Planning for peak is no easy task. Retailers work with suppliers and across their own organisation to forecast as accurately as possible, but the implications of different scenarios have to be tested and factored into the business. What peak actually looks like is down to consumers though and shoppers are fickle. While their behaviour can be predicted to a certain extent, peak planning still requires a certain amount of educated guesswork. Add in the complexity of those customers being children who can change their mind over what they ‘really need’ as quickly as the next product page then it’s surprising that toy retailers are able to not only predict this Christmas’s must have let alone get enough stock in to keep selling through until children across the country are putting the mince pie out for Father Christmas.
The demise of Toys ’R’ Us has left a large gap in the market with toy retailers, and no doubt supermarkets and Amazon alike, keen to fill or at least grab as large a share as possible. As Steve Williams, Logistics Director, The Entertainer says, “The team is busy gaining insight into what Toys ’R’ Us leaving the market will mean for The Entertainer.” This means gathering feedback and opinion from suppliers, the industry and buyers and additional data being added into the peak forecast. It does mean though that last year’s data will not be as accurate as a large part of the toy market has been freed up. “We will build in extra flexibility this year with some margin over what the plan says we should have,” says Williams.This will include sensitivity plans should the volumes be higher than expected. In its favour the retailer will see extra business starting to build with the beginning of peak.
The Entertainer is one of the retailers eyeing up the gap in the market as it plans its strategy for Christmas trading. The peak season, which for The Entertainer starts to build in September, is the largest quarter in terms of sales for the company. It is also a quarter which is planned for right the way through the year from January to September. “We never stop planning for peak because this business is so fourth quarter heavy,” says Williams. He does add that the business continues to sell product all year around with small peaks in school holidays but, “the entire cycle is about peak”.
He explains that planning starts as soon as the previous year’s peak is over while everything is still fresh in everyone’s minds. The experience of everyone involved from freight forwarders, warehouse, agencies, buying, marketing, merchandising and retail operations are dissected to find out how aspects can be improved or enhanced for the following year and where extra resource or investment is needed. “It’s very very collaborative,” says Williams. “I do nothing but try and build relationships between every one of these contributors.”
Many of these relationships have not been strong in the past because the outside companies involved have seen themselves as competitors. Williams actively encourages the relationships with everyone working as part of The Entertainer supply chain. “The more we can share information and the more we can use that information to better forecast the coming peak the better,” he says. “In relation to peak everything we do is about forecasting what we think is going to happen. It’s built on the actuals from last year and the budget for the current year. This is all pulled together with the year to date actuals and a constant rolling forecast model which rolls up to peak. This is tweaked as we go and everything else is planned around that,” he says. “The forecast is the absolute driver for everything else in regard to resources, system requirements and people management,” he adds.
The Entertainer operates with two distinct teams for its online operations with one focusing on the front end and marketing and the other on logistics. The teams work closely together but separately from the store teams with their own distribution centre (DC) fulfilling online orders. Another DC in Banbury, Oxfordshire, is used mainly for store replenishment. This is operated for the toy retailer by XPO Logistics.
However, while it’s more efficient to fulfil online orders from the online DC, attached to head office in Amersham, stock across the business can be viewed as one pool by buying and merchandising for planning purposes and channelled to wherever it’s needed. “We don’t exist to operate what’s ultimately logistical efficiency. We exist to sell toys so will efficiently move stock between DCs if that’s the best thing to do for orders we may have, orders we are forecasting to get, pre-orders that we have already received or products that the stores are beginning to sell faster. We are very flexible with our inventory,” says Williams explaining how product can be moved between the two warehouses which the company operates for online and store replenishment as well as out to stores for the fulfilment of click and collect orders. These click and collect orders are first fulfilled from store stock with customers able to collect their order 30 minutes after placing their order online. Overall control of click and collect rests with the ecommerce team but the fulfilment system controls the decision over which part of the business fulfils the order.
Once the peak forecast is in place, the logistics team can start to plan the details such as the amount of pallets needing to be moved and therefore the amount of labour needed to move them through to the amount of orders to be fulfilled each day or down to an hourly level. The online fulfilment DC operates manual pick and pack so that it can handle a small toy car as easily as large dolls houses.
The amount of labour required therefore has to be factored in throughout the peak trading period so that temporary staff can be inducted, trained and be working to the same level as permanent staff by the time that peak really hits.
For The Entertainer, peak can amount to 10x the usual level of volume units through the warehouse and during a product launch can spike to 20x normal levels with pre-orders which need to be fulfilled. While these latter orders are easier to predict, issues in the supply chain such as stock arriving a few hours later than expected can cause problems. Williams explains that the average units per order can be less on days when pre-orders are processed though as customers may not have added anything else to their basket online. “It’s quite a fluctuating thing,” he says.“The goal for us in peak is never to get further than a percentage of a day behind so that the order bank is never more than a percentage of a day’s capacity,” says Williams. This means that at some times the level of personnel in the warehouse is higher than required but it also means that the company can continue to give customers the same level of service which it aims to keep to throughout the year regardless of the number of orders going through the warehouse.
When it comes to the ‘must have product’ at Christmas, forecasting is immensely important. While people in the business will have a good idea or opinion nobody knows what the product or group of products will be until they start taking off. Then there are issues of obtaining future supplies and getting it through the business fast enough. “If you have by fluke or by brilliance forecast very well then that makes it a lot easier because you have resourced every area of the supply chain adequately to move stock to fulfil the orders,” he says. However, the adverse can also be true since it’s difficult to factor in change when logistics is operating at close to capacity during peak.
While increased sales are good for the business, Williams says that if spikes outside of the forecast happen around Black Friday it can cause issues with recruiting labour because the temp agency may not have available the number of people required – and then they have to be trained. “We have a week-by-week plan of the number of people to be brought into the business,” he says. This on boarding is smoothed across the peak to make sure that people aren’t taken on and then laid off again between peaks. “In this industry – the toy industry – the peak is such a dramatic peak, that you have this great period of preparation but you quickly find out when you are in it just how good that preparation was,” he says. And with one of the biggest players out of the picture this Christmas, The Entertainer’s operations are going to be tested as it manoeuvres to capture as much of the market as it can.