The effect of Black Friday on supply chains

Black Friday/Cyber Monday: the real effect on supply chains

They say this is the most wonderful time of the year – but the growing transatlantic popularity of this sales phenomenon won’t just put strain on cash registers… The frenzied (sometimes violent) stampede of bargain hunters will undoubtedly place strain on supply chains and logistics networks too.

The effect of Black Friday on supply chains

According to Visa, £360,000 is expected to be spent every minute on Black Friday (28th November) – with a further £281 million forecast to be spent on the busiest day for online shopping; Cyber Monday.

Black Friday has long been established as a traditional sales bonanza in the US, and is predicted to see $2.48 billion spent online this year, up by 28 per cent. Meanwhile the more recent eCommerce follow up Cyber Monday is expected to increase by 15 per cent to $2.6 billion, and Thanksgiving Day itself has been predicted to see online sales of $1.35 billion, up 27 per cent.

Global IT services company IT Infotech have shared with us its thoughts on why retailers, logistics and delivery firms should be prepared for extra pressure through Black Friday to Cyber Monday.

The American tradition has been an increasingly popular import in the UK, with leading retailers including Amazon, Argos and John Lewis offering sales both online and in-store.

“UK retailers are already bracing their logistics operations to handle the Christmas rush, which can see as much as 70 per cent of yearly sales volumes achieved in the last two weeks of December”, says Venkata V, who works with some of the top retailers around the globe.

“However, with the US expecting one of the biggest sales periods in history this Thanksgiving, the UK should be prepared to see a spike in demand and more strain on their logistics. Even retailers not offering specific Black Friday discounts themselves can expect more demand as shoppers are inspired to hunt for Christmas bargains.”

The rapid escalation in demand created by sales events like Black Friday can be extremely lucrative, but also cause havoc on unprepared supply chains, as demonstrated by China’s recent “Single’s Day” event. The country’s biggest sales event saw the e-commerce leader Alibaba rake in sales of over £9 billion, but the day has previously slowed down delivery times from two days to over a week.

Saravana Kumar who heads Supply Chain consulting in ITC Infotech says: “Marketing, production and logistics teams should work closely together to make sure their operation can handle increased demand on the 28th of November, especially as they are likely to already be stretched by the Christmas period. Flexible retailers have a strong opportunity to capitalise on the sales event by reacting to demand and adjusting their pricing strategy on the fly, increasing and lowering prices as needed”.

“The increased complexity of omni-channel retail has made the supply chain more challenging, also presents an opportunity for well-prepared operations. Capacity should be available to quickly move stock for the most popular products around to meet increased demand online or in particular stores.”

Further comment is offered from Paul Doble, chief sales and marketing officer at DX, a leading independent mail, parcels and logistics end-to-end network operator:

“Throughout the busy Christmas trading season retailers must try to forecast as accurately as possible the volumes that will need to be sent, and then communicate these expectations to their logistics partners, who will take up a huge percentage of this volume. The alternative is the situation many retailers have faced in previous years, where through a combination of inaccurate planning, poor communication and unanticipated weather conditions, demand outstrips capacity and leaves retailers unable to meet their promises to online shoppers.”

Doble continues: “It’s a problem that is often exacerbated when retailers try to maximise the online shopping window, pushing back their Christmas order deadlines and thereby drastically increasing the risk of delayed deliveries when bad weather and other factors disrupt the supply chain.”

Doble concludes with a thought-provoking double-header: “Ultimately, when Christmas presents fail to arrive, it will be the retailer that bears the brunt of disgruntled Customers and negative publicity. As such, retailers need to be asking themselves the question: just how robust are my Christmas delivery plans?”