The Christmas Tree Challenge

Feeling frustrated by seasonal forecasting and planning? Consider the Christmas tree challenge:

- perishable product with a 60-90-day lifecycle
- demand lasting only about a month
- one-way logistics from remote pick-up locations
- required specialty truck equipment and carriers
- no back-hauls
- nationwide driver shortages
- difficult urban deliveries

It should make you feel a little better to know that you don't have to deal with Christmas tree demand and fulfillment.

According to the National Christmas Tree Association, tree farms sell approximately 25-30 million Christmas trees every year at an average price of $75 each – totaling $2-3 billion in revenue. Approximately 26% of these trees are sold to big-box retail chains like Wal-Mart or The Home Depot and delivered to distribution centers. The rest are sold to nurseries, retail lots, non-profits, or other retailers.

Tied to the Economy

Christmas tree farms are located in many states, but most of the inventory comes from North Carolina, Pennsylvania, the Northern Midwest, and the Pacific Northwest. Complicating the challenge is that planting trees for harvesting must be done 7-10 years in advance. And since tree demand and purchases are closely tied to the economy, growers must predict the future demand and guess how many seedlings to plant many years in advance. Farmer's Almanac anyone? It's akin to predicting what the stock market will be doing in 2030.

Accurate forecasting of holiday demand for Christmas trees is critical to be able to meet that demand. Forecasting too few, and there will be mass shortages. Forecasting too many will leave unsold cut tree inventory in tree lots across America the day after Christmas. Excess inventory has to be hauled away at additional cost to growers and resellers. There are no retail returns. Economic recession can trigger enormous losses for tree growers and sellers, and huge amounts of left-over inventory that cannot be sold, even at marked-down prices. At the end of the season, demand drops to zero.

It's not just tree inventory that is affected if forecasted sales are inaccurate. The Christmas tree industry employs over 100,000 people and more seasonal workers at retail tree lots. Seasonal workers have an economic magnifier effect on their local area. Seasonal workers are more likely to spend their earnings in local retail stores, restaurants, and services thereby boosting the local economy. But if tree sales are depressed by a weak economy, seasonal workers aren't needed and the local economy isn't boosted.

Specialty Equipment and Truck Driver Shortages

The value of all Christmas trees purchased in 2018 was $2.56 billion. Bringing all those trees to market requires a tremendous amount of flatbed tree-hauling equipment and 40-ft trailers that may then sit idle after the season. When trucks aren't operating, they are not earning, and become burdensome fixed costs. Flatbeds and trailers, of course, haul all kinds of other goods including forestry products throughout the year, but nothing compared with the volume during Christmas tree season. These factors contribute to high logistics operating costs that are passed onto consumers.

To make matters worse, the U.S. is experiencing a severe truck driver shortage. Flatbed trucks might be loaded up in a remote forest location, and then there may be no drivers to haul the trees away. Perhaps autonomous trucks are the future solution, but that won't solve the immediate problem. As with all market shortages, demand drives up the costs - in this case, driver pay and bonuses as well as freight costs. Diesel fuel costs often increase during the holidays, taking the total cost to operate even higher. Although there are national driver safety regulations enforced by highway patrols, the accident rate increases seasonally when drivers are working overtime to deliver trees. Be careful on the roads.

So, if you are frustrated with forecast accuracy in your business, the chaos of peak season order fulfillment, and driver shortages, remember your colleagues in Christmas tree supply chains. They hold the supply chain management keys our holiday season.

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MR