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Sinusoidal operations - a story of Christmas peaks in logistics

2019.12.13
Christmas is invariably a time of increased shopping. Between 20 and 40 percent of annual sales turnover is generated in the pre-Christmas period, in particular in the last two months of the year. This is an intensive time also for logistics which has to meet the challenges of increased operations. Efficient operations of that sector determine whether crowds of people going Christmas shopping will find the products they are looking for.

Raben Group services very different industries and customers in warehouse logistics and transport, as well as in the area of repackaging. Therefore, it plays an important role in the efficient management of volumes and operations in the pre-Christmas period. Every year during this time orders increase by over a dozen or even several dozen percent in relation to average annual volumes. Fortunately, the specificity of different industries and the related work of the operator means that not all operations accumulate in November or December.

The FMCG sector is the most sensitive to pre-Christmas shopping. This group includes both food products and numerous other categories (e.g. cosmetics or decorative products). A large part of FMCG customers have to make sure that the products are available in stores many weeks before Christmas. Hence, for Raben the Christmas rush begins in the summer - and already then it is obvious what Poles will find under the Christmas tree. The peak in this type of repackaging falls already at the turn of summer and autumn for many industries. This concerns, for instance, cosmetic sets, which are among the most frequently purchased gifts in Poland. Such ready-made sets and originally packaged products are delivered by the logistics operator to distribution or shop warehouses, from where they get on the shelf. Hence, increased orders for these products are visible in warehouses already in October and the largest volumes fall in November. In December, increased purchases include mainly fast-moving food products. In the case of this product group also for the operator, the peak of orders falls at the end of November and at the beginning of December. In turn, for the beverage industry, including for alcoholic beverages, the boom period lasts from Christmas until New Year's Eve.

Apart from FMCG, a large part of Raben Group customers is from other sectors (e.g. automotive or chemical industry), and for them the seasonality of operations falls outside the Christmas season. This allows to efficiently handle increased volumes at different times, which positively translates into flexibility offered to customers. As part of standard multi-customer resources, Raben is able to successfully manage peaks at the level of 10%-20%. In case of needs exceeding such flexibility, close partnership with customers is crucial. The customer is closer to his consumers and he knows what promotional tools he is planning to use in the near future. His even slightly erroneous forecast will be more accurate than the assumptions of the operator and it can be translated into effective resource planning in warehousing or transport. Raben pays a lot of attention to building awareness and close cooperation in the area of forecasts and we have very good experience in this field. For example, in the largest multi-customer contract logistics warehouse near Poznań, the company effectively cooperates in this field with over a dozen of the largest customers.

The e-commerce business has its own rules as we deal with a shortened logistics chain: from the operator's warehouse directly to the consumer's hands who decides when he wants to order and receive the product. Here, logistics must focus on providing resources with very high flexibility associated with suddenly increased purchases. At the same time, such readiness for shipping is associated with high costs. Customers - owners of online stores - are increasingly ready to bear these additional costs because they do not want to risk losing sales. But it's not just them: more and more customers understand that in today's very difficult logistics market, this is the only way to ensure the quality of the process. There is a growing awareness that in order to be able to handle extra volumes in a short period of time, the operator has to hire additional resources or start overtime work in advance, which means an increase in costs.

It is worth noting that the increased logistics operations in the pre-Christmas period are not only the effect of actual higher consumer purchases. Still, a large part of peaks in logistics is related to achieving sales targets by manufacturing or trading companies. While the former create real value for the company, the latter do not add value for consumers, but generate high costs and disrupt the cycle throughout logistics. In terms of operations, these are the most difficult moments because sometimes in the last two days of the month, some customers would like to carry out operations even a few hundred percent higher than in the other days of the month. Such expectations mean not only increased costs but they are often not physically possible to process. Therefore, everyone - both customers and operators - should work on flattening such a sine wave. 

With so much effort put into delivering goods to stores in the pre-Christmas period, it is to be hoped that all these products will be sold from the shelves. Otherwise, after several months of intensive operations the low volume of January will be a challenge for the entire logistics industry. Resources at the ready and no work for them mean also additional costs.

Author
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Lucyna Zaborowska-Princ

Regional Contract Logistics Director

Raben Logistics Polska