Do demand planning solutions help recover after a period of downturn?
Demand planning is a foundational function of the supply chain. Since shopper behavior seems unpredictable, should you scrap your demand planning structure? In short, no. Demand planning is the anchor in a volatile supply chain.
Even though the supply chain hasn’t kept up with the demand for every SKU, you can still leverage existing data to adjust your demand planning. Eventually, the supply chain will catch up to consumer demand. At the same time, demand spikes for high-value items will decrease. True Demand Planning not only looks at what is selling, but also what could or should have sold if the appropriate stock was on hand.
Think of a Crisis as Seasonal
Winter: When snow shovel sales are on the rise, other SKUs rise with them, even if your retail chain doesn’t sell them. Sweaters, coats, scarves and hats are heavily stocked because demand is high. You don’t need to live in a cold climate to know at the same time, snowblowers, tires, and anything pumpkin spice follow the same trend. Flip flops and shorts are in less demand.
Bathing suits, sunblock and pool toys have a spike in demand during the summer. While this is retail supply chain 101, we can learn some practical lessons from it. Since consumers are creatures of habit, those habits remain, even during a crisis.
Economic history reveals interesting retail trends. For decades, the length of women’s skirts was a reflection of the economy. Longer skirts were standard in tough economic times, presumably because women needed conservative clothing for work. When the economy was thriving, skirts became shorter. In a similar way, alcohol sales would increase during good economies and coffee sales would decrease. Only in the past decade have coffee sales increased through economies good and bad. One reason is that decades ago, coffee was consumed for the necessity of caffeine, but today coffee is a daily affordable luxury.
How Will Supply Chains in Retail Verticals Differ?
Consider your data during the last major economic downturn. An effective demand planning solution can leverage this data to reveal good opportunities in this climate. The demand for some luxury items may decrease, but not in every category. Engagement rings and other special occasion jewelry are still perceived needs. Other retail verticals, like home improvement, might see an increase in products that help repair household items versus replacing items.
Profitable demand planning solutions will analyze data and predict future demand.
Do Humans Need to Step In?
You might think human expertise is more accurate during a time like this. While it’s helpful, retail demand planning solutions can deliver greater accuracy without emotion tied to the results.
4R’s Demand Planning solution is a flexible forecasting system that can integrate into other applications. The forecasts generated by 4R’s algorithms are the foundational logic to support the execution of those other systems.
The algorithms that drive these forecasts and the results can be fed into any other merchandise or supply chain system. Virtually anywhere a retailer wants to understand consumer demand, 4R can provide the data points and other information needed.