Gartner likes to publish the Top 25 Supply Chains every year. Unfortunately, there’s one supply chain the esteemed analyst firm continues to overlook. And it just so happens to be the greatest supply chain success story of all time. I’m talking about The Santa Claus Supply Chain. Don’t believe me? Who else can claim:

A laser focus on the target market - Children of all ages

100% perfect order rating, on-time delivery and fill rates

A global distribution channel that spans the world in 24 hours

Direct Door to Chimney Delivery Model

A committed workforce with zero turnover

The very first known supply chain to run “in the cloud”

Let’s take a closer look at Jolly St. Nick’s supply chain superiority, shall we?

Manufacturing and Distribution Facility

At first glance, Santa’s manufacturing and distribution facility (the North Pole) is not ideally located from a logistical perspective. However he does have total control of his manufacturing and achieves tremendous economies of scale in production by having a single manufacturing facility (Santa’s Workshop).

It is also believed to be the largest single manufacturing plant in the world. With the global population surpassing 7,000,000,000 people, of which around 35% are under 19 years old (check out this cool dashboard to take a closer look at the world population in 2011 and beyond), the workforce (Santa’s Little Helpers) need to produce over six million presents every day of the year. As a result, inventory of billions of end products are built up towards the peak season (Christmas Eve) creating the ultimate warehouse management challenge.

In addition, The North Pole location is also a brilliant financial strategy as records show that it is it is exempt from all government taxes and regulations as, being located in the Arctic Ocean it is not owned by any single country and is considered “international territorial”.

Customer Service

Santa has an unblemished reputation for “delivering on the promise.” There’s never a late delivery, and in my experience, he usually delivers more than expected! I’d say that deserves a perfect order rating of over 100%. But how does Santa actually maintain such an accurate customer database (naughty and nice list)? With over seven billion records, it’s a prime example of “big data” and is of course more manageable because it’s “in the cloud”!

Order Processing

Traditionally, Santa has taken a large number of orders personally. Usually by face to face customer meetings (whilst sitting on his knee), or from letters delivered via the once popular mail system (older readers may remember it). Thankfully, Santa is no technology slouch either as he now accepts orders electronically through popular social networking sites (check out my prior blog Are You Ready for the Social Supply Chain?). That’s right boys and girls, even Santa is on Facebook. You can also follow him on Twitter @Santa or reach him via C2S (Child2Santa) at: santa@santaclaus.com.

Supply Network Collaboration

There is no official count of how many suppliers Santa deals with but I have heard that he leverages S2B (Santa to Business) process to collaborate (check out my prior blog Collaboration: The New Battle Cry of Supply Chain). I can only imagine the level of visibility that Santa requires to orchestrate purchase orders, shipments, in transit inbound inventory of raw materials and components, and the optimization of the transportation network to get all his supplies to the North Pole on time.

Supply Chain Planning

Santa’ demand forecasting must have him pulling at his beard when trying to synchronize supply to demand during S&OP meetings. He has millions of SKU’s that all peak at exactly the same time (Christmas Eve). He also has to deal with unbelievably short planning cycle times based on 1 on 1 order taking processes at strategically placed customer service centers (Santa’s Grottos) and Direct orders (letters to Santa) that are sometimes not available until point of delivery (with milk and cookies at the fireplace). These complex challenges require a very responsive planning system to manage “push/pull boundaries” in a very demand driven, finish-to-order planning and manufacturing process.

Transportation and Logistics

Santa has the logistical and fulfillment challenge of visiting every customer / location combination in a 24 hour period. Actually it is a 31 hour time period (read on). This is all done through his own logistics fleet of “a miniature sleigh, and eight tiny reindeer” (see “The Night Before Christmas” for more details). I have done a little research to find out a few of his logistical secrets:

How Santa's Sleigh works – It’s quite complicated, and I won’t bore you with the details, but it has something to do with his “antimatter propulsion unit” which apparently, allows him to travel faster than the speed of light.

– It’s quite complicated, and I won’t bore you with the details, but it has something to do with his “antimatter propulsion unit” which apparently, allows him to travel faster than the speed of light. How fast does Santa’s sleigh go? - It has been estimated that Santa has to plan a transportation route that visit 822 homes a second to deliver all the world's presents on Christmas Eve. Therefore, Santa travels at approximately 3,000 times the speed of sound!

- It has been estimated that Santa has to plan a transportation route that visit 822 homes a second to deliver all the world's presents on Christmas Eve. Therefore, Santa travels at approximately 3,000 times the speed of sound! How much can his sleigh carry? - Assuming each child gets nothing more than a medium sized gift (2 lbs), the sleigh is carrying 2.1 million tons, not counting Santa, who himself is often described as “overweight”.

- Assuming each child gets nothing more than a medium sized gift (2 lbs), the sleigh is carrying 2.1 million tons, not counting Santa, who himself is often described as “overweight”. How long does his trip take? By leveraging different time zones, Santa adheres to a 31 hour delivery run, which, I am sure breaks all Hours-of-Service (HOS) rules.

By leveraging different time zones, Santa adheres to a 31 hour delivery run, which, I am sure breaks all Hours-of-Service (HOS) rules. How does Santa reduce supply chain risk? According to FAA folklore, if the weather's ever bad on Christmas Eve, Santa is automatically cleared for flight thanks to the brightness of Rudolph's nose (see Why is Rudolph’s nose red? for details).

According to FAA folklore, if the weather's ever bad on Christmas Eve, Santa is automatically cleared for flight thanks to the brightness of Rudolph's nose (see Why is Rudolph’s nose red? for details). How does Santa fit everything in his sack? This is one of Santa’s greatest competitive advantages and, I believe, one of the best kept secrets in supply chain management. The answer came from a source close to Santa who told me that “The sack shrinks presents and they only get bigger when they're in the right home”.

This is one of Santa’s greatest competitive advantages and, I believe, one of the best kept secrets in supply chain management. The answer came from a source close to Santa who told me that “The sack shrinks presents and they only get bigger when they're in the right home”. How do the reindeer fly? A long time ago Santa and his helpers discovered magical oats and corn. When the reindeer eat the oats and corn they are able to leap high into the air and fly. (Source: www.santaclause.com). This is a very sustainable source of power, with a very low carbon footprint.

A long time ago Santa and his helpers discovered magical oats and corn. When the reindeer eat the oats and corn they are able to leap high into the air and fly. (Source: www.santaclause.com). This is a very sustainable source of power, with a very low carbon footprint. How strong are the reindeer? On land, conventional reindeer can pull no more than 300 pounds so the eight flying reindeer do the job of about 1,633,333 of the “non flying” variety.

On land, conventional reindeer can pull no more than 300 pounds so the eight flying reindeer do the job of about 1,633,333 of the “non flying” variety. How old is Santa? Santa is also proof of the aging driver population being over 1,700 years old.

Inventory Management

Santa also seems to have perfected his Inventory Optimization and safety stock planning, as you never hear of a “Santa Sale” on December 26th – a fact that’s been making his competitors pull their hair out for hundreds of years!

Tracking and Tracing

Because Santa flies a single delivery route and mode of transport, there is not a great need for individual RFID tags on each delivery. He has, however, in the past few years, taken advantage of a GPS Tracking device so that his customers can track and trace his movements and current location in real time; through a service provided by NORAD (my children love this). This is also a very good system for parents to “encourage” children to go to bed as they can now tell, to the nearest hour that “he is coming”.

So, based on the aforementioned, does Santa have the best supply chain in the world?

Would you dare say “no” and perhaps end up on his naughty list?

P.S. According to our records, Santa is not an SAP Customer, but a lot of his suppliers are.

Happy Holidays,

Richard

(Follow me on Twitter @howellsrichard and @sapi2d)