Navigating the Peak: What to Expect and How to Prepare for this Year’s Seasonal Spike
On the eve of the crucial holiday shopping period, retailers are bracing for the impact of interest rates and economic challenges on consumer spending. Supply Chain Insights explores how strategic investments in technology, workforce management, and adaptive planning can help businesses weather the short-term challenges this peak season presents, while also setting up for long term success.
Shoppers around the country will soon visit their favourite retailers – mostly online – to start to fill their Christmas stockings. With interest rates casting a shadow over consumer spending, analysts are anticipating a challenging year for retail as customers are predicted to shop earlier this year during shopping events such as Black Friday to snap up heavily reduced items.
Glenn Barnes, Industry Manager Grocery & General Merchandise at Dematic, explains why a more cautious approach from consumers is expected this year.
"High interest rates are making consumers hold off on purchases, particularly discretionary items. There may be a bigger than normal trough-to-peak change in order volumes, and supply chain operations may need to be prepared for this, such as being ready to take on additional operators to handle the peak," Glenn says.
According to Glenn, much rests on messaging from the Reserve Bank of Australia (RBA) – hints at interest rates remaining high may temper consumer spending during the sales periods, but an interest rate cut before either or both periods could give a significant boost.
“Supply chain is about expecting the unexpected and avoiding broad generalisations, as different segments of the retail sector will experience different outcomes” ”
Bruce Herbert, Strategic Advisor at TMX Transform, echoes this sentiment of uncertainty.
"On the balance of probability, this peak holiday season will be a little more subdued because all the economic indicators are generally heading in the wrong direction. However, supply chain is about expecting the unexpected and avoiding broad generalisations, as different segments of the retail sector will experience different outcomes,” Bruce says.
Regardless of what’s in store for retailers this holiday season, supply chains need to be prepared. Doing more with less has become a reality for many Australian organisations, and a reliable, resilient, and agile supply chain provides the groundwork for succeeding in this reality.
Forecasting in Uncertain Times
The ability to accurately predict consumer demand is the foundation for supply chain success in the retail industry. Data analytics software can predict looming shortages, identify supply chain vulnerabilities, and give managers actionable insights on how to respond to problems before they arise. Raghav Sibal, Managing Director ANZ at Manhattan Associates, highlights the complexity of this task.
"I think the biggest challenge is still predicting consumer demand,” Raghav says. “All this planning starts months prior to peak season and relies on a combination of predictive analytics with historical data and algorithms to get a sense of demand.”
Raghav emphasises the importance of real-time data in making informed decisions.
"Real-time data is crucial in today's retail landscape. Information from point-of-sale systems, social media, and visibility tools gives instant insights into stock levels and in-transit inventory across different locations. Having this visibility and applying all these data elements to decision-making will be key to success."
This sentiment is echoed by TMX Transform’s Bruce Herbert, who points out the rapid advancements in forecasting technology.
"There used to be an ongoing debate about how to best forecast product demand. Which algorithm should we use? What factors should we consider - weather, economic activity, or other variables? The most advanced systems today sidestep this debate by using multiple algorithms simultaneously and letting them compete against each other to determine the most accurate forecast.
"These advancements are exciting for companies investing in people and systems. However, for those not making these investments, it’s probably intimidating as they risk being left behind."
Royston Phua, Vertical Strategy Leader for Asia Pacific Supply Chains with Zebra Technologies, explains why the advancements in demand forecasting are more important than ever.
“Business leaders haven’t had to consider the impact of climate change until recently. There are more natural disasters affecting infrastructure, causing congestion and creating other issues throughout the supply chain. Organisations now have to consider three types of data: transactional, historical, and near real-time. In the past, we'd look at traditional data going back as far as five years. Today's retail environment changes so rapidly that even data from two years ago might be irrelevant, so that historical data isn’t as useful as it once was.”
“Today’s retail environment changes so rapidly that even data from two years ago might be irrelevant, so that historical data isn’t as useful as it once was”
Striking the Balance: Efficiency Meets Resilience
In the past, supply chain managers, executives, and researchers have viewed efficiency (low cost) and resilience (high flexibility and agility) as mutually exclusive. This perspective shaped the design of supply chains, with managers often prioritising short-term profits over long-term resilience and adaptability. As a result, numerous supply chains were primarily engineered to cut costs.
The disruptions and challenges thrown up in recent years have forced a re-evaluation of this approach. Bruce Herbert argues that resilience is a "two-way story – it's not just about overcoming interruptions, disasters or big spikes in demand. It’s also about building cost flexibility, so that if things do turn down, you're not caught with a whole bunch of fixed costs."
Bruce Herbert emphasised the importance of scalability in both directions.
"Building in cost flexibility allows you to either manage high volume without exploding your costs, or when the volume goes down, reduce your cost proportionally to protect your margins."
Visibility tools and data analytics help to reveal safe cost-cutting opportunities involving sourcing, inventory, or capacity. Real-time information on potential bottlenecks reduces the risk involved in otherwise difficult decisions like adding suppliers, increasing safety stock, or ramping up capacity. In an era where consumer expectations are sky-high, visibility is paramount.
"In peak season, the consumer becomes more demanding. They want on-time arrival, accurate stock levels, and flexible fulfillment options like click and collect," Raghav Sibal says. "Within the four walls of fulfillment, there needs to be more planning from a workforce and labour standpoint, building contingency plans to become more resilient. These factors are coming into play for leaders who have to balance high customer service expectations with staying ahead of demand.”
Automation plays a big part in this pursuit for both efficiency and resiliency. Glenn Barnes particularly highlights the benefits of goods-to-person (GTP) systems, which "enable greater flexibility and adaptability to change order profiles, such as shifts in the balance between store and online orders and provide extra capacity in a compact footprint."
"Automation drives efficiencies through optimised storage, picking, dispatch as well as process enhancements. In reducing the reliance on labour, automation makes supply chains more resilient to labour challenges,” he says.
Workforce Management in High-Stress Periods
The peak season inevitably brings increased stress for supply chain workers at all levels. In a national labour shortage, retaining staff is becoming more crucial for organisations, who can’t afford a slowdown in efficiency due to a lack of staff. Leaked documents in 2022 revealed Amazon has an annual employee turnover rate of 150% – double the industry average – costing the company and its shareholders $8 billion annually.
In 2024, Ikea Australia has moved to close the gender pay gap, revising super payments on unpaid parental leave and offering retail store workers to be on a fixed roster – all in a bid to retain its employees. Bloomberg reported Ikea’s workers were previously quitting in large numbers in the US, while in the UK and Ireland, half of all new hires were leaving before their first anniversary. By 2022, more than 62,000 employees were departing each year. Globally, each departure cost Ikea AUD $7,521 to replace.
Raghav Sibal suggests innovative approaches to manage and motivate staff, where technology works to better staff wellbeing.
"Technology solutions that monitor performance and prompt breaks when needed will grow in popularity. For example, the system might notify a worker who's been maintaining high productivity for several hours and provide an unscheduled break,” he says. "Some of our customers have introduced creative incentives for high performance, such as top performers earning a prime parking spot next to the Managing Director for a month. It's a simple but effective way to recognise and reward exceptional work."
Dematic’s Glenn Barnes points out that automation can also contribute to a less physically and mentally demanding work environment.
"Automation provides for a less stressful working environment, as operators work in ergonomically and safety-optimised stations at consistent, comfortable speeds. Warehouse workers aren’t reliant on others for maintaining high performance and accuracy is assured, which alleviates stress levels as volumes increase.”
“Technology solutions that monitor performance and prompt breaks when needed will grow in popularity”
On top of this, automation can help address the issue of labour availability, which is particularly challenging during peak periods. Automation reduces dependence on casual labour pools, which is especially relevant in Australia, where labour is becoming increasingly scarce, particularly in regional areas.
Technology is fundamental to challenge perceptions of warehouses being dull and dirty environments and tackle labour shortages. However, people remain at the heart of the issue.
Bruce Herbert emphasises the importance of leadership during these high-stress peak periods.
"Good leaders have always prepared their teams for peak seasons by being realistic and honest about the challenges ahead,” he says, “They encourage their staff to take holidays and rest beforehand, treating the busy period like athletes preparing for a major event – you don't perform at that intense level all year round. If overwork creeps in the best leaders don’t turn a blind eye to it and check in with their staff.”
Royston Phua suggests that four key supply chain principles need to be in place to deal well with stressful periods.
"It sounds cliché, but the key to managing peak season stress starts with a clear vision and mission. Retailers need to define what they aspire to achieve for their customers and for themselves. From there, they should examine their supply chains, focusing on four basic tenets: people, processes, systems, and automation – in that order. Many companies make the mistake of jumping straight to technology or automation without considering their people and processes first. This can lead to costly investments in technology that don't align with their workflows. By getting the fundamentals right and leveraging appropriate technology, retailers can better manage the stress of peak seasons."
The Key to Peak Season Success
Royston advises retailers, regardless of size, to prioritise digitisation and modernisation.
"If you’re a small to medium-sized business, you don't need to invent everything yourself, you can subscribe to platforms that digitise your supply chain,” he says.
"Retailers should explore partnerships with larger players for crowdsourcing arrangements, especially in areas like transport and inventory management. There are numerous SaaS programs available in Australia and New Zealand that can optimise these processes – the goal should be to start digitising your supply chain with a medium-term view of two to three years."
While investing in automation now will not address the challenges of this coming peak season, retailers looking to invest will be ready for next year's peak seasons, according to Glen Barnes.
"When implementing automation, it's crucial to have a deep understanding of your business - and ensure your supplier does too. This includes your warehousing operations, data, supply chain requirements, business strategy, and growth plans to avoid overcapitalisation on automation. Design a system that includes manual overflow capabilities and room for future expansion, so your investment remains justifiable and adaptable," he says.
“Design a system that includes manual overflow capabilities and room for future expansion, so your investment remains justifiable and adaptable”
Bruce Herbert says it's challenging to provide generic advice about peak seasons because each retailer is unique. Rather than focusing on specific events from the previous year, retailers should be ready to expect the unexpected. While it's impossible to plan for every potential situation, organisations need to develop a flexible approach that can adapt to various challenges, rather than assuming that history will repeat itself.
“Resilience during peak season isn't just about physical capacity to handle products; it's also about financial management. Effective automation should be sized for peak capacity or close to it, rather than based on average volumes to avoid having systems that are too large during off-seasons and inadequate during peak times,” Bruce says.
As retailers and supply chain professionals in Australia prepare for the upcoming peak season, success will depend on a combination of accurate forecasting, strategic use of technology and efficient workforce management. Those who can balance these necessities will be in the best position not only this year, but for many Christmases to come.
