Supply chain holiday forecast
After a few bumpy years, supply chain researchers say 2023 is shaping up to be a happy holiday shopping season
story by Stacy Nick
published Nov. 30, 2023
Colorado State University supply chain experts are forecasting the 2023 holiday shopping season will be a return to the pre-COVID days — for the most part.
“The sort of wild swings that we’ve had for the last three years should mostly be pressed out of the system, and it should be a ‘normal-ish’ holiday shopping season,” said CSU Associate Professor of Operations and Supply Chain Management Zac Rogers.
“Normal-ish” means that shelves will be fully stocked, packages should arrive on time, and last-minute shoppers won’t be left out in the cold. In fact, they’ll be in good company.
A happy holiday supply chain – just in time
In the most recent Logistics Managers Index, Rogers noted that smaller retailers have suddenly built their inventories up, something they usually start much earlier.
“I think everyone was so burned by having too much inventory last year, they were kind of cautious,” he said. “But now they all did it at the last second, and what that tells you is they’re able to operate in a ‘just-in-time’ fashion. For 20 years, the gospel of supply chains was just-in-time inventory; you get things right before you need it.”
It’s the equivalent of stopping at the grocery store on your way home to get what you need for dinner that night and dealing with tomorrow’s dinner tomorrow, he said. But during the pandemic, businesses had to go to more of a Costco approach, building up a surplus to have on hand because supply chains had become too unreliable.
Feeling like they couldn’t afford to miss out on the potential “gold rush” of shoppers with stimulus checks to spend, companies stockpiled inventory as if the 2021 holiday season was going to be the biggest of all time, Rogers said. But then the one-two punch of Omnicron and inflation hit.
“Target took a $2 billion write-down last year because they had way too much inventory; it was the bullwhip effect,” Rogers said. “If you’ve ever seen someone snap a bullwhip, not that much movement in the wrist leads to huge movement at the end of the whip. Not that much movement in retail sales can lead to huge supply chain problems upstream.”
Now that goods are flowing through the system more easily, companies aren’t carrying much extra inventory. Meaning if stores misread demand for the “hot new toy,” things could get ugly.
“I don’t really know what the hot toy is going to be; I know last year it was Squishmallows … a big sort of horrifying pillow,” Rogers said. “And so those could still sell out because we’re at just-in-time. But it won’t be like the holiday of ’20 or ’21 when there was nothing on the shelves.”
The pandemic roller coaster
When the pandemic began, it started a roller coaster effect throughout the supply chain, said CSU Professor of Supply Chain Management Susan Golicic.
At first there was too much inventory and businesses had to reduce the costs to get rid of it, and then they needed more inventory but faced delays because the demand was so high, Golicic said. Meanwhile transportation rates were skyrocketing because of the increased demand.
Now, transportation rates have leveled out, as has demand, she said.
“We are past the pandemic roller coaster,” Golicic said. “But it doesn’t mean other roller coasters won’t surface because disruptions happen — whether it’s weather related, bad-decision related, the next pandemic, whatever. Roller coasters are inevitable.”
From Black Friday to Black Fall
Researchers said businesses are spreading out demand through targeted sales at various times.
One way businesses have leveled things out is by stretching the holiday shopping season out through advance sales.
“Companies are getting you to start shopping earlier,” Rogers said. “We just had Prime Day Two in October. Then there’s Cyber Monday and Black Friday, and Black Friday as a concept isn’t really the same as it used to be. Ten years ago, people would be waiting in line outside of Best Buy at 4 a.m. and fighting each other in Walmart to get a TV. That’s not really the case anymore. We’ve moved from Black Friday to Black Fall.”
That’s created a long peak to the holiday shopping season and changed the seasonality for supply chains, Rogers said.
“It used to just be we hit Black Friday, and it was a mad rush until Christmas Eve,” he said. “And now that they’ve extended it out further on the other side, the rush isn’t quite as intense as it used to be, because it’s now just a slow, slow buildup to one big peak and come back down. We’ve smoothed that peak out a little bit, and probably done some of it through playing on the anxiety people have about getting holiday stuff on time post-pandemic.”
Playing on our anxieties
While the running joke is that the holiday season begins earlier and earlier, it’s actually pretty true — and pretty strategic, Rogers said.
“It’s intentional,” he said. “Costco had little light-up reindeer out in mid-October. A couple of years ago, I took a picture in front of a Christmas tree in Costco, and I was wearing shorts and a T-shirt. I remember thinking they shouldn’t have Christmas trees out until people are wearing pants.
“But if it’s out, someone will buy it,” he added. And for businesses like Costco, it’s easier to sell it over time. “You want your supply chain to be like a river, flowing smooth and steady. If we have the same amount of work every day, we can have the same amount of people working and we’re utilizing all our trucks and all our shelf space. When we have peaks and valleys, it becomes much more difficult to manage.”
The challenge for businesses now will be to decipher the new normal for consumers.
Revenge spending
As the pandemic eased, the American public switched gears from wanting to buy goods to wanting to go to a concert or take a trip, because they could.
“In 2022 and 2023 this concept began of ‘revenge spending,’” Rogers said. “Revenge spending is like, ‘You know what? Maybe $1,000 for a ticket to Taylor Swift is ridiculous but we’re going anyway.’ There’s a justification that people haven’t been able to do these things for so long that now they’re going to focus on experiences.”
And it’s not just limited to trips and concerts.
Statistics show the travel numbers are continuing to increase during the holidays, said Dawn Thilmany, CSU agricultural resource economist and director of the Northwest and Rocky Mountain Regional Food Business Center. Sometimes that’s to visit family, sometimes it’s not. So, if folks aren’t eating at Grandma’s, it’s a good bet that they are eating at restaurants.
“We’re really seeing a return in away-from-home eating and people embracing going out to restaurants again,” Thilmany said. “And we’re actually seeing more restaurants embrace being open (on the holidays) just because there’s people who don’t want to cook that big meal at home, and with more women working away from home, they want to have a holiday, too.”
Merry and bright (and mostly on the shelves)
One of the phrases most associated with the pandemic (besides “You’re on mute.”) is “supply chain.” After toilet paper and cleaning supply shortages thrust the American public into a new world, everyone was suddenly very keenly aware of what it meant, and what its limitations were.
“The reason consumers know what the supply chain is now is because it was so broken after COVID due to many, many factors,” Golicic said. “However, most of the brokenness has gone away. Inventory has caught up. Rates are back down. And distribution is basically — I mean, I hate using the word ‘normal’ because is there really a normal? But it’s essentially back to normal.”
“The reason consumers know what the supply chain is now is because it was so broken after COVID due to many, many factors.”
— Susan Golicic, professor of supply chain management
She added: “The only reason at this point that people won’t be able to find the items they’d like to have for the holidays would be if the retailers themselves didn’t properly plan inventory. It’s not because the supply chain didn’t get it distributed. It’s because companies didn’t make good decisions in their forecasting of what they would potentially need. That said, some companies specifically try to make products seem scarce because then that drives demand up.”
But even a little mad dash to find the next hot holiday item will be a welcome one this season, Golicic said. Because when you get there, there’s a solid chance the item you’re after will be waiting.
“I’m actually kind of excited that we’re going to have a holiday season like we used to have,” Golicic said. “Yeah, we’re going to have crowded stores, and we’re going to have people shopping at the last minute and all the things we normally do, but from a supply chain professor perspective — this is calm, this is nice.”
At Colorado State University, faculty and students are producing cutting-edge supply chain research and providing important answers to questions on supply chain management. This special report from SOURCE explores the work happening at CSU and provides insights into the global supply chain.