While looking for some articles about some of the best implemented supply
chain networks and lessons to be learnt from them, I came across one that
claimed to be the "Best Supply Chain in the World". Intrigued, I read on.
It talks about most of the aspects related to supply chain networks in a humors way that tickles and educates. I found it to be a really interesting
read and I wanted to share it. On a semi-serious note - It made me wonder if we
could put any of these “trade secrets” into actual practice.
Gartner likes to publish the Top 25 Supply Chains every year.
Unfortunately, there’s one supply chain the esteemed analyst firm continues to
overlook. And it just so happens to be the
greatest supply chain success story of all time. I’m talking about The
Santa Claus Supply Chain. Don’t believe me? Who else can claim:
- A laser focus on the target market – Children of all ages
- 100% perfect order rating, on-time delivery and fill rates
- A global distribution channel that spans the world in 24 hours
- Direct Door to Chimney Delivery Model
- A committed workforce with zero turnover
- The very first known supply chain to run “in the cloud”
Let’s take a closer look at Jolly St. Nick’s supply chain superiority,
shall we?
Manufacturing and Distribution Facility
At first glance, Santa’s manufacturing and distribution facility (the
North Pole) is not ideally located from a logistical perspective. However he
does have total control of his manufacturing and achieves tremendous economies
of scale in production by having a single manufacturing facility (Santa’s
Workshop).
It is also believed to be the largest single manufacturing plant in the world. With the global population surpassing 7,000,000,000 people, of which around 35% are under 19 years old (check out this cool dashboard to take a closer look at the world population in 2011 and beyond), the workforce (Santa’s Little Helpers) need to produce over six million presents every day of the year. As a result, inventory of billions of end products are built up towards the peak season (Christmas Eve) creating the ultimate warehouse management challenge.
In addition, The North Pole location is also a brilliant financial
strategy as records show that it is it is exempt from all government taxes and
regulations as, being located in the Arctic Ocean it is not owned by any single
country and is considered “international territorial”.
Customer Service
Santa has an unblemished reputation for “delivering on the promise.”
There’s never a late delivery, and in my experience, he usually delivers more
than expected! I’d say that deserves a perfect order rating of over 100%. But
how does Santa actually maintain such an accurate customer database (naughty
and nice list)? With over seven billion records, it’s a prime example of “big
data” and is of course more manageable because it’s “in the cloud”!
Order Processing
Traditionally, Santa has taken a large number of orders personally.
Usually by face to face customer meetings (whilst sitting on his knee), or from
letters delivered via the once popular mail system (older readers may remember
it). Thankfully, Santa is no technology slouch either as he now accepts
orders electronically through popular social networking sites (check out my
prior blog Are You Ready for the Social Supply Chain?). That’s right boys and
girls, even Santa is on Facebook. You can also follow him on
Twitter @Santa or reach him via
C2S (Child2Santa) at: santa@santaclaus.com.
Supply Network Collaboration
There is no official count of how many suppliers Santa deals with but I
have heard that he leverages S2B (Santa to Business) process to collaborate. I
can only imagine the level of visibility that Santa requires to orchestrate
purchase orders, shipments, in transit inbound inventory of raw materials and
components, and the optimization of the transportation network to get all his
supplies to the North Pole on time.
Supply Chain Planning
Santa’ demand forecasting must have him pulling at his beard when trying
to synchronize supply to demand during S&OP meetings. He has millions of
SKU’s that all peak at exactly the same time (Christmas Eve). He also has to
deal with unbelievably short planning cycle times based on 1 on 1 order taking
processes at strategically placed customer service centers (Santa’s Grottos)
and Direct orders (letters to Santa) that are sometimes not available until
point of delivery (with milk and cookies at the fireplace). These complex
challenges require a very responsive planning system to manage “push/pull
boundaries” in a very demand driven, finish-to-order planning and manufacturing
process.
Transportation and Logistics
Santa has the logistical and fulfillment challenge of visiting every
customer / location combination in a 24 hour period. Actually it is a 31 hour
time period (read on). This is all done through his own logistics fleet of “a
miniature sleigh, and eight tiny reindeer”. I have done a little research to
find out a few of his logistical secrets:
- How Santa’s Sleigh works – It’s quite complicated, and I won’t bore you with the details, but it has something to do with his “antimatter propulsion unit” which apparently, allows him to travel faster than the speed of light.
- How fast does Santa’s sleigh go? – It has been estimated that Santa has to plan a transportation route that visit 822 homes a second to deliver all the world’s presents on Christmas Eve. Therefore, Santa travels at approximately 3,000 times the speed of sound!
- How much can his sleigh carry? – Assuming each child gets nothing more than a medium sized gift (2 lbs), the sleigh is carrying 2.1 million tons, not counting Santa, who himself is often described as “overweight”.
- How long does his trip take? By leveraging different time zones, Santa adheres to a 31 hour delivery run, which, I am sure breaks all Hours-of-Service (HOS) rules.
- How does Santa reduce supply chain risk? According to FAA folklore, if the weather’s ever bad on Christmas Eve, Santa is automatically cleared for flight thanks to the brightness of Rudolph’s nose.
- How does Santa fit everything in his sack? This is one of Santa’s greatest competitive advantages and, I believe, one of the best kept secrets in supply chain management. The answer came from a source close to Santa who told me that “The sack shrinks presents and they only get bigger when they’re in the right home”.
- How do the reindeer fly? A long time ago Santa and his helpers discovered magical oats and corn. When the reindeer eat the oats and corn they are able to leap high into the air and fly. (Source: www.santaclause.com). This is a very sustainable source of power, with a very low carbon footprint.
- How strong are the reindeer? On land, conventional reindeer can pull no more than 300 pounds so the eight flying reindeer do the job of about 1,633,333 of the “non flying” variety.
- How old is Santa? Santa is also proof of the aging driver population being over 1,700 years old.
Inventory Management
Santa also seems to have perfected his Inventory Optimization and safety
stock planning, as you never hear of a “Santa Sale” on December 26th – a fact
that’s been making his competitors pull their hair out for hundreds of years!
Tracking and Tracing
Because Santa flies a single delivery route and mode of transport, there
is not a great need for individual RFID tags on each delivery. He has, however,
in the past few years, taken advantage of a GPS Tracking device so that his
customers can track and trace his movements and current location in real time;
through a service provided by NORAD (my children love this). This is also
a very good system for parents to “encourage” children to go to bed as they can
now tell, to the nearest hour that “he is coming”.
So, based on the aforementioned, does Santa have the best supply chain
in the world?
Would you dare say “no” and perhaps end up on his naughty list?
P.S. According to our records, Santa is not an SAP Customer, but a lot
of his suppliers are.
this is really fun!!! :)
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