For the logistics sector, seasonality is a difficult issue, one that will be explored thoroughly in Ti’s upcoming report on Global Warehousing and Logistics Networks*. Supply chain managers are all too aware that during peak seasons, more warehouse space is often required than their existing network can provide for. The classic case is a retailer at Christmas.
As the graph below depicts, retail sales volumes in the EU in December are typically 20% higher every year compared to November. After December, sales slump and bottom out in February, before growing in March and then hovering around a similar monthly level for the rest of the year until Christmas comes again.
The situation is perhaps more complex in the manufacturing and construction sectors, which both have multiple significant peaks and troughs in production every year.
A question that follows is which sector is the ‘most seasonal’? There are numerical methods to measure and compare the degree of seasonality across different time series, but much can be understood by just inspecting the data. The most important things to consider are how many major peaks and troughs are there in a year and how severe these tend to be.
While the examples above offer a degree of insight into how much busier vertical sector supply chains are likely to be at certain times of year, it is important to acknowledge that these are high-level figures that serve to illustrate the issue of seasonality. Each country, sub-sector and warehouse has its own particular dynamics.
With that in mind, what can we say about seasonality at an operational level? In 2015, FLEXE, an on-demand warehousing marketplace operating in North America conducted a survey of 158 supply chain professionals. The results indicate that seasonality is by far the most common driver of excess inventory or warehouse space. More generally, 75% reported situations where inventory significantly exceeds capacity at some point in the year, while 70% reported the reverse.
In addition, 70% of warehouse managers with excess capacity do not have a solution when then have more space than inventory – they simply accept it as a cost of doing business. Only 12% sub-lease their excess space. In times of excess inventory, short-term leasing is the most common solution.
So what can be done to better manage seasonality in the supply chain? Perhaps more uptake of shared-user/ multi-user facilities would help. Or conceivably FLEXE’s model could be applied on a much larger scale. While inefficiency associated with seasonality is clearly not easy to overcome, there are an increasing array of solutions on offer to mitigate the problem. When seasonal fluctuations are substantial, these solutions ought to be explored.
*To register your interest for this report, please contact Michael Clover, Ti’s Business Development Manager: [email protected]
Source: Transport Intelligence, 2nd August 2016
Author: David Buckby
GLOBAL SUPPLY CHAIN INTELLIGENCE (GSCi)