I posted on the topic of “The danger of a business run on averages” in October last year but a recent conversation with a potential customer about their CY24 peak season got me thinking again.
Peak season is a particularly bad time if you have a business that measures performance based on the average. Peak season typically has an order volume surge that ranges from 3 to 1 (high to low peak ratio) to an extreme of 7 to 1 with one Apparel client.
The volume shift creates a big shift change going to 2 shift in almost all plants and some even 7 day x 3 shift. The economics of 2nd and 3rd shift and the weekend shifts are typically very different. Different because of the quality of leadership and level of staff skill but also because labor rates may be different.
But the shifting economics of peak goes beyond different input costs – the order mix can also change which means the average revenue per order can be quite different (usually lower) and the profitability per order may be very different to the rest of the year.
Collectively it means that there is a real risk that the gross margin of peak is nowhere near what you expect it to be, but the sheer size of the volume and the big lift in Gross Profit obscures what may be a myriad of sins in production. And the volume amplifies the scope of that sin.
Unfortunately most businesses operate based on reports that cover anything from a week to a month, and at peak with new staff working 2nd and 3rd shift and less skilled supervisors leading on the weekend there is a ‘lot’ going on.
The bottom line for the print on demand bottom line is that it is essential that performance be visible at the staff and team level in real time as the first level of defence and at the SKU, product group and business level at a shift level. This means when there is variance that is affecting profitability you have the data to act fast. Peak season amplifies the need for fast data and that this performance be visible in real time
