9 Innovative Ways to Manage and Meet Demand Surges

9 Innovative Ways to Manage and Meet Demand Surges

Retailers uncover new ways to respond to anticipated and unexpected order spikes so they don’t lose the sale.


MORE TO THE STORY:

A Sticky Situation


Whether you anticipate a retail demand surge or it happens unexpectedly, you need to be able to manage that sudden order spike in ways that don’t harm customer relationships or your bottom line.

Here are nine ways companies across the retail supply chain capture and fill orders when demand surges.


1. Go deep with suppliers.

Have “what if” conversations with suppliers. Identify the products that are likely to experience a spike, and pose surge scenarios to suppliers and manufacturers to learn how—or if—they can meet increased demand levels.

“Any company that buys anything should have conversations about what happens if demand doubles or halves,” advises Michael Zimmerman, partner and analytics practice leader at consulting firm Kearney. The solution might involve a financial investment to guarantee capacity or contracting product manufacturing elsewhere so you have options.

2. Make decisions at the factory.

Consider committing to factory capacity before you need it. That’s what Mark Burstein, industry principal at supply chain technology provider Logility recommends. If, for example, the manufacturing timeline for a product is three to four months, he says, a retailer might not receive a surge order until 150 days later. Booking capacity early moves your surge order ahead of others who haven’t ensured that protection.

At the same time, Burstein encourages retailers to forecast demand not just for products, but for raw materials as well, and to position those materials at the factory early. “With the materials in place, you can direct them to both high demand and most profitable products,” he says.

He also recommends saving time and touches by shipping finished goods directly from the factory, bypassing distribution centers completely.

3. Pre-sell to customers.

Taking a page from book publishers that have long used pre-orders to gauge demand for a book and determine how many copies to print, retailers of other types of products are now surveying customers to determine interest in a product.

“Retailers are getting smarter, thinking about how they can start to pre-sell and put customers in line to buy products ahead instead of waiting for a Cyber Monday surge,” says Troy Graham, vice president of business development at e-commerce solutions company Descartes Systems Group. This approach also assures customers that they will get the product, he adds.

4. Put some of the onus on the customer.

Third-party logistics provider Flexe is seeing results with brands that advise customers to “get it while you can.” Flexe clients using this scarcity strategy to manage demand spikes are better able to promise and then meet a customer delivery date.

“This strategy allows brands to get items to the customer quickly, but it’s also on the customer to make that happen by heeding the ‘while supplies last’ messaging,” says Megan Evert, senior vice president of operations, Flexe.

5. Outsource surge fulfillment.

Flexe offers a launch fulfillment service designed to handle surges inherent with product introductions. Typically, the manufacturer ships inventory to Flexe facilities in multiple markets selected for their proximity to anticipated demand. “When the brand knows it will have a severe spike, we can partner and distribute the inventory appropriately so that no one site has to ship 300,000 orders overnight,” Evert says.

Outsourcing surge fulfillment makes sense for other types of situations, too. “We’re not saying outsource your entire fulfillment,” she adds. “This is a way to respond to the dynamic situation we’re all experiencing. Don’t make it harder by trying to do all of this yourself.”

6. Improve delivery time by filling orders from the back of the store.

Increasingly, retailers looking for ways to get high-demand orders to customers more quickly are using a micro-fulfillment model that involves filling orders from the back of brick-and-mortar stores.

That’s what one of Pat Fitzpatrick’s outdoor action sports clients does. “A small warehouse keeps enough inventory for three to four days, but pushes everything out to stores for fulfillment,” says Fitzpatrick, vice president of sales and marketing for commercial storage solutions company McMurray Stern.

Companies can use this approach strategically according to demand locations, he says, or to improve delivery times in areas farther from a fulfillment center but closer to a store.

7. Ramp up reverse logistics.

Graham sees an increased focus on reverse logistics. “As we think about spikes in volume and limited inventory, retailers are looking at returns and asking, ‘How do we get them inspected and back to sale quickly?'” he says.

Micro-fulfillment makes that easier. “If you take returns in the store, you can get the product back into inventory much quicker,” Fitzpatrick says.

8. Carry more inventory than you’d like.

Many retailers have gone from “just in time” inventory management to “just in case,” stocking excess inventory of products most likely to benefit from a demand surge.

“The volatility and unavailability of some products has led retailers and consumer packaged goods companies to emphasize inventory over anything else,” says Zimmerman. “They want more to sell and they will pay extra for it and store more of it.”

Short-term warehouse space marketplace Chunker helps companies do that by connecting them with temporary surge storage capacity. Operating like “an Airbnb for warehouse space,” Chunker provides a buffer that lets retailers and brands stock up on inventory without committing to a long-term lease.

“Warehouse space comes with risk when companies have to sign a lease,” says CEO Brad Wright. “Shorter-term, more agile storage lets them flex their storage up and down.”

9. Let go of best practices.

Increasing inventory carrying costs and other recent survival strategies are counter to pre-pandemic best practices. “But perfection is not the goal here,” says Evert. She recommends being thoughtful about what you can do to increase the chance that the product will get to the consumer. When the best practice approach isn’t an option, consider alternatives.

“Without that, you’re losing demand,” she says. “In the worst case, you fail to realize you have to move faster and to save pennies, you lose the whole sale.”


A Sticky Situation

COVID’s impact on small businesses is well-documented, but you don’t have to show Australian candymakers David King and Rachel Turner the statistics. The married couple’s Sydney candy shop, Sticky, almost became one of them.

Founded in 2001, Sticky handmakes colorful hard candy with flare and drama while crowds of customers watch—and buy. When the global pandemic drove shoppers away, the brand’s candy artisans lost both their audience…and their customers. That’s when the couple’s teenaged daughter, Annabelle, came to the rescue.

A TikTok user, Annabelle knew the shop’s popular candy-making performances would play well with the video platform’s young users. The process is colorful and highly visual; the shop’s youthful candymakers know how to play to the camera. She lobbied her father to create short, fun videos for TikTok so they could replace the in-person audience they lost to COVID restrictions with a virtual one.

“Dad, you have to start a TikTok, what we do would work so well on TikTok,” Annabelle told Australian media outlet The Feed. “I had to hassle him so much, I had to say, ‘dad, dad, make it, make it, make it.’ He gave up one day and he let me do it.”

King was smart to listen to his daughter. Her plan succeeded in ways even she couldn’t have foreseen. When “Candy” performer Snoop Dogg shared one of Sticky’s candy-making videos on another visual platform, Instagram, his followers responded. About 1.5 million of them began following the StickyLollies Instagram account almost overnight. Within four months, the company also had 2.1 million TikTok followers and more than 30 million video views.

The exploding international fan base created unprecedented global demand for the candy—a situation that was both sweet and sour, since the company wasn’t prepared for the unexpected surge. “Over the past year, we have gone from 10 online weekly orders to 600. We sell out of everything we make each week—about 400 kilograms (881 pounds),” says Turner, who handles logistics and shipping. And this is no Amazon operation, she points out—all orders are hand-picked and boxed.

The owners had to make significant changes, starting with their e-commerce shopping cart and fulfillment. “Our major investment in automation has been integration of a more sophisticated shopping cart into our website,” says Turner. Implementing a custom-built site “has enabled us to pivot quickly to our exponential increase in sales,” she adds.

Global expansion included leasing almost 900 square feet of additional space to fill and process online orders. On any given day, seven days a week, two to four people pick, pack, and ship orders or assemble gift boxes and treat bags.

One significant challenge remains, though: Product sells out within hours of availability. As a result, the company is expanding both its fulfillment and candy-making capacity yet again. “It will be nice to have our product available for more than a few hours each week,” Turner says.

That sounds pretty sweet.

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