Update on the Christmas Express Supply Chain
Around this time last year I had a call with the jolly old man of the north to talk over some ideas on how he and his army of elves might improve the Christmas Express Supply Chain (CESC). (Read A Phone Call with Santa Claus) Our conversation must have had an impact because this year Santa sent me an invite for a video call to discuss their progress and ideas around next steps. Clearly, Santa is taking the move to more advanced technology seriously if he is now sending invites for video calls. While I eagerly anticipated learning about the CESC improvements, I found myself a bit unsettled and nervous to see him on video.
As you can imagine, the CESC is global, complex and full of uncertainty. Even so, Santa expects a flawless execution of the plan to ensure every good girl and boy receives something from their wish list. Planning optimized is not just a slogan for Santa but the fulfillment of a promise! Our call was scheduled quite early for me in Arizona since Santa’s HQ had adopted GMT as the standard time. An interesting fact, all time zones converge as you approach the North Pole so theoretically at the North Pole it could be anytime you want it to be. I wonder if that helps Santa accomplish his Christmas magic? The time came for our video call and we spent a few minutes catching up. Seeing Old Saint Nick’s deep blue eyes, red nose and snow white beard on my 32” monitor was a bit surreal, but soon we got down to business.
As with last year’s conversation the first area Santa wanted to discuss was his North Pole workforce. Along with the head of his Elf Resource Department, he had developed a plan to acquire the new skills his planners needed to embrace advanced analytics. As you can imagine, the CESC is inundated with data from multiple, disparate sources. The exponential growth in data has overwhelmed the Naughty or Nice department who sort through billions of electronic messages in dozens of languages. Santa explained that boys and girls are embracing technology earlier and earlier producing an abundance of social media data that can be used by the Naughty or Nice department. Recognizing this challenge, Santa identified an initial group of elves to study data analytics at a school that specializes in applying analytics to supply chain operations. Santa winked and said he needed to keep that school a secret to avoid undue attention. With a deep belly laugh, he explained how much fuss is made when the media discovered his elves outside the North Pole. If you are attending a top supply chain school take a look around, there just may be one of Santa’s elves hiding in plain sight. I was impressed Santa had taken the proactive measure to continue the education of his elves and embrace the opportunities analytics can provide.
Our conversation then shifted to Santa’s efforts to improve forecast accuracy. Santa said since our discussion last year he has learned quite a bit from his demand planning elves on the importance of accurate forecasts and the negative effects of forecast error on the rest of the Christmas Express Supply Chain. Over the last year Santa’s supply chain team selected a leading supply chain planning platform and implemented demand, inventory and parts of the supply planning capabilities of this platform. I’m not allowed to share which system but I can say it starts with an “L” and is a Leader in Gartner’s 2018 Supply Chain Planning System of Record Magic Quadrant. Santa referred to this system as the Santa Claus (SC) Planning Platform. His demand planning team has embraced segmentation and management by exception. They are using the platform’s automated forecast algorithm selection capability to free more of their time to establish a multi-hierarchical planning structure. These new capabilities allow the CESC demand planning team to use attributes and profiles to improve forecast accuracy. With a thoughtful expression on his face, Santa said he can see a day when the social media that the Naughty or Nice department brings in can be used to help sense the demand for toys. He laughed and said social media can change the demand for a toy faster than his speediest reindeer can fly.
Santa shared some encouraging news around improving the CESC Gifts & Operation Planning (G&OP) process. Their new SC planning platform includes enhanced abilities to balance supply and demand while also keeping his Chief Financial Elf (CFE) happy. These new capabilities include collaborative workflow, configurable limits and active alerts to help his elf planners manage the complex G&OP process (what we typically refer to as sales and operations planning or S&OP). The SC planning platform also provides robust process collaboration capabilities to allow all functions to work towards the CESC’s common goal: to deliver the right toy to the right child down the right chimney at the right time (while everyone is sleeping) on Christmas Eve. Just as important, the new platform’s advanced analytics enable simulations, what-if scenarios and advanced visual data analysis techniques like heat maps, geographic maps, bubble charts and more. The elves have quickly learned how to use advanced analytics to uncover new insights into CESC operations. He winked and said all these new capabilities have kept his elves busy mostly eliminating interruptions during important times like his mid-afternoon nap.
Santa shared that with foundational components of the SC Planning Platform in place his team can start building more advanced capabilities based on the platform’s algorithmic planning and optimization capabilities. I could tell by his jolly tone that Santa is very excited about the prospect of building a ‘digital twin’ of the CESC and utilizing the information available in the SC Planning Platform to optimize his network of 30+ manufacturing plants and more than 100 distribution centers. Santa exclaimed, “This is where the sleigh hits the rooftop.” He went on to comment that improvements in demand planning, G&OP, and analytics have been beneficial but the big present under the tree will come when the CESC can be optimized end-to-end. By the way, Santa did confide in me that his technology elves are experimenting with robotics and 3D printing although to his disappointment they aren’t close to building a ‘digital twin’ of himself to do his work while he spends more time playing working with toys.
Santa also wants to take advantage of all the new information available through the SC planning platform to optimize inventory. His SC planning platform supports Multi-Echelon Inventory Optimization (MEIO) and he believes they can reduce inventory by as much as 30% while still delighting girls and boys around the world with their presents of choice. He also believes having the right product at the right location will make his job much easier on Christmas Eve. Santa said that less cross-sleigh transfers between facilities and lower inventory will make his reindeer happy and keep his CFE and his Elf Board very jolly.
According to Santa, there are only so many improvements you can make at one time, even when you have 24 hours of sunlight for six months at a time and magic at your disposal. Then, to my surprise, he stopped talking and asked me a question. “Henry, what do you think we should consider as our next steps?” I was thrilled and a little disappointed by the question. I had hoped he would ask what I want for Christmas but alas, I encouraged him to continue to adopt advanced analytics to help his team work smarter not harder. He certainly liked that. I also encouraged Santa to take an expanded view of his CESC by considering all activities from concept to customer. He chuckled and said for his CESC that equates to gift design to placement under the tree.
Another area we discussed that piqued Santa’s interest was supply chain risk management. I asked Santa if the CESC ever encounters disruptions in its ability to deliver. He shared with me one story where he almost cancelled Christmas due to an illness that affected his reindeer’s ability to fly. I explained that his new SC platform has the ability to model different disruption scenarios and to help his elves determine the best way to respond if the disruption were to occur. Considering the tight Christmas delivery time-frame Santa thought this might be a good area to investigate.
By the end of our video call I felt very comfortable with Old Saint Nick and we agreed to stay in touch. He asked if I had any special Christmas gift requests (I knew at some point he would have to ask!) and I said a new red sports car would be nice. He laughed and said he would see what he could do. I wished him the best of luck with his upcoming big day and asked if he had any vacation plans after Christmas. He confided in me that he plans to spend some downtime in the southern hemisphere working on his tan. If you happen to see the head guy sunbathing in Brazil or scuba diving in Australia, say hi to him from me. Better yet, let him rest, he deserves it.