As we begin the mad dash toward Christmas, the prognosticators have been out in full force. Do you believe the bulls or the bears? Are we headed for the happy holidays some predict, with strong base sales delivering an above-average increase this year as we lap last year’s softness? Or will they be a lump of coal instead, with tariffs and some economic shakiness making shoppers a bit more Grinch-y this year?
A rather short time will tell for this season. But what if there’s a fundamental spending shift already underway that will make future holidays less happy for those big year-end sales numbers everybody counts on, but perhaps less stressful for supply chains?
“If I look at the trend, it’s geared more and more toward instant gratification,” said Pervinder Johar, CEO of Blume Global, a logistics and digital supply chain company. “When people want something, they want to buy it now and want it delivered in 48 hours or less. Kids don’t get the idea of waiting for the holidays anymore.”
Johar believes we’re seeing the last gasp of the big end-of-year retail booms, and that the secular trend is toward a more even year-round level of demand versus the seasonality to which all the players in the consumer goods supply chain have become accustomed. “On the capacity side, you’ll have total demand moving at the same pace, but becoming more even across the year,” he said.
If Johar is right, this will have repercussions from one end of the supply chain to the other. “Overall, it’s good news on the manufacturing end, since steady demand puts less pressure on capacities,” he offered. “On the other hand, competitive pressures will continue to challenge high inventory levels, so the old model of carrying lots of inventory won’t work anymore.” Equally, supply chains will be challenged by these same pressures. “The bad news is that people have gotten used to living with long lead times. You could see six months or more for those dealing with India and China. Now they’ll have to become more and more agile in how quickly they can deliver.”
Retailers, producers and transporters will all have to get better at managing to a smoother year-round demand. Johar sees technology helping in three areas that have historically been a challenge: forecast accuracy, forecast granularity, and ability to forecast for longer time frames.
Forecast accuracy: “The assumption has always been, ‘The forecast is always wrong,’” said Johar. “Well, it won’t ever be 100% accurate, but new technology can greatly improve accuracy.”
Forecast granularity: “It’s always been pretty easy to forecast at the macro level,” Johar explained. “It’s been a lot harder to forecast at the micro level. A good example is car sales in the U.S. versus car sales overall. Technology can also assist people in getting better at forecasting at the finer level.”
Forecasting for longer time frames: The ability to “see” much farther out has been a challenge ever since forecasting came about. “It’s always much easier to see near-in, and much harder to see farther out,” Johar said. “People need much better systems here – they need to combine old-style data crunching with much better applications around how humans actually think.”
Johar believes all three factors play together when it comes to technology solutions. “Newer technology with AI and machine learning will help with all of this, and they’re here to stay,” he said. “Owners and managers need to become far more tech-savvy as a result. Things like 3-D printing and other advanced manufacturing will be more in demand, to help retailers become more vertically integrated and more responsive.”
There are other implications as well. Labor is a big one. “As demand evens out, there will be less demand for seasonal workers,” Johar said. “That will have a big impact, and it could be good or bad. On the one hand, it could help improve working conditions and schedules, and improve productivity. On the other hand, it could be worse for people who want opportunities for shorter-term employment.”
Globalization is another big factor. “Our super-long supply chains aren’t going to go away in the short term, because of the limits of what people are willing to pay,” said Johar. “In the long term, with better technologies and more pressure on costs, manufacturing will become more local to balance the cost of goods with the lead times that will work.”
Business leaders in all these areas will be challenged to look at new ways of doing things. “You’ve heard this before, but if you’re thinking, ‘We’ve always done it this way,’ think again – that’s not going to work in the future,” Johar cautioned. “Don’t be tied to how business gets done today. The more flexible and adaptable players are the ones who will win.”
What’s most interesting about all of this is that, even if Johar is wrong and our seasonal demand reality doesn’t change, everything he recommends will still be important. Competitive pressures will continue to drive inventory levels and lead times down. Advanced manufacturing technologies will make different ways of making things not only more feasible, but in many places will become the only feasible solution, disrupting legacy manufacturing methods. An upskilled labor force will be critical. And tying it all together will be new software tools based on AI and machine learning.
The competitive pressures won’t stop even if Christmas remains a big retail season. “We’re moving to an age where everybody will behave like an online retailer,” Johar said.