During these extraordinary times, there is so much that is uncertain. So, how do Inventory Planners navigate through this unprecedented climate? Nobody has all the answers right now. But there are a few steps that Inventory Planners should take now in their demand planning.
The global pandemic is going to have a long-lasting effect on all businesses and the economy as a whole. The situation changes day to day and no one knows how long this pandemic will last. It probably doesn’t make much sense to re-forecast every single item in your assortment right now, since there are so many unknowns. There are items or categories that you can plan for short-term, perhaps pulling production forward or back-filling if you have had a surge in demand. However, as new information comes in, assumptions will change. Keep in mind that circumstances are changing for your customers too – retailers will adjust their outlook as they plan for a recession, individual consumers’ spending attitudes may change. This may mean reduced or canceled orders. Take time to think through decisions. We’ve never experienced a global disruption like this.
Take this time of uncertainty to collect data and document everything. This information will be extremely valuable when planning future demand.
Try to determine actual demand. Is demand due to actual consumption, or instead due to anxieties about the pandemic, such as the toilet paper surge? What sales were missed due to lack of availability? Document your findings.
There may be differences by geographical location, since different areas may be on different points on the pandemic curve. This will help you understand demand and will perhaps allow you to anticipate and capitalize on demand as areas that are behind on the curve catch up.
Document any supply chain disruptions you may encounter, whether it’s getting raw materials, or getting finished goods from suppliers. Also, document transportation issues.
Analyze your Product Assortment
Due to unavailability of products, consumers may not be as brand-loyal as in the past. They may be more willing to accept substitutes. This is an opportunity for companies to make adjustments to their product assortment – either short-term or long-term. Some considerations include:
Availability – are the products or materials available from the vendors? Do you have an excess of inventory in suitable substitutes? Can you promote or offer discounts for these liabilities?
Terms – it may be beneficial to shift to suppliers that have terms that favor your business.
Risk analysis – analyze your assortment and rank according to how affected each product is by COVID-19 (similar to an A, B, C ranking that is normally applied to a product assortment.) By applying this attribute to each item, you can gain insights into the risks of your assortment and develop a plan for inventory that is a blend of risk levels.
Curves and Scenario Planning
If you use sales curves to forecast your business, you may find that this method is not optimal now due to this unprecedented unpredictability of our world today. Sometime in the future, you will be able to examine the selling curve and determine the best way to move forward. Curves may have to be smoothed out, for example. Your business may have experienced a huge spike in sales in March and then a sharp decrease in April. Once these are smoothed out, you may find that the sales curve resembles a more normal curve. For right now, it is too soon to know.
It is important to realize that there will be different stages to this disruption. Each stage will have to be planned and thought about separately because consumer behavior and the supply chain will differ in each.
What Planners should be doing right now is scenario demand planning. This can be in Excel if your current planning system does not allow for it. Scenario planning applies probabilities to best- and worst-case scenarios. By using these different scenarios, you can develop a strategic plan for achieving a goal, whether it’s cash flow, service levels, or something else.
Stay on Top of Supply Chain Issues
It is more important than ever to maintain strong communication with your suppliers. Understand what their challenges are in obtaining materials and with their production capacities. Many manufacturers have closed factories to protect their employees. Lead times may have to be lengthen to accommodate for this. Safety stocks may need to be increased.
The supply chain may be increasingly disrupted by transportation issues as truckers are limited in the number of hours they can drive and others become sick. Anticipating issues in the supply chain and creating contingency plans will help the company in these uncertain times.
Keep Planning On
Demand Planners are extremely valuable to their companies in these uncertain times. By sharing data and insights with other departments in their company, strategic decisions can be made to make the best of this unprecedented situation.
For more tips on how demand planning can help your company during these uncertain times, contact the industry experts at SAFIO Solutions, or visit our website at: