By:Gary Connors, Partner at Oliver Wight EAME https://oliverwight-eame.com/
We have seen through the last 18 months how quickly supply chains can be disrupted by external forces in the most unexpected ways. The empty shelves at supermarkets in fresh produce aisles was perhaps predictable but, what was driving the toilet paper shortage is anybody’s guess. While the sight of these sad shelves may have stuck fear into most conscientious consumers the speed with which the supply chains responded was impressive.
Supply chains have responded to dramatic changes before. Supply shortages during the world wars prompted government intervention in both supply and demand. There are some notable differences between the early 20th century disruptions and how supply chains have responded.
During the early 20th century supply chain disruption, the issue was driven by a disruption in supply and the solution ultimately took government intervention in the form of rationing to rebalance the supply chains.
In the recent COVID related supply chain issues, it was not supply that was the issue, it was more about consumer confidence in supply. This, in turn, drove panic buying of the most unlikely commodities and endemic shortages on the supermarket shelves as a result.
The sight of empty shelves in itself further exacerbated the anxiety of the consumers which drove subsequent waves of abnormal demand resulting in the empty supermarket shelves.
Within weeks we saw the supermarket shelves being replenished and the confidence of the consumers being restored. It wasn’t government intervention that drove this, it was the demand management processes that supported these resilient supply chains.
So, what are these demand management processes that helped stabilise the supply chain in this instance:
Demand Monitoring – Organisations that saw the actual demand of the consumers increasing dramatically because they had good demand monitoring processes in place will have trigged investigations into why this was happening
Abnormal Demand Filtering – Organisations that were analysing the actual demand and determining what was not normal would have protected themselves from a knee-jerk reaction to respond with an increase in supply that was not needed.
Demand Influencing – Organisations with good demand influencing processes in place would have responded with the appropriate sales and marketing activity to maximise the flow of product and services through the supply chain.
Demand Control – Organisations with good demand control processes in place will have reacted immediately to the imbalances and responded with cost effective and timely actions to satisfy the immediate issue.
A supply chain will be resilient if it is able to respond to unforeseen changes. There is a school of thought that scenario planning is the way to pre-empt these unforeseen changes. It would be great if every organisation had a scenario plan for every contingency but, in the real world, this is unrealistic. Demand control is the last defence against sudden shifts is consumer confidence and having a good demand control process in place is our top tip to clients dealing with sudden changes in demand.