The retailers’ high season begins in November with Black Friday and lasts until the New Year. Holiday shopping evolves into a real rush, with the logistics sector being under increased load. This year, this higher demand is complemented by problems with supply chain disruptions. A logistics expert Pavel Lisitsin spoke about facilitating operations and establishing uninterrupted supplies.
Pavel Lisitsin: Preparing for the high season
Most retailers start preparing for the holidays at least a few months prior. It requires performing an analysis of the same period last year, making a sales forecast, preparing warehouses, and making purchases.
Pavel Lisitsin believes that recent demand fluctuations have significantly complicated this task. It is also influenced by external factors – for example, supply delays due to downtime at ports in 2021.
According to Pavel Lisitsin, there are several solutions to such a situation. For example, the world-famous retailer Wallmart chartered its own vessels not to depend on carriers. However, such expensive options are available to very large companies only. Most companies still find somewhat easier solution to this problem by purchasing large batches of goods in advance and delivering them to warehouses and stores. However, Pavel Lisitsin warns that this approach has its drawbacks since keeping large batches of products in warehouses requires significant investment.
Indeed, by resorting to such “insurance stocks” they create a new challenge for the logistics system – larger amount of storage capacity is required. Pavel Lisitsin notes that the warehouse shortage is quite common for Ukraine. Even in the capital, the vacancy rate doesn’t exceed 3%; in other cities this indicator may be even lower. However, Pavel Lisitsin claims that Ukraine is not the only country to face this problem. According to the American retailers’ reports, in the United States, the warehouse vacancy rate doesn’t exceed 4.3%, and for port warehouses it is no more than 1%.
In the West, there are companies that offer retailers and distributors to use free space in the logistics providers’ warehouses. Pavel Lisitsin says that there is a similar alternative in Ukraine – temporary storage warehouses. They are beneficial since they can be used during high periods (the pre-holidays ones, for example), and refused at any time afterwards.
Pavel Lisitsin: Challenges for logistics in the pre-holiday season
Before the New Year holidays, the cargo transportation price may boost by 10% or more due to retailers preparing for higher demand for goods. Unfortunately, this phenomenon is inevitable, and Pavel Lisitsin reveals the reasons for the higher price.
The first factor that makes cargo transportation a significantly more complex process is the weather. It may delay transportation to some future date and cause a supply chain disruption.
Pavel Lisitsin emphasizes that under such difficult conditions, for logistics providers it is important to ensure coordinated operations of all the process participants. The trucking route should include a few variations, considering alternative routes subject to traffic jams. Providers have to include these difficulties into the final transportation cost as well.
The pandemic has become a traditional factor that affects the supply cost. Pavel Lisitsin admits that over the past year and a half the so-called “coronacrisis” has repeatedly disrupted the planned supply chains. The pandemic consequences affected absolutely all parts of the trade chain – from production to transportation to the final consumer. One should also understand that the increased demand was coupled with the lower capacity of the transportation system.
Here, a few factors have coincided at once – unpredictable demand, transport delays (as it was the case with queues at ports, for example), and complicated customs control procedure. Pavel Lisitsin believes that in this situation only thorough planning that provides for possible crises can help retail companies and logistics providers.
However, don’t forget that it’s during the high season that many business participants tend to compensate for all the losses they suffered over the year due to economic reasons. Besides, as Pavel Lisitsin says, January and February are commonly known as short months (including due to numerous public holidays), so most companies are trying to compensate for the lost profits as early as during the pre-holiday season.
Pavel Lisitsin emphasizes once again that the cargo transportation rates primarily depend on demand. With the growing consumer demand and lacking transport vehicles and staff, the prices will rise. Thus, at the end of the year transportation prices may increase by 10-20% on both international and domestic routes.