Let me start by wishing you all a Happy and Prosperous New Year! There are too many economic forecasts to cite, but overall, the forecasts for 2025 are positive for economic growth and consumer confidence… and eCommerce as a % of retail sales is forecasted to increase its share as per usual, growing from 15.6% (’23) to 16.6% (’24) to a forecasted 17.8% in 2025 (source: Statista). Looking back at 2024, eCommerce sales in the United States are expected to show an increase of nearly 11% over 2023 (source: Statista), and I can say that we felt that momentum at AMS Fulfillment, with Peak Season order volumes for Nov/Dec up 20% YOY.
Okay, enough about the stats… bottom line is that brands will continue to have a landscape for success, and 3rd Party Fulfillment (3PF) companies must be up for the task in 2025 and beyond, especially during Peak!
The Challenges!
So, to the topic at hand… How did your 3PF handle Peak Season in 2024? Leaving order turnaround and accuracy performance aside, I’m asking how they actually found a way to handle it! Spikes will vary for different brands, but in general fulfillment companies can anticipate upwards of 2x the number of orders vs non-peak order volumes.
Fulfillment companies face this daunting challenge every year, and at the same time brands often rely heavily on peak season success to reach their annual revenue goals. From a margin perspective, Brands take a hit with promotional pricing to gain their share of holiday consumer spending while Fulfillment companies contend with lower productivity from short-term add-on labor along with a big bump in labor cost with overtime and (often times) additional hourly pay to attract and retain labor. Brands and Fulfillment Companies should both have high levels of empathy for the other party as we navigate through Peak Season together with so much on the line.
Looking at the operational execution side of things, let’s go over how 3PF’s handle (or should handle) the challenges of Peak, and how brands can contribute toward mutual success.
Ramping Up and Managing Labor
The first thing that comes to mind for most when it comes to managing peak season volume is bringing on additional labor, which is a very fair place to start. Whether the associates come from trusted staffing agencies or direct seasonal hires, 3PF’s must increase headcount. The challenge is how to do so without a massive drop in productivity. There is always a drop with short-term add-on labor, but the goal is to not make that drop “massive”. The 3PF’s should have tools and tasks that minimize the negative impacts of new associates, including systems technology with user interfaces that keep things simple and allow them to get up to speed quickly with limited training.
For example, a Put Wall is used for order sortation after items are picked in bulk quantities. It has lights that blink when you scan items… they scan the item, place the product into the cubby where the light is blinking, and press the blinking light. New associates can get up to speed quickly with an automation solution like this in place. Hand-held devices can also have easy to read user interfaces that bolster the ramp period for new associates to get up to speed in picking. Lastly, 3PF’s should identify simple tasks that are needed to support Peak, including box building, production line work in kitting/assembly (which can come into play with high volumes of like orders), clean-up/recycling and other manual tasks that don’t require training.
Supervisors, Timing and Overtime
Last thing to mention here is productivity tracking. For your 3PF to have some measure of success during Peak, they must be able to quickly identify the new associates who are not performing up to expectations. There will be A-players who may impress and become full-timers, and there will be B-C-D players as well. Each 3PF will set their standards, but none can afford to have D-players dragging down productivity. Most 3PFs will have data/reporting that gives the KPI information to supervisors, and others may do it the old-fashioned way with observation… but in all cases, supervisors are in a critical position to ensure the 3PF is staffed with productive team members.
Timing for the labor ramp is also a challenge… and success in terms of timing relies heavily on accurate client order forecasts that drill down to the day if possible. Knowing when the spikes will occur well in advance of Peak allows the 3PF to nail down the timing for onboarding new associates. Bringing them on too early will crush the 3PF’s service gross profit, and if they come aboard during order spikes, service levels will suffer as will productivity.
Adding additional shifts is another standard practice. Trying to manage the additional headcount within one shift can be counterproductive with overcrowding in the pick paths and depending upon set-ups in packing/shipping, oftentimes orders can bottleneck in this part of the pick/pack/ship process. Ideally later staggered shifts or 2nd shifts can either run a full pick/pack/ship process, focus on the bottlenecks from 1st shift (e.g. shipping), or narrow things down to more manageable activity that is easier for temporary/seasonal staff to execute with pared down management and support services. Lastly, 2nd or 3rd shift operations must focus on inventory replenishment and management to set the stage for a booming 1st shift operation.
Last thing to mention is Overtime. Full-time employees (FTEs) as well as temporary and seasonal associates are often given ample opportunity to earn OT pay during Peak. 3PFs are best served getting the most out of their FTEs during Peak with OT pay as they are more productive, and OT costs are not as impactful as OT with temporary staff. When Black Friday/Cyber Monday first hits, employees are geared up and ready to stay on their feet for 10-12 hours and work the weekends to combat the surge of orders. In my experience, within a week or two, fatigue comes into play and associates must have time to recuperate and regain their strength.
Inventory Preparation
If Labor is #1… Inventory prep can be considered 1-A. First and foremost, 3PFs should always have clean set-ups and accurate inventory by location for 12-months out of the year… but it is especially critical leading into Peak! With new associates coming aboard and picking product, your chances for solid productivity are heavily reliant on a clean inventory with clearly identifiable locations and spot-on unit accuracy by bin. For situations where inventory isn’t under a strong cycle count program and hasn’t been validated in some time with a physical inventory, 3PF’s and/or Brands may consider stepping up cycle counts and validating quantities by bin as Peak approaches. Miss-picks, skips and short picks will increase during Peak (particularly in bulk-pick scenarios where put-walls are employed) with new associates joining the fray, and an ugly inventory situation can really be disruptive.
Inventory preparation can also include resizing quantities by location based on anticipated velocities. This is another area where brands can help their 3PF succeed, as they may have certain bundles, new incoming SKUs or core SKUs that will be promoted or discounted, and the 3PF should get ahead of changing SKU velocities by increasing quantities in the floor level pick facings… and possibly even moving these SKUs closer to or next to the pack stations or put walls. The overall goal is to reduce the amount of floor level inventory replenishment and the number of times pick bins are picked to zero quantity during prime picking hours.
Order Management and Forecasting
Order Management during Peak is an area that requires consideration and cooperation between the 3PF and the brand. As mentioned earlier, decently accurate order forecasting for Peak Season is extremely helpful for the 3PF for timing on adding in headcount… and in a perfect world, that forecasting should drill down to orders by day. That said, even with solid forecasting in place at the 3PF across multiple clients, brands should reasonably expect there to be a “tail” or draw-down on orders when the spikes occur during Peak.
As the 3PF manages through backlogs of orders, it’s pretty standard to go straight FIFO (first in, first out) across the board. That said, there are certain order types that must jump to the front of the line, including expedites and drop-ship channels with strict requirements on processing time. Some 3PFs and brands may also look at days-in-transit or geography and move up further destinations with longer ship times ahead of those that are closer to the point of shipping.
Lastly, I think it is important to note that waving for efficiency can come into play during Peak as well, where brands and 3PFs may agree to forego FIFO in exchange for stronger throughput. This mainly comes into play with alike orders or single-unit orders that can go out through efficient processing methods. For example, if the 3PF had 500 orders for a client, all for the same 2 SKUs, it may make sense to process them together in a single wave… BUT some of those orders may fall out of FIFO. In situations such as this, brands may agree to allow the 3PF to break the FIFO rule in exchange for stronger throughput. That said, 3PFs must have empathy for the brands with respect to FIFO to help alleviate customer service inquiries and ensure a great experience for the end customers.
Last bits of Peak Season Nuance
Beyond the Labor, Inventory, Forecasts and Order Management… there are a few other areas that need special attention during Peak. We’ll bullet these ones out:
- Carrier Pick-ups: The 3PF must use forecast data, generally well in advance of Peak, to ensure the various small parcel carriers will have sufficient capacity to pick up orders each day. Oftentimes carriers will be asked to drop trailers at the operating facilities that the 3PF will load up throughout the day. Nothing worse than having orders packed and ready to go, but not enough capacity on the carrier end to haul them away!
- Safety & Security: With new shifts being added (buildings may run 24-hrs per day x 7 days during Peak) and new associates coming aboard, it’s a time to pay close attention to security & safety procedures to ensure safe keeping of client goods as well as the associates within the building.
- Communication: Having strong communication between the brands and the 3PF is a key backdrop to a long-term marriage in Fulfillment. Peak Season stands out as a time to truly connect, every day, as priorities, projects and unique challenges will often arise. Client Services plays a key role during Peak as the conduit between the brands and floor operations to ensure priority tasks are being addressed.
- Culture & Motivation: 3PFs ask so much of their associates during Peak Season, with long hours of strenuous and stressful work. This is a time to engage with the Team, provide additional compensation, run raffles and simply offer thanks for all that they do to help brands succeed during Peak!
Peak Seasons at AMS Fulfillment
I’m very proud of the Team at AMS Fulfillment for their execution in 2024 and throughout our 22+ year history. Order volumes were very strong in 2024, up 20% over the prior year, and we delivered on behalf of our valued clients! Team effort all the way around, including with our client partners. It takes preparation and planning, and immense appreciation for the People who make it happen. We know what it takes at AMS to succeed during Peak… and for those that may need a stronger Partner to deliver results, please feel free to give us a call.
