18th May 2020

What Can COVID-19 Teach Us About Demand Forecasting and Planning?

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The COVID-19 outbreak that has paralyzed the UK has had tragic, damaging consequences for almost everyone alive today. However, it is also a rare, positive opportunity to learn and gather new information about behavior during an exceptional time.

Learning lessons from COVID-19 allows us to become far more resilient and better prepared for the next ‘Black Swan’ event that hits us as a society. Strengthening supply chains means that people as a whole are better protected from psychological, economic, and health shocks such as COVID-19. Excellent forward planning can help preserve businesses and open up opportunities for growth in challenging times.

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The fast, The flexible, And The Profitable

While the data is still emerging, global investment analysts, Bain and Company have found that adaptable businesses with resilient, diverse supply chains are coping best with the outbreak and lockdown.

Speed has been central to success. Companies able to quickly produce new projections and adjust machinery and employees to new levels of demand have remained profitable. High-tech, well-networked supply chains that can be managed remotely are also performing well due to greater employee retention over purely physical workshops.

Just Out Of Time?

Since the late 1980s, many retail businesses relied on ‘just in time’ (JIT) deliveries. JIT delivers the bare minimum of goods and materials needed to maximize profitability. Usually, this model works well in sectors with fast turnover (such as supermarkets).

However, when demand in a single sector surges or a crisis occurs, JIT can fall apart without redundant capacity. This rapid collapse causes severe shortages.

Middle-ground supply chains that strike the right balance between profitability and not paying for capacity the business will never use have fared best these in high-risk, low-predictability times. This suggests JIT might not be the best approach for industries manufacturing and delivering literal ‘must-haves’.

Expecting The Unexpected…

Unsurprisingly, companies, and events that thought ahead with planning exercises and pandemic insurance clauses for their supply chains have been able to weather the storm well and obtain a market edge.

For example, Wimbledon was reduced to 0% service and ticket capacity when tennis matches were canceled by law – yet won’t experience financial loss due to an extensive ‘spread’ insurance contract specifying a wide spectrum of extremely unlikely events for payout.

Similarly, Tesco held a country-wide training exercise in 2016 to prepare for an unspecified, unpredictable disaster that could incapacitate their head office. This allowed the supermarket titan to adjust quickly and increase delivery slots, manufacturing, and stock of vital products when the time came in March 2020.

Adjustable Workforces, Healthcare, And The Technological Edge

The World Economic Forum has argued that the supply chain planning of the future will have to incorporate large amounts of digital data and feedback from many different areas of society to cope with another pandemic. A ‘big data’ approach to rapid supply adjustment could allow companies, NGOs, and the government to deliver vital products on a per-person, per-request basis.

A multiple-approach ‘Internet of Care’ has been proposed as a future solution for major disasters. An interconnected, protected, well-informed population can better equip itself to cope. We’ve seen the beginnings of this with COVID-19 with remote medical deliveries and digital disease tracing. Could vast digital interconnection improve the disaster demand planning of tomorrow?

Economic Forecasting From Reflex Planning

Economic forecasting is never simple – but Reflex Planning can make it far easier for you. Our modular package of tailored, precision forecasting and supply-chain planning software is renowned across multiple British industries. Call or email us today for a free initial assessment and product demo.

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