Businesses often experience a spike in the demand for their products during certain seasons. For example, many businesses receive an order influx during Black Friday, as customers rush to take advantage of limited-time offers and shop for the festive season.
While seasonal peaks in sales earn businesses significant revenue, they can be a logistical nightmare due to issues such as inventory shortages, shipping delays, and overburdened staff. So, how can businesses overcome these logistical challenges and capitalize on seasonal demand? That's where third-party logistics (3PL) providers can come in handy.
In this article, we'll explore how 3PLs can help you prepare for, manage, and maximize seasonal demand, ensuring you deliver a seamless experience for your customers.
The Challenges of Seasonal Demand
Seasonal demand often presents businesses with a unique set of challenges. Regardless of your company's size or industry, some common challenges you might face due to seasonal demand fluctuations include:
Stockouts
Stockouts occur when your business doesn't have enough inventory to fulfill consumer demand. Seasonal surges in orders can deplete your inventory faster than anticipated, causing stockouts.
While stockouts indicate that you're making good sales, regular stockouts can result in substantial lost revenue. In fact, it's estimated that American and Canadian businesses lose roughly $350 billion annually due to stockouts.
And that's not all. Stockouts can also damage your company's reputation and lower customer satisfaction if you frequently can't meet consumer demand.
Shipping Delays
While major carriers often take several measures to cope with seasonal demand, higher order volumes usually put a strain on their resources. As a result, an influx in orders can strain your shipping capabilities, resulting in shipping delays.
Limited Storage Space
Many businesses, especially small ones, struggle to find warehouse space to store their inventory due to competition for space from large enterprises. This issue is further exacerbated during peak seasons when businesses require more floor space to store their extra inventory.
Staffing Strain
Handling logistics processes in-house during peak seasons can overwhelm your team, particularly if you have a small team without logistics expertise. As a result, many businesses usually scale their workforce during peak seasons to cope with demand surges.
For instance, in 2024, the National Retail Foundation (NRF) estimated that retailers hired between 400,000 to 500,000 workers to cope with increased consumer demand during the holiday season.
Customer Expectations
Regardless of the time of year, customers expect to receive their orders fast. In fact, most customers expect to receive their orders within at least two days or less, and most won't purchase a product if the delivery time is too long. This expectation can put a lot of pressure on businesses with large order volumes due to sudden surges in orders.
How a 3PL Can Help You Handle Seasonal Demand
Seasonal demand challenges are inevitable. Fortunately, working with a 3PL can provide numerous 3PL benefits and help you navigate seasonal demand challenges. That said, here are 3PL services that can support your operations:
Scalable Warehousing Solutions
The average cost of renting a warehouse space in the U.S. is $9.7 per square foot. While this is substantially lower than office space rent, many warehouse lease agreements are often inflexible.
3PLs offer flexible storage options, allowing you to increase your inventory levels during peak seasons without committing to long-term leases. This can be a huge benefit for your business, particularly if you run a small enterprise and want to maintain a healthy cash flow.
What's more, 3PLs tend to have multiple warehouses, allowing you to store products closer to your customers for faster delivery.
Efficient Inventory Management
Keeping tabs on inventory levels can be challenging, especially during peak seasons. Working with a 3PL order fulfillment company can help you overcome this challenge.
3PLs use sophisticated inventory management systems to monitor stock levels in real time. These systems often send alerts or notifications when stock is about to become depleted. This allows you to promptly reorder items before they run out, preventing stockouts and backorders.
Faster Order Fulfillment
Customers want to receive their orders promptly. 3PLs can handle increased order volumes efficiently due to their streamlined picking, packing, and shipping processes.
3PLs use advanced technologies like automation tools and warehouse management systems, ensuring orders are fulfilled accurately and on time, enhancing customer satisfaction.
Enhanced Shipping Capabilities
Sudden surges in demand can stretch your transportation resources thin, causing shipping delays. Unfortunately, some customers have little sympathy for businesses that deliver orders late, as 13% of customers won't purchase items from a business that delivers items late.
3PLs often have relationships with multiple carriers, giving them access to extra transportation capacity and faster delivery options. This can be especially beneficial during peak seasons when carriers may be overwhelmed.
Seasonal Staffing Support
Managing seasonal demand typically requires additional labor. Recruiting temporary staff during peak seasons and downsizing during off-peak periods may be impractical, particularly if you run a small business.
Partnering with a 3PL eliminates the need for you to hire and train temporary staff, as 3PLs have competent logistics professionals trained to handle increased order volumes. As a result, working with a 3PL can save you precious time you would have spent vetting potential hires, allowing you to focus on other core aspects of your business that drive growth.
Returns Management
Returns are inevitable, especially during peak seasons. In 2022, out of the 1.3 trillion U.S. dollars generated in e-commerce sales, about 16.5% ended up as returns. While customers often find the returns process tedious, you can make it frictionless by partnering with a 3PL.
3PL fulfillment companies have vast expertise in reverse logistics, enabling them to streamline the returns process. From receiving returned items from customers and returning them to the seller or manufacturer to providing customers with replacements, 3PLs can make the returns process seamless for businesses and customers.
Steps to Prepare for Seasonal Demand with a 3PL
Working with a 3PL isn't a magic bullet for dealing with seasonal demand. If you want to get the most out of your 3PL partnership during peak seasons, you must plan ahead. Here are five proven ways to prepare for peak seasons:
Forecast Demand Accurately
Seasonal demand forecasting involves predicting consumer demand during peak seasons based on past trends. You can forecast demand by analyzing historical sales data to determine when orders spike.
By sharing and analyzing your historical sales data with your 3PL provider, your 3PL can help you adjust your transportation needs and inventory levels accordingly based on consumer demand. This can prevent resource wastage and stockouts.
Communicate Early with Your 3PL
Maintain an open line of communication with your 3PL provider and give your 3PL prior notice of upcoming sales events or promotions. For example, if you intend to run a Cyber Monday promotion to drive online sales, make sure you inform your 3PL to allow them to allocate resources appropriately.
Optimize Inventory Placement
3PLs typically have a network of strategically located warehouses scattered across the U.S. Working with a 3PL allows you to leverage their warehouse network. Before the peak season begins, make sure you place your inventory closer to regions with high order volumes to reduce shipping times and costs.
Test Your Processes
Rectifying issues with your fulfillment and shipping processes during the peak season can be tough and costly. Before you receive a surge in orders, conduct tests to ensure your processes are running smoothly. For instance, if you notice that your e-commerce platform isn't working seamlessly with your 3PLs custom solution, make sure you resolve the integration issue before peak season.
Monitor Performance in Real Time
3PLs usually offer advanced tools, allowing businesses to track orders, stock levels, and shipping performance in real time. These tools enable businesses to address issues quickly and maintain customer satisfaction. For instance, using real-time inventory tracking tools, you can replenish products promptly and prevent stockouts, ensuring you meet customer demand.
Case Study: Online Retailer Achieves Record Sales
An online retailer specializing in holiday decorations faced significant challenges managing increased demand for decorations. During the holiday season, their order volume spiked by 300%, resulting in frequent stockouts and shipment delays. This occurred due to their limited warehouse space and transportation capabilities.
To resolve this issue, the retailer reached out to a 3PL. By working with a 3PL, they managed to:
- Expand inventory storage across multiple warehouses.
- Reduce shipping times by 40% by using multiple carriers and optimized fulfillment centers.
- Process 90% of returns seamlessly with reverse logistics support.
As a result, the retailer achieved a 30% increase in Year-over-Year (YoY) sales and improved customer satisfaction while avoiding the hassle of managing seasonal logistics in-house.
Make Seasonal Demand Your Strength
Dealing with seasonal demand fluctuations can feel like an almost insurmountable challenge. But it doesn't have to be. With the help of a reliable 3PL, you can handle spikes in orders with ease, fulfill customer expectations, and maximize your revenue.
From providing scalable warehousing solutions and robust inventory management tools to handling returns, a 3PL can offer you the solutions needed to navigate seasonal demand fluctuations.
Ready to experience these 3PL advantages and optimize your seasonal demand logistics? Contact us today to discover how our 3PL solutions can help you manage seasonal demand spikes.
SOURCES:
Consumers Say 1 in 5 Items They Want To Buy Is Out-Of-Stock at Their Local Retailer. (September 2022). Supermarket News.
Small Businesses Squeezed Out by Warehouse Space Shortage. (February 2023). WorldCraft Logistics.
Steady Sales Growth Expected for 2024 Holiday Season, According to NRF. (October 2024). National Retail Federation.
The Future Shopper Report 2023. (June 2023). VML.
Average Rent per Square Foot Paid for Industrial Space in the United States From 2017 to 2023, by Type. (December 2024). Statista.
Retailers and Customers Don’t See Eye to Eye on Returns or In-Store Experiences. (October 2019). Oracle.
E-Commerce Returns in the United States - Statistics & Facts. (December 2023). Statista.