How to deal with a surge in demand
The novel coronavirus (COVID-19) made sure to keep retailers on their toes with a high surge in demand when people ran to stores in order to have supplies for their quarantine days, creating a once-in-a-generation test for business continuity planning and supply chain flexibility. How should retailers deal with these types of urgencies?
Even though companies have analytical relevant tools, such as forecast and prediction tools, when it comes to urgency scenarios, not even those are enough. They need be able to quickly react to constantly changing conditions across their end-to-end supply chains, make plans and decisions, and take the necessary actions – so that retailers can deliver vital goods and services (in the right places, at the right times and at the lowest cost).
Decisions made in such critical times need to be reactive and proactive: reactive to ensure business continuity and proactive to make the necessary changes for better meeting demand and shorten the distance of supply chain elements.
Organize your supply chain to meet changing demand
Let’s start by thinking of a supply chain from end-to-end: there are suppliers, fulfillment centers, transportation services, stores and the inventory management policy, the maestro of this whole orchestra. Since each of these elements will be disrupted by this surge, the main goal is to understand how to shorten the differences between elements, thus accelerating the supply chain and enhancing overall communication.
When considering suppliers some crucial questions for decision-making arise, such as:
- What products does my supplier currently have in stock?
- Which products can he quickly produce to meet demand?
- Since customers aren’t so brand loyal in trying times, can I modify my product portfolio to meet demand?
- Will suppliers reduce their working days or is a business as usual scenario?
- Are suppliers able to deliver with the same frequency as before or did it change?
Afterwards, in fulfillment centers which will be stressed even if suppliers are not affected, the focus should be:
- Does the demand peak occur in a part of the product range or across all the portfolio?
- Do I have fulfilment centers with low utilization and others bursting with excess orders?
- Can order allocation be changed to leverage all available capacity?
- Do I need to create more stock points to meet supplier uncertainty?
- Do I have enough physical space to have all my stock?
- Do I have the resources to rapidly fulfill orders thus avoiding store stockouts?
Getting every product from a warehouse to a store is a crucial role performed by transportation. Major questions for transportation managers should be:
- Do I have enough capacity to transport everything to my stores?
- Since other markets activities have been reducing, can the additional resources be used to increase the capacity in my supply chain?
- Do I need to increase shipments delivery frequency to stores?
Being stores the critical connection checkpoint between the supply chain and its customers, the focus should rely on the following:
- Do I need to review my store planogram to give more space to product categories with a surge in demand?
- Can I use stores with larger backrooms as stock points for other stores?
- Which products are customer more eager for?
And finally, the wheel that keeps everything in motion - the inventory management policy. Here, the main questions should be as follows:
- What is the best available data to use as a forecast for demand?
- What are the crucial products for my assortment range?
- Do online orders offer me a hint of how future demand is shaping and about real customer preferences?
- Which parameters do I need to change in my inventory policy to have a quicker response time to higher demand?
- Do I need to manage more stock points in my network?
- How can I manage products categories instead of SKUs (Stock Keeping Units) due to a high degree of substitution?
All these questions should always rely on the minds of every supply chain manager. However, since the world is always changing and due to its unpredictable characteristics, managers don’t have enough time for making clear decisions, but instead have days or even hours for dealing with critical matters of their supply chains.
There will never be enough time for structuring and thinking supply chains from end-to-end since the surrounding scenarios are always changing. The main challenge that supply chain managers now face is to think about which questions their focus should rely on.