Modelling Santa’s Warehouse

The festive period is an intense couple of months for anyone who operates a retail warehouse, no more so than for Father Christmas.

That’s why we are delighted to have been working directly with the team at the North Pole for the last 12 months, to help bring their warehouse and distribution operations into the 21st century.

From growth forecasting to sustainability, we’ve been working alongside the all-elf supply chain team to analyse their data and produce actionable insights. We’d like to share our favourite areas of improvement that we recommended for Santa and his team to implement in the coming years.

1. Growth Planning

We all know Santa’s warehouse has some pretty nifty space multiplying magic (think Dr Who’s Tardis – it’s much larger on the inside). That said, it’s still important that the North Pole team is able to accurately forecast any increases in space and labour ahead of time.

Delivering presents to every child on earth is no mean feat. And that feat requires an awful lot of warehouse space. Based on Santa’s existing data (historical ‘order’ data, delivery data, and commercial forecasting) we built a model to forecast warehouse and labour capacity requirements over the next five years.

We were interested to discover that Santa’s operations typically deliver 10 items (of a possible 1,000 SKUs) per child in the form of stocking fillers. He also brings one ‘main’ present to each child (small, medium or large), letting parents, family, and friends fill in any additional requirements.

SML Main present volumes over the last 10 years, directly related to the number of children worldwide.

An increasing population, and thus increasing customer demand volume was a primary concern of Santa and his team, as they hold themselves to a very high standard of 100% deliverability each year.

We reconciled warehouse activities and storage requirements for this year to 198 million sq foot of warehouse space and forecast that this would need to increase to 203 million sq foot by 2026.

In terms of labour, 360 thousand elves are currently required to fulfil North Pole operations. This is forecast to increase to 369 thousand by 2026.

This insight means that Santa and the team have time to plan accordingly for this growth, increasing warehouse capacity and hiring more elves.

2. Demand resilience

With the current operation modelled, we could then work with Santa to stress test the resilience of his operation and provide him with insights into how he might adapt to change and challenges.

One question that the team at the North Pole were very keen to understand concerned their naughty children quota.

Currently, on average 1% of children are deemed too naughty for presents and receive a piece of coal in their stocking. However, Santa is (and always will be) optimistic about children’s behaviour, and wanted to understand how different ‘naughtiness levels’ might affect overall operations.

We ran various scenarios.

With only 0.5% of naughty children instead of 1%, we calculated that Santa would need an additional 200k sq foot of warehouse space and an extra 400 elves to fulfill all of the additional stockings.

3. Warehouse Automation

Santa is also interested to find out what efficiencies could be achieved with automated solutions.

He’s looking to potentially replace the stocking fillers area, which is currently manually picked by his hard-working elves, with pick-to-light automation.

This automated system would eliminate the time walking between picks and improve the time taken to locate an item on the shelves. We estimated that this improvement would double the total stocking fillers pick rate from 200 to 400 items per hour. 

Activity to replenish items onto shelving would remain, but models suggest that pick-to-light technology could reduce the number of elves required to pick stocking fillers by 30%. Allowing Santa to weigh up the costs vs the benefit and calculate his return on investment period to make an informed decision. It also means that 30% of his elves can be freed up for other value adding departments.

The introduction of automated processes means that his staff will need to be trained to use the equipment properly and reduce overall risk. As with all automated systems, elf and safety procedures must be in place.

4. Sustainability

Finally, Santa wanted to know what changes he could make to improve the sustainability of his operations. Already running a green fleet, powered exclusively by carrots, he was interested to know what changes could be made at his warehouse HQ.

The first recommendation was for the team to look at alternative/sustainable and recyclable packaging. Consumers in the UK alone use 227,000 miles of wrapping paper each festive period, so ensuring that this paper is both recycled and recyclable where possible would go a long way to improving Santa’s sustainability criteria.

Should Santa decide to implement modern automated systems (and forgo the hassle of powering via magic) it’s suggested that energy could be produced on-site via wind generation. It was further deemed that the warehouse had capacity for external PV arrays to capture solar energy, but that the lack of consistent sun would make wind generation a preferred option.

Overall, it is encouraging to see the largest worldwide distribution and logistics facility thinking proactively about their impact on the climate. With ongoing carbon monitoring and improvements we are confident that Santa will achieve his 2025 Net Zero pledge.

Wrapping up

Santa was only one of the many fantastic clients that we’ve worked with this year at Trym Consulting, and we look forward to embarking on many more exciting projects in the new year. For now, wishing you all a very merry and restful Christmas!

To see how we could inject some magic into your supply chain in 2023 – please get in touch.

We are independent supply chain and warehouse consultants who specialise in data analysis, leading strategy, and bringing a fresh perspective to your supply chain challenges.

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