Q4 planning is always crucial to ecommerce businesses, but how you plan looks entirely different if you are planning to scale. We talked about some beginner tips for Q4 supply chain planning in an earlier article, but the EcommOps experts have more in-depth planning for established, experienced businesses. In particular, this article is for you if your business:
- Regularly hits 7+ figures in sales
- Has 50-1000s orders a day
- Has the marketing ability to make a huge, effective push for Q4
- Wants to maximize profits and sales through supply chain optimization
EcommOps has helped businesses prepare their Q4 supply chains for years. In particular, we specialize in direct-from-China fulfillment for ecommerce stores, helping them develop flexible, resilient supply chains (which remain flexible during peaks of high demand, including Q4).
Below, we’ll hit on three major points about advanced Q4 planning:
- Why Q4 planning is different when you plan to scale orders
- Key considerations when creating a Q4 supply chain strategy
- EcommOps general framework for Q4 planning
Let’s get started!
Why Q4 Supply Chain Planning Is Different if You Plan to Scale
If you’re an established business that has gone through the holiday season of Q4 before, and you have scaled products outside of Q4, you probably have the following:
- A brand that you’ve worked hard to make profitable
- Social media ad accounts that have gone through the initial growing pains of scaling
- A team of people that you trust and that rely on you for their livelihood
The work you’ve put into your business and the team that relies on you means that Q4 planning is crucial. A bad Q4 (even one bad Q4) can be disastrous for your business. We’ve seen companies that end up closing permanently because they couldn’t recover from the severe issues and losses brought on by an unsuccessful Q4.
Even businesses that opt to scale back marketing to try to not have too much demand end up potentially leaving hundreds of thousands of dollars in sales. A marketing pause in the middle of Q4 can make a campaign that could have brought in 7+ figures in sales only bring in 6+ figures or less.
Let’s take a look at the specific planning points that are unique to Q4 planning when you consider scaling to high volume orders.
As Your Order Volume Goes Up, Physical Constraints Begin to Appear in Your Supply Chain
When order volume goes up during Q4, it’s common for businesses to literally run out of physical space for their products. Factories can simply not have the physical production space you need to scale up your inventory when it gets busy (which is why inventory planning is crucial for Q4 success).
Your fulfillment partners can also run into trouble. It’s common to see smaller fulfillment centers run out of warehouse space to hold inventory for Q4 demand, which means even if your partner factory can keep up with demand, you don’t have a way to fulfill customer orders. Some fulfillment centers may not have enough labor to receive and catalog incoming inventory, too.
Physical space for shipment can become a problem, especially if you are shipping larger products. Truck couriers frequently run out of space during the busiest parts of Q4, which can add 1-2 days to your delivery time, which can cause problems for your fulfillment center and for your customers. This is especially true as you get closer and closer to Christmas Day.
Physical constraints in your supply chain must be considered and planned for during Q4. Experienced 3PLs will be able to help you navigate this problem, too. For example, EcommOps scales our capacities for Q4 demand, making sure we have enough warehousing space, labor, and courier space with our trucking partners.
Shipping Logistics Slow Down During Q4
The next point to consider is that all logistics slow down, especially shipping. Factory lead times increase, shipping times increase, and port congestion problems are more common. Domestic shipping services are overwhelmed, too. This can make giving shipping estimates to customers difficult, but it is very important that you provide accurate shipping estimates.
If orders are unexpectedly late, you risk refund requests or chargebacks. While this is true year round, it is especially true during Q4, since many of the orders being made are gifts for the holidays. If a holiday is approaching and a gift isn’t delivered as expected, it is very likely that a customer will cancel their order and attempt to buy something locally.
Remember that logistics slow down during Q4 and make sure your shipping estimates to customers are accurate.
Shipping Prices Increase, Sometimes Suddenly
Since demand for shipping services spikes during Q4, prices for shipping services will also spike. While this isn’t necessarily a surprise for businesses, how quickly prices can change often takes even experienced companies by surprise.
If you run out of inventory in the middle of Q4 and need to make an order, and prices suddenly spike, it could spell trouble for your margins. We’ve seen businesses have a great, winning product that they make almost no money on because a surprise spike in shipping caught them off guard. We’ve even seen businesses lose money on products because they have to fulfill customer orders that have been made and they didn’t get to calculate the new shipping prices into the cost.
Keep in mind that shipping prices can change suddenly, and make sure you have a supply chain strategy in place to accommodate those changes.
Key Considerations for Advanced Q4 Supply Chain Planning
Now that you know why Q4 planning is different when you’re scaling, it’s time to focus on the key considerations that are important to advanced Q4 supply chain planning.
What Are Your Specific Q4 Marketing Plans?
First, you need to determine what your specific marketing plans are. Are you planning to make a Black Friday and Cyber Monday push, and if so, how hard are you pushing those sales? Do you plan on marketing your products as Christmas gifts, and if so, do you have the logistics in place to guarantee delivery before Christmas?
Brands often forget that they don’t have to do everything. You could focus marketing on Black Friday, or you could focus marketing on consistent sales through the entirety of Q4. Whatever you decide, make specific plans early and before you start taking concrete marketing steps.
How Hard Do You Plan to Scale Based on Current Order Volume Trends?
Predicting Q4 sales volume based on your current order trends can be tricky, especially if you haven’t attempted to scale during Q4 yet. This is one of the reasons we recommend businesses consider direct-from-China fulfillment as part of their overall Q4 supply chain strategy.
Even though you won’t be able to get an exact number, you should shoot for a general ballpark figure. For example, if you run 100 orders a day, you consider a goal of 5-10x that volume during Q4. It’s important to at least have an idea of how hard you plan to scale, since that will help you plan effectively and avoid some of the surprises that come along with demand spikes.
Are You Guaranteeing Christmas Delivery, and How Long into Q4 Do You Plan to Make that Guarantee?
It’s not uncommon to guarantee delivery before Christmas, but you need to decide how long into Q4 you want to make that guarantee. The closer you get to Christmas, the more risk that a higher percentage of orders won’t make it by the guarantee, which can cause refund requests.
In addition to making sure you can meet customer expectations, you also need to consider the rising prices of shipping in Q4. The more demand there is for parcel delivery, the more expensive your shipping costs will be, so pushing sales deep into Q4 can cause more expenses than you may think.
What Is Your Risk Profile in Regards to Inventory Planning?
Inventory planning is an enormous part of advanced Q4 planning, and it often is the key factor in determining how successful your Q4 is. Generally, businesses are deciding between one of two general strategies:
- Do you want to take more risk in ordering more inventory to support your scaling and make sure you don’t sell out too early (but risk overstocking), or…
- Do you want to take less risk in ordering less inventory to make sure you don’t overstock, but have a much higher risk of selling out.
This is a particularly challenging question for seasonal products (like Christmas ornaments). You want to make sure you don’t lose potential sales, but if you are overstocked on ornaments after Christmas is over, you’re stuck with that inventory for at least a whole year. It may make more sense to buy less inventory and risk selling out.
On the other hand, if you are selling a more evergreen product (like a product that has consistent sales, but you’re planning on making a big scaling push in Q4), then buying a lot of extra inventory may not be that big of a risk. It just means you spent Q1 or Q2 continuing to sell inventory that has already proven itself to be a winning product.
For businesses that may be struggling to make accurate forecasts for inventory planning, we often recommend that they incorporate direct-from-China fulfillment into their supply chain. Since lead times are short from factories to fulfillment centers, you don’t need to buy a lot of inventory at once, and you can accommodate spikes in demand without selling out too fast.
What Specific Products Do You Plan to Scale?
Next, businesses will need to consider what specific products they plan to scale. Every additional SKU that you want to scale will make inventory planning more difficult. You’ll need to decide if you really want to try to scale every product you sell, or if you just want to focus on one or two of your top sellers to make sure you streamline inventory planning as much as possible.
How Much Margin Are You Willing to Sacrifice in Exchange for Faster Shipping Close to Christmas?
We mentioned this earlier, but how much margin you’re willing to exchange for faster shipping close to Christmas is worth considering. The closer you get to Christmas, the more expensive shipping will be (and the higher likelihood that you’ll need to offer faster shipping to customers in order for products to get delivered before Christmas).
If you sell high margin products, you may want to consider spending more on faster shipping closer to Christmas so you can get another 1-2 weeks of sales during peak demand. On the other hand, if your margins are already pretty slim, it may not be worth it for you to cut even deeper into those margins to sell during the final weeks of the holiday shopping season.
Which Supply Chain Partner Do You Plan to Work With?
When you are considering scaling during Q4, partnering with a 3PL (or third-party logistics provider), makes life so much easier. If you’re a larger ecommerce brand, it’s likely going to be a necessary partnership if you’re serious about handling high order volume without delays.
When choosing a 3PL, you need to consider your specific business needs (don’t just choose a partner that has a good reputation. They also need to offer services that are a good match for your business). For Q4 purposes, it’s usually a good idea to choose a 3PL that operates within close proximity to your factories, if possible.
For example, EcommOps is a China 3PL, so for ecommerce brands that already use a China factory, we may be the natural choice. Fulfilling directly from China skips the need to rely on sea freight shipping during Q4, which was notoriously congested and delayed for the past several years.
A Q4 Planning Framework: By EcommOps
We’ve gone through why Q4 planning is different when you’re scaling, as well as key considerations to keep in mind when you’re starting to make a supply chain strategy for the holiday season. Now, let’s take a look at those considerations in practice in a real planning framework.
The following framework is the general strategy EcommOps uses when helping businesses prepare for Q4 scaling. It’s a good starting place when creating your own strategy, but keep in mind that any final Q4 strategy needs to take the specific needs of your business in mind, and that any given supply chain strategy will be different from business to business (and potentially even product to product).
First Week in October: China’s Golden Week Holiday
In the first week of October, China celebrates their Golden Week Holiday, which marks the final major holiday that’s observed until Christmas. This is when brands with consistent, winning products should start reaching out to their factories to get details on production plans and communicate any potential concerns about Q4 production.
Some data points you should get from factories include:
- Lead times, how how they can be impacted by higher volume
- Capacity constraints and competition you may face as demand for production increases
- Do they have the ability to scale up production if needed, and how quickly can they do it
- Are there viable backup suppliers, should the factory not be able to meet demand
For our clients, we usually begin these conversations before the Golden Week (usually late September), but you don’t have to have those conversations that early. You could wait until after Golden Week, but planning early never hurt anyone.
What you should absolutely have before Golden Week is a factory you trust, and a 3PL partner that is helping facilitate communication between you and your factories.
Early October to Mid-November: Factories Ramp Up Production and Businesses Begin to Scale Hard
After Golden Week and through mid-November, factories begin to ramp up production for Q4, and businesses begin to start scaling. This is when you must begin to communicate with your factories and fulfillment partners (or 3PL partners) about your specific Q4 plans. For example, they should know if you plan on pushing sales during Black Friday so they can prepare for the spike in demand.
Conversation regarding inventory planning should be happening almost daily at this point, both with factories and fulfillment partners. As order volume goes up, purchasing plans may need to be adjusted based on order volume and lead times, and you’ll need to know if factory lead times or capacity have changed, as well as any other potential issues that need to be navigated around.
This is the time frame where businesses will start to see shipping prices begin to increase and general logistics begin to slow down, which businesses should keep in mind as they continue to navigate Q4 challenges.
Fourth Tuesday in November to Following Monday: Thanksgiving, Black Friday, and Cyber Monday Sales
This is THE biggest sales period of the holidays, and almost any business can expect some kind of sales spike during this period. This is when big decisions need to be made about marketing and fulfillment, and indecision in your planning at this point can be disastrous for sales or meeting customers expectations.
When considering your marketing needs, you want to have as good of an idea as possible on how much volume you plan to push. These predictions should be based on your order volume and return on advertising spend (ROAS) prior to Black Friday and Cyber Monday and how aggressively you want to push sales. This is a big reason why we encourage clients to attempt to scale profitably before Q4, since it will make it easier to make predictions and have confidence in sales forecasts.
When you are considering your fulfillment needs, this is when you need to decide if:
- You are going to prestock, and if so, how much
- Your business is targeting fast fulfillment and is willing to take a risk on potentially overstocking
- You plan to target and guarantee Christmas delivery, what your shipping cutoff for this guarantee is, and what the cutoff dates are for each country you plan to sell in
- The lead times for re-ordering stock make sense for your business needs, potentially allowing you to not prestock and wait until demand presents itself.
Remember, while these decisions are specifically important for Black Friday and Cyber Monday sales, the holiday selling season doesn’t end here. You still need to consider the rest of December!
Early December: Holiday Shopping
After the big sales spike of Black Friday and Cyber Monday, you can still expect high sales volume early in December. This means that regular communication with your 3PL or fulfillment partner, as well as your factory, is still a must. It’s possible you may want to purchase more stock to support sales volume.
If you are targeting and/or guaranteeing Christmas delivery, this is when you need to start considering when your shipping cutoff will be. You should already be opting for faster shipping lines if you are targeting Christmas delivery, and you should keep in mind:
- Expected shipping cutoffs are estimates, not guarantees. You may need to fulfill orders past your cutoff time, depending on when those orders were made and available inventory.
- Cutoff dates are the dates when packages are fulfilled and shipped from the fulfillment center (so, for example, with EcommOps, it’s the last date we ship orders from China to customers). It is not when customers make their orders.
- If you run out of stock, a cutoff date doesn’t matter. This is why inventory management is crucial, since if you have to restock close to Christmas, you very likely will miss your own cutoff dates.
Mid-December Through Christmas: Late Holiday Shopping and Personal Shopping
Many businesses write-off any kind of meaningful sales after Black Friday and the big holiday shopping rush, but we often see that just isn’t the case. Sales performance continues to be strong well into December right up until Christmas Eve. If you over-ordered stock for Black Friday, this is a good period to continue to push sales and unload some of your excess inventory.
It’s worth noting that after your shipping cutoffs, you should not promise Christmas delivery. You run an enormous risk of not making deliveries by Christmas, which is very problematic for your brand. We have found that customers continue to buy through December even without the promise of Christmas delivery, so don’t feel like you have to offer that guarantee to move inventory.
EcommOps: Q4 Planning and China Fulfillment Specialists
Advanced planning for Q4 supply chains is extremely complex, which is why so many businesses have relied on EcommOps to help them navigate the holiday shopping season. We are a full-service 3PL, specializing in direct-from-China fulfillment, and our clients enjoy our unique advantages, which include:
- Physical offices in the U.S. and China
- Shenhzen-based fulfillment center
- Bilingual English/Mandarin support
- A full-suite of 3PL services including inventory warehousing and order fulfillment
If you want a trusted partner that can help you reliably scale during Q4, we would love to get in touch. You can reach out through our webform, and our experts will be in touch on creating a supply chain strategy that’s perfect for your business and for unique Q4 challenges.