Supply Chain Holiday Forecast

Colorado State University supply chain experts are forecasting that 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” in 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 companies have suddenly built their inventories up, something they’re typically slow to do and 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 every night 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 use as they went because supply chains had become too unreliable, mainly because there was too much volume. 

Now that volume has balanced out and things are moving more easily, things are back to the just-in-time model and aren’t carrying much extra inventory. Meaning if stores misstepped on 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 by incentivizing you,” 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.” 

In an effort to avoid the dramatic highs and lows of 2020, businesses are spreading out demand through targeted sales at various times. Consumers can order items now well ahead of the traditional shopping season to get them a little cheaper. 

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 not just slow, slow build up 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. We want to have swift, even flow throughout our supply chain. 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. During the 2020 and 2021 holiday seasons, retailers wanted to take advantage of the fact that Americans had extra cash in their pockets thanks to stimulus checks, and really the only thing to spend it on was goods. 

Feeling like they couldn’t afford to miss out on a potential “gold rush,” companies built up inventory as if the 2021 holiday season was going to be the biggest holiday season 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.” 

Revenge spending 

Meanwhile, the American public completely switched gears from wanting to buy goods to wanting to go to a concert or take a trip, and finally 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.” 

So now, that billion dollars that’s being spent to see Taylor Swift or a football game or out for a nice meal at a restaurant is money that’s no longer going towards goods. 

This shift in spending caught many brick-and-mortar retailers off guard and forced them to offer steep discounts to get rid of all their extra inventory after the 2022 season, which might lead some to wonder if stores will shy away from fully stocked inventories this year. 

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.