Home Macroeconomics A Visit from St. Nicholas – Christmas Logistics in 2020

A Visit from St. Nicholas – Christmas Logistics in 2020

by Jackson B

By Wayne Snyder, VP, Retail Industry Strategy, and Alan Duncan, Senior Director of Industry Strategy (Manufacturing) at Blue Yonder

“T’was the night before Christmas, when all through the house not a creature was stirring, not even a mouse. The stockings were hung by the chimney with care, in hopes that St. Nicholas soon would be there.”  The famous opening lines from the nineteenth century poem by Clement Clarke Moore.

How different will this year’s visit from St. Nicholas be?

Stockings will still be hung by the chimney; children will still go to bed filled with excited anticipation of the gifts and fun of Christmas Day.

But will we hear the “clatter” of Santa’s sleigh and his eight reindeer?  For this year St Nicholas’ Christmas operations will, like most of the rest of the world, have to cope with the increased complexities and restrictions imposed to curtail the spread of COVID-19.  Dasher, Dancer, Prancer, Vixen, Comet, Cupid, Donner and Blitzen: will Santa and his 8 reindeer need to abide by the “rule of 6”?  Which of them will be furloughed?  How will Santa deliver the “sleigh full of toys” if he is not able to enter the homes of all the expectant children?  After all, he cannot be in a social bubble with every child in the world.  His usual attire of “fur from his head to his foot” won’t be enough to prevent the spread of this evil virus.  Fully decked out in PPE, mask, gloves and high-vis jacket adorning his traditional red and white,  carrying hand-sanitiser for use before entering every home, if you catch a glimpse of this jolly old gentleman this year you will be forgiven for being startled.  But it’s for our own good.

St Nicholas should be the patron saint of logistics.  For centuries he has been able to achieve more than any other global logistics operation could ever dream of.  Who else can, single handed, deliver over 500 million parcels to addresses across the entire globe in 24 hours?  The British Royal Mail (one of the oldest postal service in the world) delivers fewer parcels in a year.  Amazon delivered 10 million per day in 2019 – only 2% of the volume Santa deals with on Christmas Eve, and Amazon has tens of thousands of helpers to deliver for them.

But this year, in the year of COVID-19, on the “night before Christmas” St Nicholas is preparing for a very different delivery service.   It’s been a challenging year for everyone, and Santa was not immune to the effects of the virus that incapacitated the planet for many months.  In a normal year he was able to meet children at his Grottos to help sense demand and “take orders” from boys and girls everywhere.  In 2020, due to social distancing restrictions and lockdowns, the grottos have remained closed and Santa is having to use alternative methods of prediction.  Just as others have done, Santa switched some of his market intelligence gathering online – taking to Microsoft Teams, Zoom, Facetime and other video conferencing to talk to children across the globe about their hopes and wishes for Christmas 2020.

But we know that Santa had to start planning long before the delivery date to ensure had the right level of inventory to satisfy all the children.  This year, forecasting has been even more difficult than the usual experience of trying to keep up with the fads and ever-changing wants of children. However, we understand that for the first time, Santa has introduced some new technology to aid him.  Prompted by Mrs Claus’ warning that “You cannot let the children down this year,” Santa has invested in AI demand forecasting capabilities to ensure he can meet the demands of all his important recipients.  So, what is he seeing? LEGO is predicted to remain popular as we continue to stay indoors. Jigsaws and board games saw a resurgence during lockdown as we all looked to get through the boredom, but will this continue through to Christmas?    Parents seem to be wanting their children to receive more bigger gifts this year as some compensation for the loss of experiences suffered at the hands of the pandemic.  But can Santa even make everything on time as goods are restricted due to demand spikes and supply restrictions?  Santa has needed to increase his flexibility to respond quickly as things continue to change before he can finish his lists, check who has been naughty or nice and prepare for the final deliveries.

Seasonal peaks are a feature in many businesses and Saint Nic manages the greatest peak of all.  But in 2020 some of the Elves have had to work from home.  ‘Elf and safety in the workshop has been paramount, with social distancing rules significantly reducing output.  Santa and his highly adaptable elves have had to look at different production techniques to combat the efficiency drops and counter the challenges of poorer demand visibility.  Inventory pre-builds, product redesign for late configuration, range reduction are all strategies that Santa has employed just to get through the extraordinary circumstances.  Like many businesses, the efficiencies that Santa’s single sourcing at his Lapland elf workshops has enjoyed in the past has been exposed for its lack of resilience in 2020.  Spokes-elves have indicated that Santa may be considering moving to a more global/local sourcing strategy in the future.  Food for thought for the night after Christmas.  Remaining COVID-19 compliant whilst supporting his many elves working from home, ensuring they continue to collaborate has been tough, but Santa Claus knows, this year, more than ever, he needs to bring joy to every child.

And what of the new complexities of delivering those millions of parcels during a pandemic?  Fewer families will be allowed to get together so there will be more delivery points; differing COVID-19 related regulations and restrictions in place from country to country to consider; the need for Santa, the elves and the reindeer to socially distance (and social bubbles are already in place); the “Rule of 6” in place in many countries means that the sleigh cannot be pulled by the usual 8 reindeer so sleigh-power is reduced. This will place a greater need on efficiency: Santa must do more with less.  Luckily for the children, Mrs Claus is on the case and has bought him his own Christmas present (please do not tell him it’s an AI powered logistics control tower!) to ensure he has complete visibility of his delivery network and can mitigate issues before they happen.

Network and route optimisation software will be used for the very first time and, after running various scenarios, Mrs Claus is confident that Santa will deliver all the gifts on time and in full. With the reduced sleigh pulling power and more delivery drops, Santa has to change his approach.   Insider elves have leaked that Santa has trained one of the senior elves to drive a second sleigh to a secret location on or around the Greenwich Meridien where Santa will swap sleighs with the slickness of a Formula 1 team, mid-journey around midnight GMT.  The decision about which reindeers are to be used on each leg of the journey remains a closely guarded secret although leg 1 is expected to use only 4 reindeer and, given the more dense population of the Western hemisphere, Rudolf is expected to be drafted in to boost the leg 2 team up to 5.

Those who track Santa’s progress through the NORAD or Google control towers will not see any interruption: the sleighs are said to be fitted with identical GPS tracking devices to ensure full visibility throughout the journey.

And what next for St. Nicholas?  With the likelihood of a vaccination for COVID-19 soon, he is hopeful that this year’s challenges will be short lived.  However, there’s no rest for the world’s greatest logistics team.  St. Nicholas and his team of management elves are already looking to 2021, weighing up the implications of Brexit and the change in US President.  What will be the impact on global tariffs? Will more suppliers move to production nearer to Lapland? How will Brexit impact the free movement of elf labour from UK to his workshops in Lapland (inside the EU)?  How can Santa Claus, the reindeers and elves drive toward carbon neutrality and a circular supply chain?  And what will be next year’s favourite toy?