Coronavirus disease 2019 (COVID-19) has impacted our end consumers in numerous ways. The widespread outbreak has led to lockdowns and stay-at-home orders that have resulted in the closure of various businesses (e.g. hotels, airlines, restaurants, tourism and entertainment), an unemployment crisis, salary freezes and reductions in pay for the global workforce. Due to these economic changes, consumer needs and demands have shifted to items such as food, medicines, cleansers, sanitizers, personal grooming products, alcohol etc. However, demand for other items such as high-end apparel, cosmetics, electronic goods, furniture, travel/tourism have dropped.

With an extension of the lockdown and assumed minimization of the pandemic, some items that were selling in large quantities will maintain a higher rate of sale. However, other items that were at higher rates will drop and we will likely experience sharp declines in sales of high value premium products. This will create “bullwhips” or large scale volatility in the supply chain flows, immediately and in the coming months. At what levels the sales of each of these categories will stabilize is currently uncertain and will need to be monitored constantly, especially due to the dip in economic growth and slow recovery.

Demand, Production, Inventory and Replenishment planning practices have to be modified. In Demand planning, the focus needs to be in constantly monitoring the near term (last 2 to 4 weeks) and putting additional weightage on using actuals orders on hand, recent shipments of finished goods to customers and POS (point of sale) data where available, to modify the statistical forecast. Maximum weightage is to be given to short term/immediate sales trends to adjust forecast in the next 7-14 days – demand sensing (sales pattern recognition) techniques will gain importance where the recent actual sales trends will be used to modify the statistical forecast. Algorithms which are more sensitive to recent trends need to be used for the statistical demand forecasting.

Production planning should likely become more flexible with shorter batches, higher changeovers to cater to the volatility and change in demand. This will increase manufacturing costs but will be better suited to service the changing market and avoid stagnant stocks.

Inventory Target Setting must consider the volatile demand, changing customer priorities, changing supplier availability/lead times and transportation realities. Wherever possible, multi-echelon inventory target setting should be used to replace individual location target setting. Multi-echelon systems take the total supplier to customer network into consideration and simultaneously calculate inventory targets at each point in the network to provide a desired customer fill rate at the end of the network. This has significant advantages over individually calculated inventory targets at each location (plant, warehouse, retailer). Replenishment system settings like transit times, freeze times, receiving times, planning periods, inventory targets, capacities etc. need to be reviewed and adjusted with the new realities. Replenishment systems need to be equipped with view only capabilities horizontally across organizations so that decision making and actions across the company are sped up. Items need to be reclassified based on changing demand and profitability and resultant priority must be utilized in production and replenishment planning. Long lead, higher value imported items orders should be critically studied, recalculated and re-ordered, if the original source is impacted by Covid-19, alternate sources should be looked at or developed.

Retailers need to focus on recalculating and reallocating shelf space, storage space and displays based on the latest sales trends. The duration of the after-effects of Covid-19 in the coming months may require a relook/revamp of the items stocked, space allocation etc. Taking orders over website/telephone calls, pick up at store, delivery at home will increase for standard retailers. Volumes will significantly increase for .com and e-tailers. To that extent e-tailers need to focus on scaling up the warehousing, transportation and last mile delivery infrastructure.

Seniors and elderly are the most impacted as most of them are not used to buying items on the net, using internet banking or using mobile apps. Govt, Retailers, NGOs should focus on developing programs, services that are focused on assisting the elders and the poorer section of society, in such emergencies.

The termination of this epidemic still remains uncertain and while we cannot foresee the future, we can make responsible choices to shape it. Implementing the measures listed above, better position our supply chains making them capable of managing the business volatility.

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