And what a year it was! Across the board, businesses had to deal with demand shocks and everyone had to adapt rapidly to uncertain and dynamic circumstances in order to survive. Ultimately, the experience has shifted the approach organisations take to planning.
We’ve looked before at lasting shifts in consumer behaviour at a time when ‘unprecedented’ was the word on everyone’s lips. The new, or in some cases accelerated, trends, created demand shocks, experienced in different ways according to sector.
This was seen in industries experiencing a sudden downturn – aviation for instance. Volumes dropped off a cliff and then saw a slow but steady growth as areas started opening up more again. Typical product lines included manufacturing equipment, spare parts for aircraft and oil and gas.
The hoarding phenomenon was the sharpest of the demand shocks in a way – a sudden huge jump, followed by a steep decrease once everyone had calmed down. While the headlines left us in no doubt that toilet paper was perhaps the prime example of this phenomenon, other items included pasta and canned foods and painkillers.
More sustained than the demand through hoarding, the immediate demand shock was no less extreme with structural increases. These products fulfilled an emerging and ongoing need – items including face masks, in-home consumables and vitamins and nutrition items. The demand for these lines has held steady and will continue to do so while Covid-19 remains a key feature of our lives.
Changing planning challenges and priorities
Before the current crisis took hold, the key challenges facing wholesale organisations were around increasing the efficiency and effectiveness of inventory planning and optimization. The pandemic meant that planning and inventory management functions suddenly needed the capability to understand the implications of the emerging situation and adapt quickly.
- Key Challenges:
- Automating routine planning processes to reduce planners’ workload
- Incorporating the effect of own and customers’ promotion into forecasting processes
- Managing product life cycles with new launches and removing end of life items
- Ensuring discipline to uphold data quality and timeliness for planning
- Improving statistical forecasting and advanced analytics algorithms by tweaking parameters
- Improving capabilities in using the system
- Key Challenges:
- Traditional models cannot rapidly capture demand realities without historical patterns
- Anticipating new and irrational customer behaviours e.g. hoarding or phantom orders
- Dynamics based on government measures, e.g. lockdowns and border closures
- Building capabilities for understanding the implications of the whole inventory ecosystem
- Evaluating external influences more and handling new data sources
- Extending activities beyond demand forecasting to forecast other important factors e.g. availability of supply or product capacities
What lasting impacts will we see?
With continued uncertainty and little historical data thanks to new patterns of behaviour developing, planning for 2021 is going to be even more challenging. We’re certainly not going to make any predictions for the year ahead. What will be important though is having an overview of what is happening alongside your analysis of emerging trends within your own inventory ecosystem.
This awareness will support the scenario planning and forecasting required to boost your recovery and resilience for the next phase of this evolving retail landscape. This resilience is an underlying feature of a world-class wholesale organisation. To see how you currently measure up against the baseline anatomy we have created for this level of business, try our self-assessment tool today.