Managing Coronavirus: Forecasting Tips for Un-Forecastable Lead Times
Welcome to Part 4 of our series! If you've been reading, you know the cold, hard truth: the decisions you make today, and how you are managing your Coronavirus-stricken business, will follow you for quite some time. How much time? That's the million-dollar question.
Yesterday we blogged about some recovery signs in China. And the fact that even long after the pandemic subsides, logistics problems will ensue for a while. Particularly challenging is the eternally long and wildly erratic lead times when it comes to demand forecasting.
Long lead times have always been a thorn for wholesale distributors. Now, with the logistics impact of Coronavirus, it's the entire vine -- strangling everyone's ability to forecast inventory with any level of accuracy.
Inventory is in handcuffs everywhere, whether stuck on a ship, on shelves at a shut-down retail branch or DC, sitting in a warehouse, on lock-down due to transportation capacity issues, or just plain unavailable. Demand is equally erratic.
While we can't just remove the handcuffs for you completely, we do have a couple forecasting tips to help you make good long-term decisions and work toward stabilizing inventory and service levels for your customers. Even in 'un-forecastable' times like this.
Forecasting a DC or Location Shutdown
A lot of our customers worry about what will happen if a COVID-19 infection causes a shutdown in one of their DCs or branches. Pretty real possibility, right? Imagine the logistics problems that would cause.
If one of your DCs or branches must shut down, there are things you can do in your demand forecasting system to minimize the logistics impact around things like, say, filling trucks. In a system like Blue Ridge, you can use Lead Time Forecasting to monitor the availability/unavailability of trucks that are deployed elsewhere -- maybe to get foodservice to grocers or to get life-saving medical supplies out.
Lead Time Forecasting
How does Lead Forecasting work? In Blue Ridge, you can set your system to cap deviations so it does not overreact. You stay in control.
Because scrambling to meet routes might impact your lead times, in Lead Time Forecasting the system doesn’t chase the spike. It caps the number of lead time deviations, so it doesn’t overreact. If deviations are being challenged over multiple periods, the system automatically moves from Demand High to Trending High. You can narrow down or expand the number of deviations considered, then get notified about changes in real time, apply your own knowledge, and make the best decision.
Whether you're using Blue Ridge or a different forecasting solution, listen to your system. Rinse and repeat for hundreds of thousands of SKUs. Trust those notifications, as they are more reliable and efficient than a handful of demand planners running through stacks of spreadsheets in a vacuum.
Clearly, Coronavirus has a very regional component, too, when it comes to predicting lead times. We watch global maps on the news every day growing redder and shifting, as the disease spreads in all its ugliness. In the case of a DC shutdown, or even just sudden spikes/high deviation in areas of high infection, there are controls you can put into place to reduce lead times and get products where they need to go, efficiently.
For example, can the inventory be transferred elsewhere using a feature like Overstock Transfer?
Multi-Echelon Inventory Optimization
For larger companies with complex operations, a Multi-Echelon Inventory Optimization (MEIO) solution could also be super-helpful.
MEIO allows you to very quickly move demand to another location – or move inventory to a new location or back to the hub. The long-term financial benefits are huge when you think about filling trucks and the massive premium on freight right now.
About forecasting lead times in Blue Ridge Demand Forecasting
NEXT UP IN PART 5: How to Free Up Cash For Your Business