Resiliency and ability to predict surges in demand and the agility to leverage their supply chain

As a result of the vaccine rollouts, the $1.9 trillion stimulus package, restrictions starting to be lifted, shops opening, and the possibility of children returning to school and employees going to work, you can almost smell the money burning a hole in people’s pockets.

This urge to spend is known as “revenge spending.” It usually follows an unprecedented event as people seek to reclaim control and a sense of normalcy.

When it comes to “revenge spending,” the sales forecast can be thrown out of the window. In fact, a forecast based on last year’s spending would result in shortages of the very items people are looking for (as they were not buying them for the past 18 months). And carrying excess inventory of everything, just in case the demand appears, is cost prohibitive.

So, what are some areas of focus that we should be thinking of to ensure we have the solutions in place to address these challenges?

Improve visibility into actual demand
The challenges of responding to fluctuating demand has been highlighted by the recent shortages in the automotive industry due to the highly publicized chip shortages. During the pandemic, the demand for new cars literally “crashed.” Now, as the demand has come back, due to the increased demand for other smart products such as consumer electronics, the auto manufacturers simply can’t get the semiconductors they need to meet the demand. This has resulted in a supply/demand imbalance for new vehicles.     

Put risk mitigation strategies in place
If your source for a hot product or a critical part for that hot product suddenly shut down, you need to have contingency plans in place. By making risk management a natural part of the sourcing and procurement process and identifying alternative sources of supply by balancing off-shore, near-shoring, and on-shore suppliers and contract manufacturers, you can significantly reduce the risk of disruption. Companies are also incorporating inventory optimization strategies across the business network to establishing inventory safeguards at strategic decoupling points, and buffer against disruptive events.

Enable the agility to respond to change with synchronized planning and execution.
As well as having the visibility into swings in supply and demand, it is equally important to have the ability to react to the opportunities and risks they may bring. We saw during the pandemic that the clock speed of planning processes has sped up. Where once we may have had a monthly planning cycle, we moved to weekly or – in extreme cases – daily planning.
This requires business planning systems that can rapidly, simulate scenarios and re-plan based on changing market dynamics, and the flexibility to execute these changes across manufacturing and logistics processes.

Improve connectivity, collaboration, and visibility with partners
At the end of the day, no business operates alone and relies on a business network of contract manufacturers, suppliers, 3PL’s and other trading partners to meet changing customer demands and needs. By connecting with these trading partners, and communicating in real time, you can leverage the power of the network to respond to changes in supply and demand.

As customers start to flex their spending muscle, businesses must be in a position to take advantage of the opportunity and ensure their products are available to meet the demand. This will require the resiliency and ability to predict surges in demand and the agility to leverage their supply chain to deliver the goods.  

Source: https://internetofbusiness.com/the-rise-of-the-revenge-economy/