THIRD-PARTY LOGISTICS

Guide to ecommerce fulfillment during the holiday season

In this guide, we discuss the steps you need to take with your 3PL to make sure you are prepared to satisfy demand and deliver for your customers during this upcoming holiday season.
For many people, the holiday season – which begins in the US on Thanksgiving and goes all the way to the end of the year – is a time to relax, unwind, and take a break from the daily grind of work. This is not the case for most retailers.

For retailers, the holiday season is the busiest time of the year – a make-or-break period that can account for more than 40% of their annual sales.

For ecommerce companies, this upcoming peak season is expected to smash all-time sales records. Online sales during the holiday season – which have shot up by 46.8% over the past two years in the US – are forecasted to increase by 12.8% to 14.3% this year to reach between $260 billion and $264 billion.

To satisfy surging demand during the holiday season – which typically reaches its high point during the “the Turkey 5” (the five days stretching from Thanksgiving to Cyber Monday) – ecommerce companies must be able to ensure:
  • Product availability: If online retailers don’t have the products that shoppers are looking for in stock during the holidays, they are likely to see a loss in customer trust and loyalty and a corresponding drop in sales. A survey by McKinsey revealed that around 70% of shoppers faced with out-of-stocks decided to switch retailers or brands.
  • Fast, reliable shipping: It’s imperative that ecommerce companies are able to deliver products on time, ahead of the end-of-year holidays. Delivery delays are a top concern of online shoppers, with 65% of customers saying that they are worried about having their holiday gifts arrive on time.
The question is: How can online retailers ensure their products are in stock and their customer orders are delivered on time during the busy holiday shopping season?

It all boils down to how well their manage their end-to-end logistics operations – from upstream inventory management to order fulfillment – and deal with supply chain challenges and constraints during the end-of-year peak sales period.

To help them handle their logistics operations during the high-volume, high-stress holiday season and meet high expectations from customers, many ecommerce companies engage third-party logistics (3PL) providers.

In this guide, we will walk you through the steps you need to take with your 3PL to make sure your ecommerce business is prepared to satisfy demand and deliver on time for your customers during this upcoming holiday season.

Step #1: Make a sales plan

As the old adage says, “Failing to plan is planning to fail” – and this especially holds true for ecommerce companies during the holiday shopping season.

To set your ecommerce business up for success during the holidays, you should start your sales planning process (as well as your planning for other areas including manufacturing and website optimization) as early as possible.

Ideally, you would have a sales plan in place two to three months before the onset of peak shopping season on Thanksgiving Day, which falls on November 24th this year. But never fear if you are running behind schedule – just try to solidify your sales plan as soon as you can.

When creating a sales plan, you will want to:
  • Take a close look at your historical data and demand forecasts, analyzing past sales trends and future projections. Identify which products – such as top sellers or hot new items – you would like to feature in your holiday season sales campaigns.
  • Work with your internal team and other supply chain stakeholders (including manufacturers and 3PL partners) to determine:
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  • Which products you plan to sell during the holiday season.
  • Which deals and promotions you plan to offer on those products.
  • Which channels – including your own brand website, other ecommerce marketplaces, social media shopping sites, and even brick-and-mortar stores – you plan to sell those products through and if you will have exclusive offers on any of those channels.
  • How much inventory of those products you will need to satisfy forecasted demand across all your sales channels.
  • How much inventory of those products you already have in stock and how much will need to be manufactured (by you or your manufacturing partners).
  • Generate a holiday season sales plan, which details which products you will sell, which promotions and deals your will run across various sales channels, and where you will source the inventory you need to meet high demand from holiday shoppers.
As mentioned above, it may be a good idea to give your 3PL partner a seat at the table during your holiday sales planning discussions. Some 3PLs – like Amazon Supply Chain – can provide expert insights on inventory management, order fulfillment, and supply chain management that can really help you crystallize your sales plan.

Step #2: Make an inbounding plan

Once your holiday season sales plan is firmed up, the next step you should take is to work with your 3PL partner to create an inbounding plan.
Before creating the inbounding plan, you should check with your 3PL regarding a few potential issues:

Capacity

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Check to see if your 3PL has enough capacity to handle the volume of orders that you expect to have during the holiday season. If your 3PL does not have the capability to inbound, store, pick, pack, and ship your products, you may need to look for other 3PL partners to help handle your holiday season order fulfillment. Be aware that some 3PLs may charge you for the cost of hiring additional staff required to handle your holiday season orders.

Surcharges

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Find out which surcharges your 3PL imposes. Some 3PLs have a surcharge for order fulfillment and other services rendered during the peak period, and they may have other surcharges as well including zonal surcharges and fuel surcharges. It’s important to get a grasp of the true cost of your order fulfillment during the holidays – as this will enable you to budget appropriately.

Global presence

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Ensure that your 3PL provider has a footprint in those locations where your customer base is located. Ideally, you would be able to partner with a 3PL like Amazon Supply Chain, which has a network of over 200 fulfillment centers around the world. Working with a 3PL with a global presence allows you to distribute your inventory so it’s as close as possible to your customers – thereby reducing shipping times and costs.

Integrations

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Make sure that your 3PL has integrations with the various sales channels that you are using. With Amazon Supply Chain, for instance, you can integrate with essentially any ecommerce website or social media channel via API or app – and thereby automate the entire order fulfillment process.

Cutoff date

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Find out when your 3PL’s cutoff date is. During the holiday season, most 3PLs implement cutoff dates, after which they are not able to accept new inventory shipments. You will want to make sure that your inventory is inbounded to your 3PL well before their cutoff date – so that’s it’s ready to be shipped out to customers once holiday shopping commences.
After checking with your 3PL about these and other important issues, you can start creating your inbounding plan.

Generally speaking, the goal of this inbounding plan is to ensure that you send the right amount of the right products to your 3PL at the right times – so that your 3PL can efficiently pick, pack, and ship those products out to customers during the holiday season.

The inbounding plan that you create with your 3PL should stipulate:
    Which SKUs, in which quantities, you will send to your 3PL.
    When you will send those shipments to your 3PL.
    Which of your 3PL’s facilities – such as upstream distribution centers or fulfillment centers – you will send the shipments to. Some 3PLs – like Amazon Supply Chain – will automatically and optimally distribute your stock across their network.
    Which channels you would like to allocate your SKUs to. Some 3PLs – like Amazon Supply Chain – allow you to consolidate your inventory into a single pool, which can be used to fulfill orders across all of your sales channels.
    What are the optimal inventory levels of various SKUs that you would like to maintain across your 3PL’s storage and distribution network – so that you can replenish whenever necessary.

Step #3: Send your inventory to your 3PL

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After you’ve created your sales and inbounding plans, you will be ready to start sending your inventory to your 3PL (according to the schedule laid out in your inbounding plan).

As mentioned previously, you will want to be certain that you inbound all your inventory to your 3PL’s facilities as early as possible – and well ahead of your 3PL’s cutoff date.

It’s imperative that you communicate and collaborate very closely with your 3PL to ensure that the inbounding process is goes smoothly.

Once your stock has been received by your 3PL and is safely stored on the shelves of your 3PL’s warehousing facilities, you are essentially prepared – on the order fulfillment front – to handle the spike in orders from holiday shoppers.

That’s the beauty of working with a 3PL partner: You can let them worry about handling the picking, packing, and shipping of your orders during the holiday season spike, while you focus on your sales, marketing, and overall business development.

Step #4: Let your 3PL handle your order fulfillment operations

Before the holiday shopping season kicks off, you will want to make sure that your website is optimized and that all of your deals and promotions are up and running across all your online channels.

And then – if you’ve done your sales and inbounding planning correctly and have distributed the right products across your 3PL’s fulfillment center network – you can sit back and watch the holiday orders pour in and your shipments go out.

Your 3PL should take care of all the heavy lifting as far as logistics are concerned, but you will definitely want to maintain visibility over your operations in case:
  • Your inventory levels run low over the course of the holiday season and you need to replenish. If this happens, you will want to coordinate with your 3PL to see if you can redistribute your stock or pull from your buffer or back up inventory. Some 3PLs – like Amazon Supply Chain – offer low-cost bulk upstream storage in distribution centers, so that your inventory will be automatically replenished in fulfillment centers whenever necessary.
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  • Any issues with customer orders arise. Most 3PLs offer customer service and support, and they should have representatives working around the clock during peak season to assist you with any order fulfillment issues. And, if any customers want to return or exchange the holiday gifts they received, your 3PL provider can also help you with reverse logistics.

Conclusion

If you follow the steps outlined in this guide, you can set your ecommerce business up for success during the end-of-year peak period.

By ensuring product availability and on-time delivery across your various sales channels throughout the holidays, your 3PL partner can help you bring big smiles to the faces of your customers.

And, by managing your order fulfillment operations and eliminating your logistics headaches, your 3PL partner can probably help you relax and enjoy yourself a whole lot more during the busy holiday season.
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To learn more about the business benefits of partnering with a 3PL provider, read our Guide to 3PL.

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