ERNST VAN BILJON: Black Friday stretches supply chain management

The festive season and events such as Black Friday have become centrepieces of global retail calendars, with hundreds of billions of rand changing hands annually. While these shopping surges drive big profits for retailers, it also imposes substantial pressure on supply chain management.

The period leading up to Black Friday and the holiday season brings an undeniable surge in consumer demand. Globally, Black Friday has transformed from a one-day shopping event in the US into a month-long promotional phenomenon.

Preparing for the influx of consumer demand during these periods requires advanced planning, flexibility and reliable data analytics. Yet, it also presents unique challenges and opportunities that shape supply chain management strategies for the long term.

Retailers worldwide — SA included — are increasingly relying on e-commerce platforms, making demand forecasting more difficult but also more crucial. Consumers expect not only competitive pricing but fast, reliable deliveries.

A 2023 PwC survey revealed that due to the pandemic, 63% of consumers surveyed said they had already increased their shopping online, while 42% decreased shopping in physical stores. Furthermore, 47% of global consumers preferred to shop online during Black Friday. This creates immediate pressure on distribution centres, warehouses, and the logistics network to get products into customers’ hands swiftly, sometimes within 24-48 hours.

In the months leading up to the festive season, companies worldwide must cope with tighter shipping schedules, delayed manufacturing timelines, and the complex task of securing enough inventory to satisfy heightened demand.

For SA retailers, the situation is aggravated by the country’s reliance on international suppliers and the challenges posed by local infrastructure. Port congestion at big hubs such as Durban and Cape Town is a persistent problem, especially given it coincides with much of our agricultural exports harvest season, leading to delays in receiving goods.

A pertinent case study is that of SA e-commerce giant Takealot, which experiences considerable demand spikes during Black Friday and the festive season. Takealot’s revenue almost tripled in the three years since the pandemic. While the company invested heavily in enhancing its technology infrastructure, including predictive analytics and automated warehouses, in 2020 it initially faced significant strain on its delivery network, with customers reporting delays in receiving their orders. Takealot’s response was to build a stronger relationship with third-party logistics providers and optimise its fleet for faster deliveries during peak periods.

In such a volatile retail environment, managing inventory effectively becomes a critical success factor. Retailers face a constant dilemma: how much stock should they hold to avoid stockouts, which harm sales and customer loyalty, while preventing the costs associated with overstocking?

During Black Friday and the holiday season, companies must ensure they are not only prepared to handle spikes in demand but also that their stock is evenly distributed across various channels. Brands such as Woolworths and Mr Price have relied on sophisticated demand forecasting tools to ensure they don’t end up overstocked on unpopular items or running out of fast-moving products.

The Mr Price Group uses predictive analytics to better forecast demand, enabling it to streamline its ordering processes and avoid overstocking. This approach not only helps maintain profitability but also reduces the waste typically associated with unsold stock.

One of the biggest logistical challenges of the festive season is handling last-mile delivery — getting products from distribution centres to customers’ doors. In SA, the last-mile problem is compounded by the inefficiencies in public transportation networks. While major metropolitan areas such as Johannesburg, Cape Town and Durban are well-served by logistics providers, rural areas often experience delayed deliveries due to poor infrastructure.

The pressure on transportation networks during peak seasons leads to higher costs, particularly for air freight, which is often used to expedite international shipments. Retailers such as Takealot thus have had to carefully balance their pricing strategy, ensuring that they can absorb shipping costs while keeping discounts attractive enough to drive consumer interest.

The lessons learnt from Black Friday and the holiday season can lead to long-term improvements in supply chain resilience. By diversifying suppliers, investing in technology, and maintaining stronger relationships with third-party logistics providers, retailers can better manage the shocks that come with demand surges.

The supply chain behind the festive season is a remarkable example of logistical execution and efficiency. By leveraging data intelligence, this complex process can be managed carefully, from planning, forecasting, and logistics to inventory management and waste reduction for an impeccable festival celebration.

• Van Biljon is head lecturer and programme co-ordinator of the MCom in supply chain management at IMM Graduate School.