional holiday season. Any time of year when there is a strong consumer need for specific products can be considered “seasonal demand.” For example, Back To School season sees high order volumes for educational necessities such as backpacks, clothes, and other school supplies.
These periods of seasonal demand can shift, especially in the world of ecommerce. Thanks to Amazon’s popularity and the powerful draw of Prime Day, the 2024 holiday shopping season is starting as early as November 1st, according to Reuters.
Of course, peak sales season seldom affects one or two companies but rather an entire marketplace. This means every company is vying for the same transportation resources, which makes maintaining delivery schedules for high-order volume fulfillment even more difficult.
Anticipating Sales Volume Fluctuations
To anticipate sales volume fluctuations, businesses can leverage historical sales data, market trends, and seasonal demand forecasting tools. By analyzing these data points, businesses can identify patterns and trends in customer demand and adjust their inventory levels, supply chain, and logistics accordingly. This proactive approach ensures that businesses have the right products in stock at the right time to meet customer demands.
Seasonal demand forecasting involves using advanced analytics and predictive models to estimate future sales volumes. These tools can provide valuable insights into when demand is likely to peak and which products will be in high demand. By incorporating these forecasts into their planning processes, businesses can optimize their inventory management and supply chain operations to handle the increased order volumes effectively.
The Challenge of Maintaining High-Order Volumes
The biggest challenge of seasonal demand peaks is simply a matter of keeping customers happy and being able to fulfill customer demands. Expectations run higher than usual during the holiday season, especially for last-minute shoppers, meaning delivery schedules are often tight and unforgiving. A missed delivery during the holiday season can lead to customers that are irritated at best and irate at worst. And with the internet being what it is, it doesn’t take a lot of negative reviews to leave a company’s reputation in shambles.
Adding on to high customer expectations, the overall strain on operations can also be a considerable challenge. Many companies will end up filling their rosters with seasonal help to offset the busy season. While an effective strategy, it’s not without its costs. Recruiting, interviewing, and hiring seasonal employees is a time sink in of itself, not to mention the additional payroll hours.
In addition to the labor strain created during seasonal demand spikes, logistics also incur additional costs. Logistics prices during the holiday season will undoubtedly creep higher, but depending on where in the world a company is shipping to, prices could become considerably more inflated. Some companies have reported as much as a 42% increase to their transportation costs during the holiday season, which quickly eats into profitability.
An alternative option is to shore up logistics, which not only helps during peak season but will also benefit operations year-round.
Identifying Key Issues
Identifying key issues in managing seasonal demand is crucial for businesses to optimize their inventory management, supply chain, and logistics. Some of the key issues that businesses may face include:
a. Inaccurate Inventory Forecasting
Misjudging the demand for products can lead to either overstocking or stockouts, both of which can negatively impact customer satisfaction and profitability.
b. Insufficient Inventory Levels
Failing to maintain adequate inventory levels can result in missed sales opportunities and dissatisfied customers.
c. Overstocking
Excess inventory ties up capital and increases storage costs, which can be particularly problematic during non-peak seasons.
d. Stockouts
Running out of popular products during peak seasons can lead to lost sales and damage to the brand’s reputation.
e. Supply Chain Disruptions
Unforeseen events such as supplier delays, transportation issues, or natural disasters can disrupt the supply chain and hinder the ability to meet customer demands.
f. Logistics Challenges
Managing the increased volume of orders and ensuring timely delivery can strain logistics operations, leading to potential delays and increased fulfillment costs.
By identifying these key issues, businesses can develop strategies to mitigate them and ensure that they can meet customer demands during peak seasons.
Strategies for Managing High-Volume Order Fulfillment
With peak season around the corner, order volumes are bound to start creeping upwards. Rather than being caught unprepared, here are some good strategies to maintain the entire order fulfillment process while keeping customers satisfied.
Seasonal Demand Forecasting
Accurate demand forecasting is the key to successfully managing high order volumes. While knowing exactly how much will be sold at any given time is pretty much impossible, there are plenty of predictive models, AI, and other software programs that can assist with trend analysis to help predict seasonal demand. Additionally, order management software can enhance this process by providing a centralized platform for managing incoming orders, automating tasks, and integrating with other systems to improve accuracy and efficiency.
Improve the Customer Experience
Putting the customer experience front and center of operations is the secret to building a successful business model. With ecommerce being what it is, customers can order anything from anywhere, making it incredibly more difficult for a company to distinguish themselves from the competition.
For example, there are few things that will irritate a customer more than a cumbersome process to figure out where their package is and, more importantly, when it will arrive on their doorstep. Having a system in place that will notify customers of delivery updates and provide real-time tracking does wonders for soothing that irritation and turning customers into repeat patrons.
Returns are another big focal point, especially during the ecommerce system. Having a strong reverse logistics system in place with a focus on making it as easy as possible for customers will not only save time and money but also improve the customer experience.
Optimize Inventory Management and Warehouse Tracking
A popular strategy, especially for ecommerce fulfillment, is to operate out of multiple warehouses. By having inventory staged in various geographical locations, it can reduce the necessary fulfillment mileage and shorten the strain on logistics. A third-party logistics provider can assist with managing multiple inventories and reducing fulfillment mileage. Of course, managing multiple inventories can be a risky endeavor without the right management system.
Automating inventory processes is another way to address the challenges of managing seasonal demand. These systems provide real-time visibility into inventory levels, streamline order fulfillment processes, and reduce the risk of human error. By automating inventory management, businesses can improve accuracy, reduce costs, and enhance overall efficiency.
Flexible Fulfillment and Fulfillment Costs
A rigid and standardized logistics system often lacks the agility necessary to keep pace with any meaningful increase in demand. Building flexibility into logistics is a fantastic strategy not only for dealing with increases in demand but also for offsetting disruptions such as a potential port strike, labor shortage, canal drought, or any other number of events that seem to occur with alarming regularity.
Flexible fulfillment can take any number of forms, from working with a wide carrier network, providing different shipping options such as drop shipping, working with third-party logistics providers (3PLs) or operating out of multiple fulfillment center(s).
Optimizing Supply Chain Execution for Seasonal Demand
Managing supply chain and logistics is critical for businesses to ensure that they can meet customer demands during peak seasons. This involves optimizing inventory management, supply chain execution, and logistics to ensure that products are delivered to customers on time and in good condition.
Effective supply chain and logistics management require a holistic approach that considers every aspect of the order fulfillment process. From sourcing raw materials to delivering the final product, each step must be carefully coordinated to minimize delays and maximize efficiency.
Supply chain execution involves the coordination of all activities involved in the production and delivery of products to customers. This includes sourcing raw materials, manufacturing, warehousing, transportation, and delivery. By optimizing supply chain execution, businesses can ensure that products are delivered to customers on time and in good condition, which can help to improve customer satisfaction and loyalty.
To optimize supply chain execution, businesses can use various strategies such as:
- Implementing Just-in-Time Inventory Management: This approach minimizes inventory holding costs by receiving goods only as they are needed in the production process, reducing waste and improving efficiency.
- Using Third-Party Logistics Providers: Partnering with third-party logistics providers (3PLs) can help businesses scale their logistics operations quickly and efficiently, especially during peak seasons.
- Investing in Supply Chain Management Software: Advanced software solutions can provide real-time visibility into the supply chain, enabling businesses to make data-driven decisions and respond quickly to changes in demand. A great example is Metapack’s delivery management software, which offers dynamic shipping rules paired with an extensive carrier library. This allows retailers to efficiently adjust shipping volumes based on demand fluctuations and quickly pivot in the event of service disruptions.
- Developing Relationships with Suppliers and Logistics Providers: Strong relationships with suppliers and logistics providers can enhance collaboration and ensure a more reliable supply chain.
- Implementing Quality Control Measures: Ensuring that products meet quality standards at every stage of the supply chain can reduce the risk of returns and improve customer satisfaction.
By optimizing supply chain execution, businesses can ensure that they can meet customer demands during peak seasons and improve their overall competitiveness in the market.
Winning the Seasonal Demand Rush
Winning during the peak seasonal demand can take many forms, depending on what your goals are. For some companies, it’s simply a matter of keeping up with orders and managing the entire order fulfillment process. For other companies, it’s about creating brand loyalty during a time of high expectations and giving customers a reason to keep coming back.
Whatever your goals may be, having the right solutions in place makes all the difference. Whether you’re looking for access to a comprehensive carrier network, looking to improve the post-purchase customer experience, or simply looking for a better way to handle fulfillment, Metapack has the solution.
Click here to learn more about how Metapack can help you win during peak demand season.