Could AI help Santa’s supply chain challenges?

By Tim Woodman, Sales director at SpendConsole

Tim Woodman - Global Banking | FinanceTim Woodman - Global Banking | Finance

Tim Woodman

Imagine if ‘Team Santa’ was a real entity and it’s their busiest time of the year. Failure is not an option. If logistics and supply chains fail, kids across the world will be throwing gargantuan tantrums. The stakes couldn’t be higher for Team Santa. In this article, we review the complexities of ‘Team Santa’s’ logistics and supply chain management and how AI could be a real ‘game-changer.’

Quantifying the Challenge: How Many Presents Does Team Santa Deliver? 

Our first task is to quantify the challenge by examining Team Santa’s first crucial metric – how many parcels is Team Santa likely to deliver with only one sleigh and eight reindeer, one with a flashing red nose, in one single night? 

At SpendConsole, we take the time to analyse the logistical complexity of your business. So for such an important issue as identifying Santa’s use of AI and ML, we’d need to see quality insights. As an example:

  • The number of kids across the globe under 14 is estimated by Statista to be just under 2 billion.
  • 32% of the world’s population is of the Christian faith and, therefore, most likely to celebrate Christmas, giving us 640 million kids likely to receive pressies. 
  • Sadly, very limited up-to-date data is available to show how many kids believe in Santa, despite an information-drenched world already sapping the sheer joy and beauty out of our collective innocence.
  • We have to go back to an academic study from the late 1970s (yes, it actually happened), the conclusions of which many argue still stand today:
    • 85% of four-year-olds believe in Santa
    • 65% of six-year-olds believe in Santa 
    • 25% of eight-year-olds view old Saint Nic favourably.

Assuming an even distribution of kids between 0-14, this reduces the number of kids likely to receive pressies to around 238 million. The question is, how many kids have been so naughty they can’t get on Santa’s nice list? 

In the absence of a formal naughty scale, our statistical assumption is that only 15.9% of kids have been naughty. With the greatest coincidence ever, this leaves us with an exact 200 million kids likely to receive pressies – oh the power, beauty, and convenience of statistics! 

Finally, Statista shows an average global fertility rate of 2.27 children per female in 2021. This means Team Santa should expect to deliver to around 88.1 million unique households! Assuming three presents per well-behaved kid, that’s around 530 million parcels for same-day delivery. So many pressies to source, prepare, wrap, and deliver – and so much milk and cookies for Santa!

Benchmarking Team Santa Against Industry Best Practice

With 530 parcels, we can see how Team Santa has their work cut out. This is especially true when we consider Amazon, the largest e-commerce company globally, which delivers an estimated 1.6 million parcels daily. While Amazon’s infrastructure has been tried and tested, how would Amazon consider handling 530 million parcels for same-day delivery with one sleigh and eight reindeer? Team Santa has decided the only outcome of impossible is possible as they target delivering over 300 times more in one day than Amazon.

Clearly, such amazing performance opens up Team Santa to numerous supply chain management issues that need to be met proactively by looking at effective demand management. 

Demand Management: Using AI and Big Data for Forecasting

At the heart of Team Santa’s Just-in-Time (JIT) methodology, there must be a sophisticated demand forecasting AI. To get details on the presents kids want and to meet that demand, Team Santa relies on some key channels for data. 

  • Their global Santa franchise – Santas in shopping malls 
  • Letters and emails to Santa at the North Pole

Handwritten notes are likely subject to Optical Character Recognition (OCR) software. If Team Santa has followed our lead by using proven AI to turn supplier invoices into ERP-based data, they will use AI to turn those letters directly into purchase orders and contracts in real-time. The biggest challenge, however, is timing. 

The marketplace data is collected from around mid-November onwards. With extended lead times and shipping times from international suppliers, Team Santa must have a very clear idea of what well-behaved kids want as presents well in advance. Team Santa must proactively use ML to look at the patterns of purchase from last year and look at real-time data models on kids’ current behaviours.

It is also likely that Team Santa has partnerships with all the major Social Media outlets to proactively predict the toys kids will likely want. Our analysts checked all the public social media companies’ annual reports, and we can’t find any confirmation of these strategic partnerships with Team Santa – perhaps Team Santa has really strong NDAs!  

Supplier Performance and the ‘Silly Season’

Having been through some serious economic challenges over the past three years globally, it is unlikely there will be any extra favours for Team Santa from their suppliers. As a highly seasonal business, Team Santa’s cash flow will tend to be very lumpy. Suppliers do not want to be a tail-end Charlie and get paid last. Instead, they will want to be paid before shipping their toys. It will be critical for Team Santa to have a complete overview of their suppliers, the supplier data, and supplier performances to create Dynamic Supplier Relationship Management tools. With access to this data across all suppliers, they can adjust their financial strategies and negotiate early payment settlements.

Our clients have found our supplier reporting from our AP Transformation platform effortlessly helps them plan – so no doubt Team Santa could be using something similar to help scale their efforts.

Logistics and Delivery Performance

Team Santa delivers at nighttime, typically between 10pm – 6am across multiple time-zones, when kids are asleep. Therefore, Team Santa must be able to cross-match delivery times with kids’ sleep patterns. AI is very powerful for identifying patterns in data and providing matches and exceptions that would take humans far too long to calculate. Perhaps, Team Santa also has access to biometric data from kids’ smartwatches to give the necessary sleeping insights.  

Fraud Prevention: Dealing with Naughty Santa Scammers

Finally, whenever there is time pressure to deliver products fast and to pay for them quickly, there will always be those trying to scam Santa. We see this in action with our clients in normal times, where scammers have used AI-generated voice clones of senior management staff and sent subsequent extremely well-worded emails, requesting fast payment for new suppliers. 

Given Team Santa deal with so many international suppliers, and many new ones, they are probably using automated compliance tools to validate new suppliers against local compliance databases (if not, of course, they can always reach out to us on the Santa express line). 

Just-in-Time (JIT) Inventory Management 

Team Santa’s supply chain management has to be a marvel of logistical prowess and festive efficiency. They have taken JIT inventory management to a new level, operating at a scale that shows unadulterated talent. To make this workable, undoubtedly Team Santa leverages the best-in-class, technologies, and best-in-class practices. 

Best practice determines that it is vital to have preferred and qualified suppliers. Thankfully for Team Santa, in a digitised environment, inventory replenishment is automated with clear contracts, pricing, and delivery timeframes, meaning that demand for presents can be catered for in a dynamic, real-time way. Team Santa must be super adept, as we never seem to hear of any problems associated with any failed deliveries across social media. 

Team Santa and the Season of ‘Festive Funtech’ 

Team Santa’s logistical excellence is a great lesson for us all to learn about the power of AI and ML when solving direct business problems. Importantly, it’s a valuable lesson in how to use AI and ML to help review supplier management and craft the supplier performance data necessary to help manage inventory and empower that feeling of ‘Festive Funtech.’ 

About Author 

Tim Woodman is sales director of SpendConsole, a proven AI-powered Platform that effortlessly transforms Accounts Payables and gives data-driven insights to make informed decisions. With 20 years eProcurement experience, SpendConsole has been pioneering breakthrough AI-powered innovations tackling the toughest e-procurement problems. 

About SpendConsole

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