How Christmas is delivered

Professor Stuart Cole, CBE. Emeritus Professor of Transport Economics and Policy, University of South Wales.

The shopping centre and high street lights are on; the Christmas trees bought, put up and decorated; nearly one billion cards across the UK, are being written and hopefully delivered by the Post Office; and Christmas shopping is in full flow (or is it)?

Christmas is of course a vital part of the retail market throughout the wealthy European markets. The UK has the highest sales value estimates for this Christmas (£84.9 billion) with for example Germany at £73.9 bn, France (£62.8 bn) and Italy (£37.9 bn). (Statista Research)

Shops have been gearing up for Christmas spending and although the value of sales are up actual demand is slowing down.

Inflation and concerns about future employment are making shoppers more financially savvy and cautious.

Price competitive edge

Food is a major part of the Christmas family spend and here the price competitive edge of lower–cost retailers will push M&S/Waitrose to highlight quality and Tesco to make use of Clubcard discounts.

This includes the chocolate market where Cadbury’s reckon 97% of us buy sweets/chocolate items at Christmas, and whose retailing began in August. Persuading us, since 1900, that what we really want are their seasonal specialities.

A UK consumer survey (KPMG (the international financial consultants) shows that 53% of consumers will spend the same as last year though 34% will spend less.

Clothing and footwear are high on the Christmas present list and sales here are likely to increase in value (Statista) as shoppers react to the end of Covid restrictions.

Restaurants and pubs (again a popular activity from office/works parties to Christmas family lunches) are also likely to suffer with 36% saying they would be eating out less (KPMG).

However, none of these sales and activities would be achieved without careful supply chain planning.

The presents we buy may appear to be the latest fashionable must-have item promoted extensively on television and social media but they are more likely to result from:

• selection of best-selling products (based on forecasts) or those which retailers believe can be made best-sellers
• sourcing products (often from low-cost countries across the globe)
• distribution (including shipping, warehousing), and
• delivery to retail outlets or on-line logistics centres in Wales.

Warehouses

This process began last January and warehouses (including those of on-line suppliers) have been filling up since last July.

The public are becoming increasingly aware of these supply chains putting the sector into the limelight when previously it sat in the shadows.

Press commentary will always react to crises with, for example, empty shelves and cancelled Christmas events.

Long lead times especially from overseas sources means ordering has to be done months before Christmas.

Often nearer sources could be sought but these, located in western Europe, are likely to increase costs.

Hence the importance of accurate demand forecasting in maximising sales and reducing the risk of left-over stock.

If customer product selection was the same every year it would be easier to accurately forecast demand from historic sales patterns. However, the product range changes as technology (especially toys) and clothing fashions change.

The Christmas retailing season can extend over several weeks so central warehousing forecasts enable stock to be diverted to specific retail outlets.

This can prevent stores running out of stock so losing sales and avoiding the need for ‘% off’ price reductions before Christmas and afterwards.

While those stores and on-line retailers with high Christmas Eve sales, prevent embarrassment for last minute shoppers blaming themselves for not getting ‘that’ Christmas present.

Trucks

Despite the forecast sales reduction there will still be more trucks on our roads than at other times of the year, and their parking in a town centre street or travelling before you on a narrow rural road may result in unprintable comments with little goodwill attached!

But without those trucks there would be no Christmas.

Recalling the Leadbetter household in The Good Life television programme, Christmas was (or in their case not) delivered in a Harrods van.

Today’s deliveries are tomorrow’s sales and purchases. It is this which shows the importance of freight and logistics in our daily lives. Without them we would have no food, clothing and certainly no Christmas in its current commercial sense.

The management of seasonal demand is a continuing task for retailers. However the two-month Christmas selling period is the biggest challenge.

It represents up to 30% of total annual sales for some products and puts a greater pressure on supply chains whose objective is to operate smoothly and ensure shoppers have what they want.

There is of course the 25th December deadline matched only by birthday deadlines for the supply of presents.

One positive aspect is the high availability of drivers resulting from recently increased hourly payment rates.

Pressure

Just-in-time operating targets and working within hours regulations puts pressure on drivers to arrive at their warehouse slot (timetabled as with trains and buses). Traffic regulation enforcement generally enhances traffic flow but the extra Christmas shoppers bring a higher level of congestion alongside the extra deliveries needed to meet the seasonal demand for Christmas consumer goods.

The Christmas period market, despite the forecast sales decline, still increases demand to such a high-volume sales level, that capacity constraints may come into play.

Companies have to determine if there is sufficient storage capacity and shelving in warehouses and in back-stores of shops. Road vehicle capacity in both heavy goods vehicles and local delivery vans has to be ensured.

Friday evenings and Saturdays in December are the busiest times of the year for retailers. So, there may be a need to have store deliveries on quieter days when staff may have sufficient time to stock shelves.

Logistics and retailing companies told me what they would put on their Christmas list to Santa are:

• Correct forecasts
• Good on-shelf availability throughout the season
• No excess stock
• Avoiding discounts
• Retail stores and on-line sites achieving sales targets
• Avoiding differences in performance between product groups
• All suppliers performing as expected
• Identifying problems, seeing why they occurred and how to avoid them next Christmas

Christmas will still remain the busiest period for shopping and dining out and on that joyful note from this Nation.Cymru columnist: Nadolig Llawen a Blwyddyn Newydd Dda – Merry Christmas and a Happy New Year.