Singles Day, Cyber Monday, Christmas: Over the course of a year, there are various occasions when the demand for products on the internet is particularly high and logistics reaches its capacity limits. However, the Christmas shopping season regularly poses special challenges for all parties involved in a value chain. We spoke with Christian von Papen, Head of World Parcel Operations at Hermes International, a division of Hermes Germany, about the upcoming Christmas business, good peak management and the right way to deal with overcapacities.
Mr. von Papen, due to a booming online trade, the demand for logistics solutions is at a very high level all year round. Why does the Christmas business remain such a special challenge for international e-commerce and logistics?
The Christmas season is traditionally the most important time for end customers to buy gifts and make purchases. Thus, during Christmas business, sales campaigns and trends meet an already increased demand. For us logistics service providers, this leads to increased parcel volumes over a relatively long period of time. It is the length of this peak period – one to two months – in particular that distinguishes the Christmas business from other sales campaigns.
In Asia, the Christmas shopping season starts on November 11th with Singles Day. For American consumers, Black Friday and Cyber Monday at the end of November are important kickoffs into the final shopping spurt. Both events have recently become increasingly important in Germany and Europe and are extending or shifting demand to November. What changes do they entail? Will the earlier start into the Christmas business lead to a reduction of peak quantities?
On the contrary, the ever-increasing importance of super-sale promotions such as Cyber Week and Black Friday are causing consumers to postpone their purchases. Of course, this development is accompanied by a shift in peak volumes: Whereas a few years ago peaks were reached one to two weeks before Christmas, today, at the end of November, Black Friday is also experiencing a strong increase in volumes.
For us, those sales campaigns lead to a second peak next to the Christmas peak. In an already busy time we now have two peaks to cushion.
Since August, e-commerce giants such as Amazon and Co have been preparing for the Christmas business. When did you start peak planning and what measures did you take at Hermes International?
We started planning early during the summer. In the preliminary stage, it was primarily a matter of planning available capacities on the basis of a sound forecast planning with our customers and our own experience values. Internally, we have also developed a catalogue of measures which will take effect if there should be any complications during processing. We then finalised the entire process in the course of October.
Despite good planning, overcapacities may occur. What was the situation like at Hermes International in recent years? How did you prepare for this and how were you able to cushion overcapacities?
Last year, our customers were rather surprised by the success of Black Friday. As a result, we had to find solutions within a very short time to free up capacities. This year, based on forecasts and the reconciliation of daily quantities, we have positioned ourselves much more strongly in order to cope with the growing volumes. In addition, there are clear internal communication channels that help us to react quickly to changes in volumes.
In the end, we have to wait and see what the strongest weeks really bring in order to be able to conclusively evaluate our peak planning. External factors such as thunderstorms, for example, have a major influence on logistical processes, but are naturally only predictable to a small extent.
What lessons did you learn from the 2018 Christmas business? Which personnel or technical solutions were particularly successful in the past or which measures were less successful than expected?
The most important learning was the understanding of the high relevance of good internal communication processes. This year, we were able to significantly improve our communication strategy and thus find even more effective solutions. Today, to name just one example, we use modern technologies to improve the visualization of current volumes.
Lastly, a question for future top management: What do you advise companies to remain capable of acting in future peak times? What aspects do you consider to be part of good peak management?
I’m convinced that the better the planning, the fewer short-term problems. I’ve mentioned this advice before, but for me good peak planning still means using capacities flexibly, and, if necessary, being able to find a remedy as quickly as possible. This is not always easy, yet it‘s necessary for an efficient implementation without tremendous additional costs.
Mr von Papen, thank you for the interview.