The COVID-19 pandemic rattled global supply chains and left inventory-based businesses scrambling. While the pandemic shook up many industries, and the work landscape was impacted as a whole, the global supply chain experienced severe disruptions. COVID demand for products and supplies was sometimes far different than usual demand, for example, and led to shortages and delays. While the pandemic is now behind us, the impacts of COVID-19 on the supply chain are not. One issue that businesses today are facing? The historical supply chain data regarding COVID-19 demand now impacts future forecasts.
Here’s everything you need to know about how COVID impacted the supply chain, how COVID demand can impact future forecasts, and how to avoid this data from disrupting your business going forward, by “right-sizing” it.
COVID and the Supply Chain
To understand the future implications of COVID-19 demand on your business’ forecasts, it’s important to begin with a quick recap of exactly how COVID upended the global supply chain. The pandemic had several different impacts on the supply chain: for example, multiple lockdowns caused the flow of raw materials and goods to become delayed (and completely stopped in some instances). There were restrictions on trade, certain items became scarce, and spending habits changed abruptly.
Data shows that the pandemic also caused surges in customer demand for products. For example, experts say that first there were initial supply shocks, followed by “demand shocks,” where people stocked up on regular goods, in some cases “buying months’ worth of goods in a single day.”
Now, the pandemic is a thing of the past. Unfortunately, all of this data from COVID-19 demand during the pandemic can have lasting impacts on future demand forecasts, which can lead to cascading effects for businesses.
Historical COVID Demand and Future Forecasts
How can the historical data from COVID demand affect future forecasts, and what tangible impact can this have on inventory-based businesses? Firstly, let’s touch on what demand forecasting is: it’s the process of using historical data and other information to predict how much inventory your business needs in the future.
Accurate demand planning and forecasting matters because it informs buying decisions, and helps businesses avoid cases of stockouts or overstocking. Avoiding overstocking helps businesses save on unnecessary holding costs and avoids letting inventory go to waste while avoiding stockouts helps keep customers happy. Research shows that more than half of shoppers say that stockouts impact their shopping behavior and that 40% of shoppers expect to receive their online purchase within 24 hours. This means that delays from stockouts can have lasting negative impacts on the customer experience.
For demand forecasts to be as accurate as possible, they take historical data into account to anticipate future needs. But as you can likely imagine, in the case of COVID demand, the data was unusual. So, if this data alone is being used to inform future demand forecasts, there is a risk that these forecasts could be inaccurate.
The Risks of Inaccurate Forecasts
If demand forecasts are skewed because of the COVID demand data, what could happen to your business? Firstly, inaccurate demand forecasts can lead to overbuying, which will tie up valuable resources, capital, and space in inflated inventory levels. It can also lead to underbuying and stockouts, which can then translate to missed sales opportunities and customer dissatisfaction.
Inaccurate demand forecasts can also cascade into disruptions in production schedules and supply chain management. Manufacturers may struggle with excess capacity or face bottlenecks due to unexpected demand spikes. Conversely, underestimating demand can leave supply chains ill-prepared to meet customer needs, affecting product availability and timely deliveries.
And of course, the financial health of a business is intricately tied to the accuracy of demand forecasts. Inaccurate demand forecasts can lead to strains on cash flow and profitability, as well as increased carrying costs or missed revenue.
Instead of letting the historical data from COVID demand incorrectly influence your future forecasts, you can take steps to overcome this unusual data by “right-sizing” it, to result in forecasts that are as accurate as possible.
How to Avoid Miscalculations from COVID-19 Demand Data
Here are some steps you can take to “right-size” your data, or adjust it to ensure accuracy, even when taking COVID demand into account:
1. Leverage advanced analytics tools
One of the best weapons for combatting skews from COVID demand is today’s supply chain technology. Modern inventory analytics tools are advanced and can help you avoid stockouts, excess, and dead inventory. But these tools can also help you accurately monitor how inventory is moving, and what consumer buying habits are like, so you can use accurate, up-to-date data to inform your demand forecasts.
2. Use real-time monitoring
Demand forecasting is a useful tool for inventory purchasing decisions, and you can use it to strategically decide how much to buy, and when. But you can also monitor your inventory in real-time, and use this data strategically. For example, you can use real-time software to monitor if you’re running out of something, and make a speedy purchasing decision to intervene, before a stockout occurs.
Ultimately, real-time software allows you to act quickly against discrepancies in demand forecasting, and correct inventory-related issues before they occur.
3. Use data outside of COVID demand
To create the most accurate forecasts possible, don’t only use historical data from the pandemic. Instead, also include data from before and after this period. This data can help level out your forecasts and can help forecasting models understand that COVID demand is not usual. Luckily, as we move further and further away from the pandemic, you can start to use more recent historical data.
4. Use software that considers special events
Using supply chain software in your business can be beneficial for many reasons, but one of the most significant is that this software doesn’t only use historical data to inform forecasts. It’s highly intelligent, and can also take special events into account. For example, StockIQ’s proprietary forecasting algorithm takes promotions, new customers, natural disasters, and any other unusual demand into account when creating your forecasts. That means when you use StockIQ, your forecasts can take abnormal data (such as COVID demand data) into account, and work around it.
5. Build resilience in your supply chain
Demand forecasts are not a crystal ball, and there’s always room for error, even when your forecasts are as accurate as possible. Because of this, it’s wise to take steps to build up resilience in your supply chain in general. For example, take different forecast hierarchies into account, and plan for different scenarios. Also, embrace adaptability in your forecasting strategies, to better navigate unforeseen disruptions. Also, use data to look to the future, identifying potential risks and disruptions, and minimizing their impacts where possible.
Historical COVID Demand Doesn’t Have to Impact Your Forecasts
The COVID-19 pandemic rattled global supply chains, and today, the data from COVID demand for products is still impacting how we’re forecasting. Instead of letting this rogue data inaccurately impact your forecasts in the future, turn to StockIQ.
StockIQ is an intelligent supply chain planning suite that can help you improve turns and service levels while reducing stockouts and excess. It also has advanced demand planning tools, which can take special events into account when generating forecasts, like your COVID demand data.
Find out how StockIQ can help your business improve forecast accuracy by contacting us today.
