Preparing for peak holiday season presents a constant stream of challenges—from ensuring equipment functions properly to training the influx of temporary employees, it takes wisdom and planning to make the most profit in the final quarter of the year. We sat down with Dwayne Black, Senior Vice President of Operations at Shutterfly, to understand just how the website—which turns personal photos into books, holiday cards and gifts—tackles the holiday season. Read on for tips on forecasting stock needs, perfecting inbound and outbound processes and the importance of smooth communication along the way.
How much of your business occurs during the holiday season?
Well over 50% of our revenue comes in the fourth quarter. Our highest volume of orders comes between November 15 and December 20, which is really our peak season right around Thanksgiving and Christmas.
How do you plan and prepare for the holiday season? How do you forecast stock and staffing needs, for example?
Ten years ago, when I started, we started our Q4 planning in June. Now, Q4 planning is a year-long activity, from equipment purchases to workflow improvements. When the holidays are over, we’ll immediately go into postmortems. We’ll evaluate the entire model. We’ll go through what went well and what we can improve. Then, the following year, we’re fixing the things we can improve and augmenting the areas that performed well. It’s a full-year planning process.
During planning, what is the cutoff date for implementing new ideas?
As an online digital retailer, we have a code freeze, so we don’t make any changes to our website or workflows after October. All equipment will be installed and tested before then. Labor-wise, we bring in 3,000+ temporary employees in the fourth quarter to augment our workforce. The fourth quarter is the time of year when everything comes together–we bring people in and get them trained to ensure we deliver the best possible experience for our customers.
What role does your permanent staff play in holiday planning?
Everyone takes part in the employee onboarding process. My team focuses on the supply chain, which deals with the transportation side, and manufacturing which makes sure that the equipment runs and that we have the people in the right places. It all comes back to ensuring we deliver on our 100% customer happiness guarantee.
When it comes to postmortems, what kinds of activities do you do in order to single out successes and failures?
Postmortems are key to our continued success and happen in early January, right after the holidays. Our teams hold postmortems at all of our locations and divide them by department: calendars, holiday cards, personalized stationery, photo books and gifts. Those departments will really dig into areas that exceed expectations as well as areas where we can improve.
There’s one challenge I think every company is being faced with. Black Friday and Cyber Monday create huge peaks of demand. I’m sure it impacts the carriers as well. We work really hard to ensure that we can meet our customers’ needs during the rush.
Are there any tactics you use to increase processing speeds around those dates? Since you have customized products, pre-packaging isn’t an option, but what advice can you give to alleviate those demand peaks?
You’re 100% right, everything we do is custom and on-demand; we don’t pre-package or pre-produce anything. What we can do, however, is make sure our workflows and processes are perfect. It’s not only making sure the processes work and the equipment is running right. It’s also making sure we have the technicians on board so that if something does go wrong and a piece of equipment goes down, we can get it up and running right away.
The other thing is, even in our automated processes, we have backup plans. We always have a plan B and in some cases a plan C and D. We know if a piece of equipment goes down, there are ways for us to produce the product and get it out the door without using that piece of equipment. It might require more resources until we can get things working again, but it keeps our process moving.
So one piece of advice you could give is pre-plan and understand where your potential pitfalls are, have plans a, b and c ready. And the second part is to make sure your staff is properly trained, everyone’s on the same page and knows how to deal with potential risk situations.
One of the things we do internally, we call it the five P’s. It stands for: Prior Planning Prevents Poor Performance. That’s what everybody looks at. You have to expect the unexpected, and stay calm and communicate. If we encounter a challenge, it’s best to admit that there’s a challenge and develop a plan to solve it. It sounds cliché, but communication during peak is especially key. We have multiple meetings daily at all hours of the day; we’re always talking, so that everybody is in alignment.
Do you have that level of communication with all of your facilities across the country?
Absolutely, yes. Communication is not just held within the manufacturing facilities, it’s also with the teams working on the website, engineering and promotions.
With such massive operations, with so many moving parts and people involved, how do you keep that communication clear and how do you keep it from overwhelming the system?
In Q4, we have people in each department who are the communicators. You can’t expect a production manager on the production floor to be sitting in meetings all day and managing a workforce. We provide updates as needed so that we’re not inundating our workers.
Let’s change gears and tap into the subject of stock and inventory during the holiday season. Shutterfly has tons of SKUs and a ton of different product offerings. How do you organize your inventory to make it more efficient for processing, picking, packing and shipping?
It’s twofold. If you look at it from a floor perspective, we have what we call “supermarkets.” With raw materials and supplies, we have a visual factory in our locations. Everything is in its place, so you can easily look at it and determine if anything is low on inventory. We also have backup stock in our facilities. Nine months out of the year, I can keep everything I need to run our business within our own production facilities.
When we get into the fourth quarter, it’s all about planning. Our teams are really focused on creating a strong supply-chain strategy. When we get our forecast from our revenue teams, we’ll go through and extrapolate what we need for raw materials. We also calculate scrap, damage, etc. The worst thing I could do in the fourth quarter is run out of paper.
Everyone thinks, “Ok, just make sure you have enough paper,” but that’s easier said than done. People don’t often realize it, but paper is perishable; it has a certain moisture content to it. If you store it in a dry area, it’s going to dry out and it’s not going to print or cut as well. There’s a lot of planning that goes into the process. It’s a very orchestrated model. You just have to manage all the raw materials.
Do you have strong communication with your suppliers and your carriers?
We absolutely do. We know that our partners need to plan out their supply chain as well. For our carriers, we know they need to figure out how many trucks they need on the road, how many drivers to staff, etc. It’s a major orchestrated effort.
In terms of the shipping and carrier component, when do you start talking to the carriers about the holidays?
We give our carriers forecasts as soon as we can. We understand that they need to build their platform internally as well, and we give them a hard commitment of what we think we will be shipping about 3 to 4 months before the season.
It seems like you’ve figured out a way to manage all the obstacles that come with the holidays.
It’s a beautiful thing when everything comes together. When you’re shipping those packages, you’re making a lot of people happy. They’re not just ordering everyday staples. Everything we send out is customized and personal. Sometimes it’s Christmas cards and sometimes it’s a photo book from a special vacation. All in all, it’s things that make people smile and how we share life’s joy.