The last few peak seasons have been volatile, and 2022 was no exception. Most retailers and supply chain professionals had no idea what to expect, given that 58% of holiday shoppers told Metapack that they would cut back on spending, and 59% of supply chain professionals expected the 2022 peak to be more challenging than the year before. Yet, despite those early concerns, sales numbers came out better than expected, according to data from Salesforce.
However, peak season still had its share of issues that now require attention from logistics and supply chain leaders. While 2023’s peak season may seem far away, this is the time for the retail and logistics sectors to analyze what went right, what went wrong, and what can be done about it. After all, the beginning of the next holiday peak season is only a little over half a year away.
2022 Peak Season Wins
While the most focus usually goes on what went wrong, retail stakeholders should pause briefly to celebrate a few unexpected wins. For example:
- Online sales were up 5% versus 2021 in the United States.
- Major parcel carriers did well with on-time delivery (OTD) over 2021, with UPS boasting a 97.5% OTD rate, FedEx improving a full 7% by climbing to 95.2% OTD, and USPS falling only slightly to 94.3% OTD year-over-year.
- The retail sector successfully waylaid consumer inflation fears by offering deep discounts early on.
The sector can use these successful metrics to influence future decision-making. For example, if a shipper is concerned about on-time holiday delivery, check to see if parcel carriers have been making preparatory investments throughout the year. Similarly, if consumers seem uneasy about spending, consider how sales might entice them to buy.
2022 Peak Season Failures
Despite the wins above, the logistics sector has plenty of issues to address before another busy retail season rolls around. Here are some of the biggest challenges faced in 2022:
- Inventory management. Retailers tried to frontload inventory to avoid their problems with meeting consumer demand in 2020 and 2021. Unfortunately, this strategy backfired badly. As inflation drove up costs and economists began to predict a recessionary environment, consumers became hesitant to spend money. As a result, many retailers found their fulfillment and distribution centers overflowing with unsold goods purchased earlier in the year, leaving little to no room for new peak-season inventory.
- Labor shortage. The logistics sector has relied on temporary labor for decades to scale up in advance of peak season demand. However, that strategy has become less effective due to low unemployment during recent peaks. In fact, 71% of retailers named labor shortages as a concern going into the 2022 peak season. Despite those struggles, numerous retailers and their logistics partners continued to engage in intense competition for temp workers instead of investing in alternatives that might allow them to scale up with a smaller workforce.
- Low warehouse vacancy. The industrial real estate sector has been struggling with low vacancy since before the onset of the pandemic in 2020. Even so, countless retail stakeholders failed to account for their limited space problems before trying to stock up on inventory for peak. As a result, warehouses were packed to near-bursting for peak, further taxing an already-strained national warehouse inventory.
To address these problems, the best thing you can do this year is start early. Work closely with your logistics and technology partners to analyze data from 2022 and figure out how you can do better in 2023. Throw out your old inventory models and determine which products need safety stock and which don’t. Review your real estate portfolio and begin discussions to add space. Start reviewing automation and robotics solutions that can help you address your labor issues. Starting on these things now gives you time to test and implement new solutions before another holiday rush can derail your improvement plans.
About Phoenix Logistics
Strategic Real Estate. Applied Technology. Tailored Service. Creativity. Flexibility. These fundamentals reflect everything we do at Phoenix Logistics. We provide specialized support in locating and attaining the correct logistics solutions for every client we serve. Most logistic competitors work to win 3PL contracts, and then attempt to secure the real estate to support it. As an affiliate of giant industrial real estate firm Phoenix Investors, we can quickly secure real estate solutions across its portfolio or leverage its market and financial strength to quickly source and acquire real estate to meet our client’s need.