We may yet be a few months away from seeing the first tinsel appear in shop windows. But December is in the pipeline, and retailers will need to start preparing for a potential Christmas 2024 peak. Christmas peaks have been absent for the last two years due to economic volatility and shifting consumer behaviour but, as a result of the Consumer Price Index (CPI) dropping to 2%, a ripple of (cautiously) mild optimism has arrived.
While positive on the whole, this doesn’t change the fact that forecasting peaks has become an increasingly challenging task in recent years. The days when a traditional holiday rush could be depended upon are nearly as mythical as the bearded man in red himself.
The uncertainty surrounding peak periods is, of course, hugely problematic. Retailers face financial risks such as sunk costs from over-commitment or missed opportunities from under-commitment, with these stock risks no more worrying than at Christmas. It’s surely no coincidence that the most famous carol, “The Twelve Days of Christmas” is essentially an inventory checklist in musical form.
In a bid to prepare retailers for the upcoming Christmas peak, this article will look at:
- The inherent challenges in demand forecasting during peak periods.
- How 4PL solutions are emerging as an effective antidote to uncertainty.
- How logistics firms like X2 (UK) may well make Christmas a far merrier time for retailers everywhere.
The current UK economic outlook
As we approach the latter half of 2024, the UK economy is perhaps best characterised as warily optimistic with a hint of ongoing uncertainty. Which, to be honest, doesn’t help retailers much one way or the other. If the outlook was either good or bad, they could reliably prepare for both. However, a tentative balancing act in the middle is similar to a weather forecast predicting “sunshine with a chance of rain”. That‘s great, but what do you wear?
The UK may have emerged from a technical recession in late 2023 (with a GDP growth of 0.6% in Q1 2024), but this recovery is fragile at best, with economists offering mixed predictions about the future. The wider global economic outlook for 2024 also remains uncertain. The International Monetary Fund (IMF) forecasts a slight decline in global growth to 2.9%, driven mainly by emerging markets, with advanced economies like the UK showing tepid growth. Geopolitical tensions are adding another unwanted layer of complexity to the equation, with nearly 70% of economists anticipating that geoeconomic fragmentation will accelerate in 2024, potentially resulting in trade restrictions that could cost the global economy up to 7% in output.
Against this backdrop, the UK is admittedly showing some signs of tentative resilience. Business confidence, although tempered by uncertainty, remains relatively positive. However, it’s the word “relatively” in that sentence that really matters – 50% of CFOs rate the level of external financial and economic uncertainty affecting their businesses as ‘high’ or ‘very high’ in Q4 2023.
In short, “sunny with scattered showers” (yes, but scattered where exactly?).
The challenges of forecasting peak periods
While peak periods have been a stable feature in retail for decades, the Christmas season, in particular, has become rather moody of late. As mentioned, this is largely due to shifting consumer behaviour and economic uncertainties. The COVID-19 pandemic accelerated the shift towards e-commerce, altering traditional shopping habits. While online sales surged, their pattern became less predictable, with consumers spreading their purchases more evenly throughout the year rather than concentrating them during peak periods. Needless to say, this complicates forecasting efforts since retailers can no longer rely on historical data to predict demand spikes accurately.
In addition, logistical constraints are posing a formidable challenge. The supply chain disruptions experienced over the past few years have underlined the vulnerabilities in global logistics networks. With many businesses looking to save money and improve operational performance with Just-in-Time inventory systems, any hiccup in the supply chain can lead to disastrous delays and stock shortages during critical periods.
While technological advancements such as AI-driven analytics can vastly improve forecasting accuracy (and deliver ever more granular insights), this technology requires substantial investment and expertise to manage effectively. With traditional forecasting methods no longer sufficient, and with flexibility central to performance, Father Christmas has a special gift for retailers on his good list – in the shape of 4PL providers.
What is 4PL?
Fourth-party logistics (4PL) is a major leap forward in supply chain management. Unlike third-party logistics (3PL) which focuses on specific functions within the supply chain, a 4PL partner assumes a more comprehensive role. Essentially, a 4PL can act as the orchestrator of a company’s entire supply chain, serving as the central point of contact for all logistics activities.
At its core, 4PL integrates and manages the resources, capabilities and technologies of multiple logistics solution providers. This holistic approach allows businesses to streamline their operations by consolidating logistics management under one unifying umbrella. Using an extensive network of carriers, warehouses and technology platforms, a 4PL provider optimises transportation routes, reduces costs and boosts overall efficiency. That might sound like marketing speak, but it’s also highly accurate.
Beyond this, 4PLs also provide strategic oversight and consultancy resources that help businesses steer more effectively through challenging economic climates and operational difficulties. 4PL providers bring vast amounts of resources, expertise and technology to the supply chain table.
How 4PLs help deal with uncertainty
4PL MSPs (Managed Service Providers) specialise in providing the necessary logistics insights and flexibility to quickly respond to any curveballs the market may throw at retailers. From managing peak periods to enabling effective Just-in-Time inventory management, they help businesses confidently move forward in a number of ways.
- Flexibility in demand management
Unlike rigid logistics setups that require fixed capacities to operate, a 4PL provider uses its extensive network to scale operations up or down based on real-time demand. Whether through deploying additional vehicles, adjusting staffing levels or optimising transportation routes, 4PLs keep businesses on an even keel even if demand exceeds initial forecasts.
- Reduction of sunk costs
Traditional logistics models often involve heavy capital expenditure on vehicles or long-term lease agreements. During peak periods, if demand doesn’t meet forecasts, companies can find their hard-earned profits disappearing into a costly hole populated by woefully underutilised assets.
A 4PL provider allows retail companies to pursue an asset-light logistics strategy. This approach places agility and flexibility firmly at the top of a retailer’s operations, minimising the need to invest in and maintain physical assets. In much the same way that virtual offices have enabled businesses to sidestep the sizable costs of renting physical office space, 4PLs allow businesses to remove the similarly painful costs of purchasing or leasing logistics hardware.
- A single point of contact
It’s probably fair to say that managing multiple logistics providers is cumbersome at best and a coordination nightmare at worst. Partnering with a 4PL streamlines the entire process by delivering retailers a single point of contact for all their logistics activities. This consolidated approach simplifies communication and coordination, vastly reducing the administrative burden. Unless organising logistics is something you’re particularly fond of, farming out the process allows you to avoid the headaches associated with it and focus more productively on your core business.
- Strategic oversight and risk management
Sitting at the heart of a 4PL’s operations are a host of advanced technologies. From AI-driven analytics to the IoT (Internet of Things), 4PL providers serve as a veritable oracle of strategic oversight and risk management. While “optimising supply chains” is a phrase that’s bandied around a lot in logistics, 4PLs actually have the resources needed to turn that phrase into a genuine “boots on the ground” reality. In short, the data analytics and industry insights that 4PLs bring to the table, make managing economic uncertainties a far less risky proposition for everyone.
- Cost efficiency
Whether through optimising transportation routes, consolidating shipments or negotiating favourable terms with suppliers, 4PLs reduce costs across the entire supply chain. Their specialist expertise, in conjunction with the influence they bring to bear (4PLs tend to be the big fish in the pond), results in lower logistics bills for retailers. When you add this cost efficiency to the improved inventory management services they offer, 4PLs are probably the best Christmas present any retailer could ask for.
The X2 (UK) solution
As one of the leading 4PL managed service providers in the country, X2 (UK) sits at the cutting edge of the field. We spoke to them about how their solutions are specifically designed to meet the challenges of managing peak periods. With an expansive network of partners that includes over a thousand haulier fleets across the UK, Ireland and Europe, X2 (UK) are more than just a big fish in the logistics pond – they’re pretty much the pond itself.
Tailored logistics solutions
From retail and manufacturing to construction and specialist services, X2 (UK) have the resources and experience needed to deliver customised logistics solutions to meet the precise demands of any sector. “We’ve been doing this a long time,” says Vic Faulkner, Operations Director at X2 (UK). “We not only understand the ins and outs of a sector like retail – we have an extensive nationwide partner network and own fleet that enables us to flex resource in line with customer demand – whether this is for ongoing support during Christmas peak or ad-hoc loads if you have been let down by your existing supplier for example”.
X2 (UK) are also combining real world human insight with modern tech, including AI and tracking, among other things, to help organisations meet highly specific industry challenges. “Dealing with the uncertain nature of peak periods in retail and manufacturing is a big one,” says Faulkner. “Knowing that we can help businesses overcome the challenges of demand planning is a driving factor for us.”
Operational flexibility
Central to X2 (UK)’s operations is the ability to scale up or down at a moment’s notice. The whole point of 4PL is to provide a logistics answer that gives businesses the freedom and flexibility they need to move with the market. While that’s always been the aim of logistics providers, bringing that flexibility and responsiveness down to the time scales of hours and days as opposed to weeks and months, is what makes X2 (UK) such a powerful partner in the supply chain arena.
A pay-as-you-go solution
Another common flexibility problem that X2 (UK) addresses is the confining nature of long-term contracts. At X2 (UK), they use a pay-as-you-go model that allows companies to only pay for the services they use. This makes a lot of sense when you think about it – what’s the point in developing an advanced, highly flexible supply chain solution if clients are stuck in a contract that covers services they may not actually need?
Comprehensive support and customer service
As smart as farming out logistics to a 4PL may be, cutting the umbilical cord to your own in-house supply chain operations is a big step for most companies. X2 (UK) understand the responsibility they take on for companies and offer continual, personalised customer service. “We want our clients to feel absolutely confident that their supply chain is in the best hands.” says Faulkner. “Being available 24/7 to deal with requests and answer questions is central to that.” With X2 (UK) offering a single point of contact for all logistics needs – one that’s never “too busy” or “unavailable until after lunch” – retailers gain the operational trust and reliability needed for successful long-term partnerships.
Have a merry Christmas with X2 (UK)
Who knows what Christmas may bring in terms of demand peaks. But it’s comforting to know that there is a cost-effective solution available 24/7. With a 4PL provider like X2 (UK) in your corner, you can adapt to demand surges quickly, making sure your retail operation performs its very best, irrespective of the economic climate.
Ultimately, Christmas should be a time of joy and goodwill to all, and retailers shouldn’t be exempt from that. With X2 (UK) delivering the resources and insight needed to keep retail shelves stocked reliably, Christmas unpredictability doesn’t need to be such a worry. If X2 (UK) had any experience managing elves, Father Christmas would probably farm out his deliveries to them as well. Sources have confirmed they’re working on it.
For further information, head to x2uk.com
