A totally unpredictable demand pattern has been the nightmare that has come true for many businesses over the last few years, particularly retailers involved in e-commerce. Many are struggling to cope and even more have hoped that the situation would return to “normal”.
It remains to be seen whether ten years from now we will look back on the pandemic years with a wailing smile or will haile them as the beginning of a new era in consumer behavior. But in the meantime, it’s worth adjusting supply chain and fulfillment strategies to deal with the volatility. In theory, it can even offer benefits. If this sounds crazy, read on.
Take it from a company that doesn’t just deal with volatility; it lives on – Unusual Goods. A quick search will tell you that this is the ecommerce site where consumers shop for “creative, original gifts and experiences.” In other words, goods that are whimsy rather than useful. Gifts can generate spikes in demand of 30X or more.
“We’ve seen volatility for years,” says Rob Carucci, operations manager at Uncommon Goods. “One of the interesting challenges for Uncommon Goods is that initially it’s a very seasonal business.”
Uncommon Goods can see sales spike up to 10 times the average volume in Q1 and Q3 during its typical six-week peak period, and typically makes two-thirds of its business in Q4. “So we’re used to that surge,” he says, stressing that it absolutely doesn’t mean they’re filing their nails for the rest of the year. “As with the Macy’s Thanksgiving Day Parade, we begin planning for the next the day after the last.”
Get the right workforce
Preparing for this wild fourth-quarter ride is all about ensuring adequate staffing and skills, says Carucci. The recruitment effort is significant and has involved building strong partnerships in the local Brooklyn community, but also with its outside logistics partners, including ITS logistics.
In a notable strategic move, Uncommon Goods is offering employees who handle day-to-day fulfillment tasks the opportunity to become frontline managers and supervisors for the additional employees who are coming on a temporary basis. “This is a great opportunity for them to develop further,” says Carucci. “They are pickers and packers seven months a year. Then, in the fourth quarter, they are removed from those positions, paid extra, and conduct training for new team members. They take on performance management and even administrative responsibilities, and we give them training on various factors throughout the year to help them grow into those roles for three months.”
All of this translates into great employee retention rates, Carucci says — something that’s high on many facility managers’ priority lists right now. It is a clear signal that payment alone is not enough. “We pay well, but a lot of people want to do other things after X years,” says Carucci. Of course, in a year where there’s growth, Uncommon Goods can offer that. But as mentioned, most years are volatile. “That’s why we also have internship programs where they can work in technology or finance and learn other skills.” Carucci’s approach is to keep an eye on the variety of tasks so that the employees not only pick and pack, but also, for example can proceed to inventory control.
“We ask: How do you make the work a bit more diverse? Even if they’re not leveling up, they’re expanding their experience,” says Carucci.
To forecast well, forecast often
Aside from building and maintaining a happy workforce, Carucci says forecasting is key, even though volatility usually means unpredictability. “One of the lessons we’ve learned as a company is that if you want to forecast properly, it’s important to forecast often.”
According to Carucci, Uncommon Goods has been able to perform useful data comparisons and identify year-over-year trends over the past several years. “We know when the catalog will appear. We can predict to the day exactly how many are arriving at the house and can adjust the forward-looking sales accordingly.”
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Another tool for forecasting sales is to get very accurate data on past sales, says Carucci. The company measures data such as units per order and sales per item.
“We’re constantly updating and adjusting item-level selling velocity to see where we’re putting things in the warehouse.”
Nonetheless, volatility means building some redundancy in operational capabilities. “In e-commerce, you should build up additional capacities,” says Carucci. “It’s like insurance. You must have enough flexibility to manage additional sales because it’s too risky to give up that income at this time of year. It’s a good problem!”
Carucci says it helps to have partners who can help the company remain flexible, such as ITS. The ITS team has helped reduce delivery time, increase the efficiency of inbound suppliers and of course work with the massive fluctuations experienced by the retailer. To enable two-day delivery to the Lower 48, Uncommon Goods and ITS opened a West Coast distribution center in Reno, Nevada. Part of the enhancement included technology integration that sends customers an instant notification upon shipment through to final delivery.
ITS also established a consolidation point for shipments from West Coast suppliers for East Coast products, reducing transportation costs for unusual goods. As a result, Uncommon Goods can now be distributed in 90% of the US within two days.
Automation isn’t always the answer
Perhaps surprisingly, Uncommon Goods hasn’t invested much in automation. One reason is that the company’s Brooklyn logistics center is located in the Brooklyn Army Terminal, which served as the largest military supply base in the US during World War II and is more than 100 years old. The company has talked about wall erecting and zone picking and has some automated air-seal packaging equipment. They also plan to expand zone picking and a put wall as a secondary sorting location. “But robotic picking doesn’t really lend itself to our product mix, which at this time of year is seven thousand SKUs and 1.2 million storage units,” notes Carucci. “We don’t have the space.”
His advice to retailers new to volatility: “We’ve found it’s important to look at both pre-pandemic and post-pandemic sales because there’s more competition now. We are aware that some of the growth over the last year may have been a variance.” On the fulfillment side, Carucci recommends renegotiating contracts with transportation and fulfillment providers now, given the significant movement over the past 12 months has moved. “There are more favorable conditions than a year ago,” he says.
