COVID 19 : THE “UNPRECEDENTED” PLANNING PROBLEM
If there is a word that has seen a spike in usage over the three months, then it must be “UNPRECEDENTED.” There is no better word to describe the situation that businesses and people are faced with today in the face of CoVID 19 pandemic. There are three clear phases in which this event has played out – 1. Pre-CoVID 2. During CoVID and 3. Post-CoVID (event represented in the Fig. 1)
Even before Covid 19 became a global pandemic, many of our clients raised the red flag of supply and demand disruptions since they had supply chains that originated in China. With initial indications of the pandemic being global in nature, we saw high demand for essential products (health, hygiene, groceries) and markedly lower demand for discretionary purchase items. There were demand, demand-mix, and supply line disruptions being observed, with an immediate need to understand hot-spots for disruptions. We observed this pattern the most in our retail clients. We helped build quick Supply-Demand views for key executives running the “War-Rooms” to help make a critical decision (Fig. 2); this helped businesses realize that it is imperative to plan and observe where demand and supply disruptions are, to assess in near real-time the size and nature of the impact of this pandemic.
This led to specific operational analytics to help make the right day to day trade-off decisions while being able to take into consideration the larger picture. One of the oft-repeated work we have done during this period, for e.g. is to build a custom inventory allocation logic to ensure that limited inventory is distributed in the right way to the right regions and customers. Similarly, another impact that CoVID escalation has was the availability of resources (workforce and hence transport, equipment, machines, etc.) to run day-to-day operations. We helped build location and population-centric forecasting models to help identify supply-constrained demand and make the right decisions on-demand fulfillment. For e.g., for one of our large retail client, we built a DC level day level forecasting view and overlaid it with the Rate at which CoVID is spreading in that population center, to help them understand labor call-off (supply constraint demand) rates for the next 4-week window. This helped them plan their operations better by taking proactive network design (DC- Planning region) decision. We observed this in manufacturing firms and B2B distribution, where the need was to identify freight capacity and volumes by lanes to make the right supply-constrained fulfillment decisions (Fig. 3) again
Though we believe some of this work we have done has been to address the short-term needs of the “War-room” and to ensure efficient operations under the current circumstances, the need for these solutions will continue. There are multiple epidemiological models that show a resurgence of CoVID across populations centers over the course of the next 9-12 months. This leads us to our next segment.
Businesses today have realized the pandemic has had a long-term impact. Though it is critical today to react to the short-term problem of servicing and surviving during the pandemic, it is all the more important to plan and be ready for the “Post-CoVID” era. We believe, CoVID will impact long-term demand and demand-mix for businesses, albeit differently for different industries; there are three major ways in which businesses will be impacted –
- Impact of CoVID on consumer behavior leading to change to channel-mix and product-mix – the growth of non-store channel like BOPIS, Curbside, Ship from store
- Impact of CoVID on direct demand at a population center level, due to predicted resurgence
- Impact of Pandemic triggered economic slow-down – most major economies are looking at economic slow-down for the next 3-4 quarters; this will impact essential vs. discretionary businesses in a very different way.
- Supply and Operational disruptions due to micro and macroeconomic issues – e.g., possible US-China economic disruptions (macro), local regulations around distancing and work-force availability (micro)
With very little available in terms of a past event to learn from, most businesses are able to hypothesize, but not visualize the scale of a long-term impact of CoVID. We believe, it is hence more important to put in energies and effort into building a robust PLAN -> SENSE -> ITERATE -> RESPOND model (Fig. 5)
Analytics can play a key role in sifting through a large amount of historical data within the organization and outside the organization to build the right models. But what we believe is more important is to identify the key levers that can impact and shape demand in the mid to long term. Businesses should hence look at the future, not a deterministic OR one single cure/ data point, but a set of possible scenarios that could possibly play out. Analytics can help not only build these scenarios out, and sense which of the scenarios will possibly play out, but importantly identify the “reversible” vs. “irreversible” decisions that businesses can make and the impact of each of these decisions in quantitative and qualitative terms.
We are working with clients in Retail, CPG, and Industrials to build out this model that can provide support to the executives to make critical decisions around operations, buying, and mid to long term investment strategies.