The Christmas tree supply chain

Think you’ve got supply and demand challenges? Consider Christmas trees.

The Christmas tree industry has to deal with the ultimate challenge in logistics, supply, and a very demanding public. Trees take between 3-10 years to grow before they are harvested. Then when the season is over, providers have to deal with excess and out-of-date products. Consider the product:

• Perishable with a 60-90-day lifecycle

• Annual 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

• Weather and road conditions.

Wow! What a challenge for Christmas tree supply chain people.

According to the National Christmas Tree Association and the U.S. Department of Agriculture, tree farms sold approximately 25-30 million Christmas trees in 2021 at an average price of $70 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. More than 100,000 people are employed by the Christmas tree industry – which makes you wonder what they do the rest of the year.

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 3-10 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. It’s akin to predicting what the stock market will be doing in 2030. With wild swings in demand for consumer products during the pandemic, and a general trend to buy artificial trees, it becomes even more difficult for farmers to make planting decisions.

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.

Specialty equipment and truck driver shortages

Bringing all those Christmas 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 the 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 in bad weather conditions.

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 to our holiday season.

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MR