COVID-19 put a spotlight on issues within modern supply chains as well as demand management failures for retailers.
As a result, many brands are now dealing with delayed shipments, manufacturing bottlenecks, and other headache-inducing issues around logistics.
If you ask Jeanette Barlow, VP of Offering Management at IBM Sterling Supply Chain, this is an issue retailers have to solve moving forward.
“In order to better manage demand fluctuations and potential supply disruptions, retailers need to evolve their end-to-end supply chain visibility and ensure they have a global view of their inventory and supply base, which they then must tie into their planning systems and order management systems to create a real-time feedback loop that helps enable fulfillment flexibility,” she said.
To face this head-on, some retailers are working to build more resiliency in their supply chains to solve demand-related issues in the future.
One example of this can be seen with non-toxic home cleaning brand Branch Basics.
Over the past year, Branch Basics sold out of inventory several times due to growth that exceeded expectations: They’re currently experiencing 600% year-over-year growth.
As a proactive measure, they brought in demand planning professional Karen Lowery who could help them plan and forecast more effectively through data-driven decision-making.
Broadly speaking, Lowery looked at three main areas of the Branch Basics business:
- Demand (historical sales are used to project future sales)
- Inventory (how much should we hold)
- Procurement (how much and how often should we buy)
Lowery’s biggest insight was that Branch Basics’ demand was exponential—not linear—as originally expected.
Because they had been tracking growth with the assumption it was linear, it caused them to run out of stock in both 2019 and early 2020.
However, this insight allowed them to think ahead from an inventory perspective and plan for larger jumps in both repeat and new customers.
It proved especially helpful as demand for their home cleaning products spiked with the onset of coronavirus: They sold out of a product within a 48 hour window; a new record for the brand.
What’s more: Their average growth of about 900 new customers per week pre-coronavirus jumped to 1,400 per week, and has remained consistent since then with subscription sales up 43% as well.
While the brand was thrilled to see so many sales, they also realized that selling out of inventory leads to a loss of opportunity and presents its own challenges with fulfillment and customer experience—so they needed to handle inventory strategically.
To do this, Lowery helped them identify key insights, such as panic purchase behaviors vs. standard purchasing behaviors as well as which purchases indicated true growth spikes versus spikes from panic shoppers.
With this information, they could then effectively manage and allocate inventory during the crisis, ensuring there was enough product for existing consumers to maintain retention and customer loyalty.
“While selling out of product seems to have a certain status within the eCommerce landscape, we never want to leave our customers hanging,” said Tim Murphy, CEO of Branch Basics.
“Karen’s arrival happened to coincide with the start of COVID-19, which allowed us to better analyze how consumers purchase when faced with an unpredictable circumstance. We now feel like we’re in a great place to keep our customers, both current and new, well stocked on product.”
This example from Branch Basics illustrates why demand planning is something retailers across verticals will have to take a close look at moving forward—especially since some predict a second wave of coronavirus that could cause another surge in demand with more panic-driven purchasing behaviors.
While not every retailer may have the resources to bring on professional help, taking a hard look at data and demand-driven processes can businesses more accurately plan and prepare.