Operations Planning - 'Peak Season'

Since we are currently are in the midst of the peak season of the year, I wanted to take the opportunity to touch upon how companies plan for it. Quarter 4, has traditionally been the most important time of the year for retail and e-commerce brands. There was a common notion in my experience with the industry that the first 3 quarters of the year are to build and test to be able to successfully deliver in the last quarter. As much as it may sound fascinating, it can be equally frustrating, if not done right. Therefore, a lot of discussions, iterations and simulations culminate into the final plan.

“Give me six hours to chop down a tree and I will spend the first four sharpening the axe.” – Abraham Lincoln

Just to set up the context, Quarter 4 constitutes for some of the most widely celebrated festivities from Halloween and Single's Day to Christmas, New Year and everything in between. It is a series of occasions where people want to celebrate and buy gifts. So for a quarter this important, it is essential to understand that factors involved in the planning process. Be it marketing, traffic operations, commercial, warehousing, logistics, human resources, security or any other team, each of them have to plan accordingly. It all starts with a forecast of orders being aligned with the commercial team (in technical terms this is also known as 'Sales & Operations Planning'). In an ideal state, these forecasts should be extremely granular (origin/destination combinations, products, SKU's, frequency etc). The forecast numbers are put together based on historical data accounting for external factors like seasonality, outliers, cyclical impact, external factors and etc.

Nowadays, as customers become more and more aware and sensitive to timelines, policies and procedures, it becomes essential to have it all planned out. Under-planning will result in a constrained workforce and a lot of delayed packages, whereas over-planning will result in a higher workforce with limited load resulting in a higher cost per order for the company. Planning using a sensitivity analysis allows for a wide array of situations and allows for contingency plans to be put in place. Below are certain critical factors that should be considered during the planning phase.

Here, today I will touch open the ingredients for ops to ensure we cover all critical topics. However, it is important to understand, that for peak season planning, all organizational functions need to be in sync. Your order forecast should align with the commercial team, payment, marketing and etc. One misalignment could backfire.?Circling back to ops, understanding the historical data is essential. Data is where the insight is. Learning from your mistakes is key. What worked last time, may not work again, external factors continuously evolve. Therefore an in depth understanding of the factors at play is super critical.?As already mentioned earlier, peak season planning is not a month long or a quarter long activity. Instead it is a year long process, since certain upgrades like facility, system and infrastructure take time.

Lead times are an important factor to consider. Theoretically, your capacity and lead times work hand in hand. An increase of promised lead time from 4 to 5 days means you can hire 20% less workforce which directly reduces costs by the same proportion. In practice, on ground situation is far more complex, because workforce onboarding has various linked departments that need to be adjusted accordingly. For example, a reduction of 20% workforce would require less onboarding and training staff, less workstations, lesser consumables and etc.

Similarly, forecasts are equally important. It allows for alignment with internal stakeholders (ideally through an S&OP process) of expected numbers based on targeted categories.?

While planning is important, mitigation of risks is also important as part of the planning process. Having a contingency plan in place along with a preventive maintenance plan for risk mitigation purposes, be it for IT equipment, warehouse equipment and etc.

Based on the numbers in discussion, resource planning is followed by IT and warehouse equipment planning which in turn allows for facility and logistics capacity planning. All of the above cannot happen without a financial plan in place. There are numerous factors at play and a sensitivity analysis is the best way forward. Therefore multiple simulations are to be conducted to understand the various implications of each factor deviance until the right one is agreed upon and put into execution. While we account for all of this, it is absolutely critical to revisit the post-mortem report from last year's peak season to ensure that we do not repeat the same mistakes again and learn from them. Let's not forget, planning is step 1 in the execution process.

An interesting article pertaining to peak season planning can be found below.

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