The Christmas peak is expected to come earlier than ever in 2010, so retailers need to ensure their supply chains are prepared, according to OPS Logistics Consultancy.
The early peak will come as a result of the emergency budget and forthcoming VAT rise – the potential affect this will have on supply chains has been outlined by the consultancy in a new white paper.
“Retailers need to start planning now if they are to take advantage of both the opportunities and challenges the VAT rise will bring, and this is likely to have a major impact on the logistics sector,” said Dan Derry, managing director of OPS.
“With the tax changes occurring in the middle of the peak, (note: peak is October to early December; VAT is not until January) this will not only encourage the consumer to buy earlier this year to beat the rise but also create spikes in the demand to put increased pressure on the supply chain.”
The paper suggests trends show that consumers tend to avoid paying extra tax by buying large ticket items before any tax increases, such as the 2.5 per cent rise in VAT chancellor of the exchequer, George Osbourne, earlier this year.
As the increase is planned for 4th January 2011 this will coincide with the Christmas peak and cause unusual buying habits to occur.
The paper explains that in order to meet this change, businesses need to ensure their supply chains have the flexibility to meet future challenges.
OPS has urged companies to review their entire supply chain to ensure they have the best value for money approach and can ensure customer satisfaction, while being able to adapt quickly to a changing economic climate.
However, Derry added: “The biggest challenge this year is not only coping with an unusual peak but also the subsequent slump.
“Post Christmas can always be a hit or miss affair, depending upon sales and consumer response, but this year we predict it to be quieter than normal, as consumer spending habits change in line with the effects of the budget and because people have less disposable money available.
Therefore, logistics operations need to be planning ahead and be proactive to find alternative uses for supply chain resources or looking where infrastructures can be streamlined.”