HomePublicationsInsightsCollaborative demand planning in the time of coronavirus

Collaborative demand planning in the time of coronavirus

“Toilet paper makers must be happy,” says a friend of mine. “The demand for notebooks must have increased a lot with the number of companies adopting a home office”, says my mother. My father is concerned about the impacts on the telephone and internet networks, which are overloaded. One fact is indisputable, the coronavirus pandemic has altered the demand for everything that is marketed, in some cases for more, in others for less. And how are companies doing to adapt their numbers and align production and distribution with the new consumption habits of the population?

Coronavirus demand planning - ILOS Insights

Planning is important in times of crisis
Source: Campaign Creators on Unsplash

At this moment, more than ever, it is extremely important that companies in the food, pharmaceutical, cleaning and technology sectors work to ensure that there is no shortage of their products. Likewise, it is valuable for other industries such as apparel, automotive and furniture to understand what the impacts on their sales will be. However, predictive models cannot collaborate to deliver accurate numbers, as demand patterns have changed abruptly, making it virtually impossible to work with a low margin of error.

In a post I wrote last year, I talked about three ways to increase the accuracy of forecasts: the use of better techniques, the adoption of more advanced technologies and the integration between the links in the chain. At this time, when the reaction to the effects of the pandemic has to be extremely fast, the first two have less applicability. What I mean is that, in the short term, the best solution to understand changes in demand for your products is transparency between the players in your logistics chain.

Collaborative planning worked in the deepest way allows all layers to have visibility of what is happening in all links, making the chain more proactive, essential to work in a crisis situation such as the one caused by the coronavirus. Imagine how much it favors a primary supplier to know concretely the final demand for products, thus being able to have more concise data to decide whether to invest in increasing its production or if it will reduce its factory shifts. Likewise, it is important for the links at the end of the chain to be aware of the productive capacity of their suppliers, thus being able to understand whether they are able to meet the new demands and not be taken by surprise by a delay in replacement.

Visibility isn't the only benefit of deepening collaboration in the supply chain. Now, when demands are varying in a considerably unpredictable way, it is important to align reaction strategies with the other links. It is necessary to jointly establish ways to face the lack of raw materials, the closure of points of sale, the increase or decrease in demand. All scenarios need to be considered and, the more orchestrated the chain is, the faster and more effective the action will be for any change that the market may undergo.

The contamination of the coronavirus around the world, especially in Brazil, continues in an unforeseen way. Likewise, its impacts on the economy and consumption, which change from week to week – is the case of the strangely large demand for toilet paper when the pandemic arrives in each country, which tends to decrease as people become more aware of your real needs in isolation. Collaborative planning, through communication and alignment of actions, allows industries to be prepared to respond to changes, making chains more fluid and, mainly, reducing cases of shortages, as well as excesses. In addition, it improves inventory management, cuts costs and increases the level of service offered to customers.

Personally, I see this moment we are living as an opportunity for companies to see in practice the real advantages of this model and I understand that the increase in the adoption of this form of supply chain management is one of the possible positive consequences of the pandemic. It is a question of survival and my bet is that the chains whose objectives, motivations and limitations are shared will present a greater capacity to face the challenges that we are already witnessing, as well as the ones that are yet to come.

Sources:

Coronavirus and the antifragile supply chain
SpendMatters – Afternoon Coffee: Coronavirus, China and supply chain delays, Tesla batteries…
Three strategies to help your supply chain survive coronavirus

He has been part of the ILOS Team since 2018, working on projects focused on Logistics and Supply Chain. His experiences encompass major players in the cement, polymers and consumer goods industries, as well as retail companies. Types of projects carried out at ILOS: Transport management, transport contracting strategy, advice on the impacts of setting minimum freight levels, fleet sizing, process mapping and optimization, reduction of return rates.

Sign up and receive exclusive content and market updates

Stay informed about the latest trends and technologies in Logistics and Supply Chain

Rio de Janeiro

TV. do Ouvidor, 5, sl 1301
Centro, Rio de Janeiro - RJ
ZIP CODE: 20040-040
Phone: (21) 3445.3000

São Paulo

Alameda Santos, 200 – CJ 102
Cerqueira Cesar, Sao Paulo – SP
ZIP CODE: 01419-002
Phone: (11) 3847.1909

CNPJ: 07.639.095/0001-37 | Corporate name: ILOS/LGSC – INSTITUTO DE LOGISTICA E SUPPLY CHAIN ​​LTDA

© All rights reserved by ILOS – Developed by Design C22