Halloween. The holiday that haunts supply chains and frightens retailers.
The Halloween season brings excitement and festivities, but behind the scenes, supply chains face unique challenges to ensure seamless customer experiences.
What costumes, decorations, and candy to make or procure? How many of them? What raw materials you might need? How and when to ship them over?
These questions echo through the minds of supply chain managers as they navigate the complexities of the Halloween season. In this article we will explore some of the key challenges faced by supply chains during this spooky time from accurately forecasting demand to the complexities of managing inventory levels and ensuring timely delivery. We will also discuss some of the most effective strategies to overcome these challenges.
In the weeks leading up to Halloween, consumers stock up on a wide variety of candies to give away to trick-or-treaters. Year after year, Halloween is over just as quickly as it started and the demand for Halloween costumes and decorations is as intense as it is brief.
Even with inflation around the world, consumers are still spending much more this year compared to past ones. According to a survey commissioned by the National Retail Federation (NRF), it’s projected that 73% of people celebrating Halloween will spend about $12.2 billion, which averages out to $108.24 per person. $4.1 billion will be spent on costumes, $3.9 billion on decorations, $3.6 billion on candy, and $500 million on greeting cards. This corresponds to a huge demand in Halloween spending, scaring all supply chain managers.
However, Supply chains must anticipate this spike in customer demand and adjust their production schedules accordingly. To do so, candy manufacturers and retailers must plan throughout the year to make the most of the short witching season.
“Best-case scenario, it has to be six to eight months in advance,” said Julie Niederhoff, associate professor in the Supply Chain Management department at Syracuse University’s Whitman School of Management. The problem is that Halloween is driven by trends – you don’t always know what people are going to want to dress up that far in advance.
According to S&P Global Market Intelligence, retailers are preparing for Halloween sales earlier than ever, leading to earlier shipments of Halloween products than prior years.
Credits: Sky news
One of the significant challenges faced by supply chains during Halloween is accurately predicting consumer demand. Part of the issue is that forecasts are unreliable. The diverse range of costumes, decorations, and themed products flooding the market each year, predicting which items will be popular can feel like trying to read tea leaves.
Today, what’s popular is more of a surprise and this is majorly fueled by the virality aspect influencing costume choices. A show or an image can become unexpectedly popular overnight, such as “Ted Lasso” or Kim Kardashian’s Balenciaga Met Gala full black bodysuit.
These trends might come out of nowhere and the very little advance notice makes it hard for supply chains to handle large-scale production and logistics around a tight timeline like Halloween or Christmas.
“Squid Game”, the viral Netflix show about people battling in a series of traditional children’s games while wearing a lot of brightly colored tracksuits, is the perfect example. Two years ago, the show took over TV screens and became a top Halloween costume. Everybody wanted “Squid Game” costumes and designs. The problem: the show was released just one month and a half before Halloween and it was not on anyone’s production plan six months earlier. So, there was a big gap between what people were looking for and what was available for Halloween.
Paradoxically, this potential strong demand paired with ongoing supply chain constraints can lead to supply chain issues resulting in some empty store shelves.
The Halloween season has a relatively short window for sales compared to other holidays like Christmas or Thanksgiving. There are only about six to eight weeks to make sure Halloween candies are made and delivered correctly. This compressed time frame combined with the high volume of demand can be tricky for some large manufacturers that try to plan out the supply chain at least 18 to 24 months ahead of time. The pressure is even bigger as they need to deliver the products quickly without compromising quality or customer satisfaction.
Then, the festive time brings with it potential disruptions such as natural disasters or unforeseen events that can impact production capabilities and transportation routes. Even a slight miscalculation can result in a disastrous over- or undersupply of treats. Businesses are still haunted by the lessons learned with COVID lockdowns and problems related to shortages of truck drivers, warehouse employees, natural disasters, and container scarcity.
With a short sales window and a wide range of seasonal products, striking the right balance between supply and demand becomes crucial. Manufacturers need to navigate the complexities of production planning to ensure they have enough stock to meet customer demand without overproducing and risking excess inventory. They must think about solutions ranging from production to delivery to the final customer and this, in an environmentally friendly way, to combat waste. In other words, they must achieve several competing objectives at the same time. These multiple objectives depend on accurate demand forecasting, end-to-end visibility on the whole production resources and operations and effective communication with suppliers.
On the other hand, retailers face the challenge of optimizing shelf space while ensuring they have enough stock on hand to satisfy customers’ varied preferences.
Additionally, Halloween presents a unique challenge for manufacturers and retailers when it comes to repurposing supplies. With the seasonal nature of Halloween products, there is a risk of unsold inventory once the holidays pass. This is particularly challenging for perishable items.
Most of the time manufacturers, wholesalers, and retailers find creative ways to repurpose leftover inventory during holiday seasons. However, unlike other holidays where surplus items can be easily adapted for future occasions, Halloween-themed products have limited versatility. For example, it’s not easy to repurpose glow-in-the-dark skeleton decorations for Thanksgiving, repackage witch-shaped cookies for Valentine’s Day or find alternative uses for vampire-themed costumes outside of the Halloween season. This unique nature of Halloween products makes it difficult to find alternative uses or markets for the unsold inventory.
Among other reasons why the Supply Chain is the scariest thing on Halloween is that it requires additional labor resources due to the increased demand and order volumes. Finding qualified and skilled employees who can quickly adapt to supply chain tasks can be a significant challenge that can lead to difficulties in meeting production targets or fulfilling customer orders on time, resulting in limited availability of popular Halloween costumes and decorations.
For instance, the United States requires 80,000 truckers to ensure the smooth transportation of goods while employment in the retail sector has been declining for three years.
What does that mean? That means that the cargo ships might get unloaded. And if that Squid Games-inspired costume happens to arrive at the store, will there be anyone to sell it to you?
So, how can you anticipate and respond to the fluctuations and uncertainties in seasonal demand signals? How can you make sure you have the right amount of stock to maximize sales while minimizing waste?
To conclude on a positive note, not everything on Halloween is cursed. Despite the increased complexities faced by supply chains during the Halloween season, advanced technology offers a glimmer of hope.
Halloween serves as a perfect illustration and a poignant reminder of the challenges faced by supply chain managers and consumer goods companies globally as these challenges are not limited to this spooky season alone. The unpredictability of consumer preferences, the need for accurate demand forecasting, inventory management complexities and labor constraints are all prevalent in supply chains worldwide.
To overcome these challenges, smart supply chain leaders are turning to advanced technologies like AI Simulation.
By leveraging predictive and prescriptive simulation, they gain valuable insights into consumer demand to tackle all types of uncertainties on a larger scale. AI Simulation allows them to test different scenarios and evaluate the impact of various factors on their operations. For example, they can simulate changes in demand patterns or disruptions and make informed decisions based on these insights.
It empowers businesses to make more accurate forecasts, optimize inventory levels and reorder points considering demand fluctuations or transport lead uncertainties, thus preventing stockouts or excess inventory that may haunt profitability.
By embracing AI-Simulation technology manufacturers and retailers optimize their production schedules, ensuring they have the right Halloween costumes, Christmas decorations or chocolate Easter eggs when customers come knocking.
Furthermore, AI-Simulation technology enhances efficiency throughout the entire supply chain process. The integration of risk modeling into supply chain planning allows organizations to identify risks before they occur. By precisely assessing the potential impact of supply chain disruptions, businesses are able to optimize resource allocation, streamline processes, effectively implement risk mitigation strategies and ultimately provide exceptional customer experiences.
While Halloween may continue to haunt supply chains with its unique set of challenges, it is clear that leveraging advanced technology will continue to play a crucial role in optimizing supply chain operations throughout the whole year. By embracing digital transformation, companies can navigate complexity and uncertainty challenges with greater agility and precision, enhance their responsiveness and transform uncertainties into opportunities for growth to ensure long-term success.
In conclusion, as each year brings new surprises in consumer preferences and market dynamics, those who embrace technological advancements will have an edge over the competitors by delivering treats rather than tricks when it comes to customer satisfaction.