The Month End Saga Continues....

As we reach another month end, the saga of order spikes continue… So does BNPL – Make no mistake, this term has a different definition in Supply Chain Domain – Bill Now Process Later.

Jokes aside, Month-end peak load for order processing is not unique to India; it is a global phenomenon that affects many businesses around the world, though its intensity and implications can vary by region and industry. The month-end peak load typically occurs as companies experience heightened activity towards the end of the month due to several reasons, including:

1. Financial Reporting Cycles: Many companies align their sales and financial reporting cycles with the calendar month. Thus, businesses might see a surge in orders at month-end as customers and clients rush to close deals, use up budgeted funds, or finalize their monthly targets.

2. Sales Promotions and Targets: Companies often run sales promotions or discount campaigns that end at the month's close, driving a spike in orders.

3. Inventory Management: Businesses might also engage in inventory clearance or replenishment activities, contributing to increased order volumes.

Challenges and Inefficiencies

Month-end peaks in demand and fulfillment can create several challenges and inefficiencies, including:

1. Overwhelmed Systems and Staff: Sudden spikes in orders can overload warehousing and logistics systems, leading to processing delays, errors, and increased strain on staff.

2. Increased Operational Costs: Companies may incur higher labor costs due to overtime or temporary staffing, and additional shipping and handling costs due to expedited processing.

3. Inventory Imbalances: The surge in orders can lead to stockouts of popular items while other items may remain overstocked, impacting inventory turnover and efficiency.

4. Customer Service Issues: Delays in order fulfillment can result in increased customer complaints and potential loss of business.

5. Inconsistent Quality: The rush to fulfill orders may compromise quality control, leading to mistakes or defects in the shipped products.

While there are various strategies to ‘manage’ the month end loads like -

1. Demand Forecasting and Planning

2. Better Inventory Management

3. Operational Flexibility

4. Enhanced Communication, Better collaboration

5. Process Improvement

6. Technology Integration

None of these actually help avoid the occurrence of the problem itself. All these strategies assume this anomaly to be Business As Usual.

Objectively thinking, this surge in demand is certainly not induced by the end customer. There could be an argument that there is increased demand in essentials at the start of the month aligned with salary disbursements. However, this is not a sector specific phenomena, nor it is prevalent at a particular node of the supply chain. It pervades through all nodes and has nothing to do with the industry sector.

The skew is as high as – 60%-70% of order processing takes place in the last week for many businesses.

Why? How does this make sense? How can this be solved?

Should there be Uber kind surge pricing model - that the product/fulfillment costs are higher when the demand is high - encouraging customers/sales team to book orders earlier?

Should the definition of 'closing' be changed?

Should the Promotions and Discount framework be revisited?

What strategies do you think can be adopted to evenly spread demand across the month and excessive prevent month end skews?