The rapid spread of the virus is alarmingly impacting industries all across. And it is certain that even in the post-COVID times, businesses worldwide will continue to receive the backlash. As we know it, most of the demand forecast does not hold much value for at least a year from now.
Whatever happened to the world in the last three-four months has never been witnessed by any surviving generation we have around us. The COVID-19 pandemic is an unprecedented event that has upended our lives in the most terrible ways. We are socially shut, bound to our homes, forbidden to work at our workplace and so on. All these factors have led to a whirlwind of global economic distress. And as an inevitable result, all the demand predictions and forecasts have been knocked down.
What is Demand Forecast and why is it so Crucial for a Business?
Demand forecast projects certain ups and downs in the demand trends for products and services in general. These predictions are imperative in framing infrastructural and financial goals.
Currently, essential services are under exhaustion; steps must be taken to stabilize the disruption. Businesses mostly rely on machine learning and automation for the forecasts. But right now, we need more human judgment to gauge the long-term impacts.
What are the Prime Challenges for Demand Planners right now?
Any kind of business operation starts with a somewhat accurate projection of future demands, be it for a product or a service. The importance of demand forecasting goes deep into framing these projections. As in the present times, we have to depend more on human jurisdiction, demand planners have to come up with their best guesses mainly based on the factors below:
- Keep track of the sales during the current Coronavirus fallout, to map the existing market demand.
- Look out for the pandemic curves and plan for the next seven days or next month. At the same time, estimate the recovery period.
- Adjust forecasts in the short-term by assuming the current demand drop/uplift, based on product/services and region.
But now the question remains, how to respond to these challenges? Well, let’s categorize them into three distinct categories-
1. A Flexible Adjustment
- Right away, define a flexible adjustment approach when any latest information is available. Demand planners must evaluate a basic course of trends leveraging pre-Corona data.
- They should also document assumptions as per the current situation. Doing this facilitates a more straightforward review of the forecasts and fine-tune the curves with changing times.
2. What should be the Start?
- One should ask for the advice of their forecast analysts for valuable insights from external data sources and prediction models. Just in case your business lacks an analyst, well, it is time to have one.
- Also, in such cases, you might look for an external tool-based support.
3. What kind of Approach to be taken in the Mid-Term
- Ensure documenting your decisions and assumptions regarding the demand predictions for future decision making.
- Along with that, you would need methods and tools such as probabilistic forecasts, driver-based planning, assumption-based planning, external data integration methods, etc. to reckon demand forecast of a specific industry and its target market.
The four pivotal factors below, must be taken into consideration while deriving forecast modifiers, as well as calculate demand forecast.
Triggers and Delays
Modifiers must be in continuous analysis for the triggers and delays for the effects of the catastrophic event.
However, since new data is always flowing in, these assumptions and insights must be reevaluated frequently. Predictive analysis for demand and supply depends on these periodic assessments and reevaluation.
As mentioned above, brick-and-mortar stores will see a slowdown in foot-fall both during the COVID period as well as in the post-COVID times. Hence, there should be a zero demand forecast for these stores. However, DTC (Direct-to-Consumer) and OTT (Over-The-Top) media must be monitored vehemently by the demand planners.
One must analyze the categories of items that are deemed as the bare necessities by the consumers; thus mapping the customer sentiment.
Analyzing the product mix trends also helps in augmenting sales during and after the crisis period. Anticipating a potential rush enables manufacturers to be ready with the products to meet the demand. Even when we kick off our normal lives, there will be a steady demand for the ‘essentials‘ as considered by the end users.
This signifies the intensity of the effects on a specific industry, that determines the upside and downside trends.
This is best estimated on the basis of best, worst and most likely case scenarios. These scenarios must be formulated to make continuous changes, as a company treads forward.
Reaction and Response – What you need to do during the Initial Shock Period?
There has been a new kind of lifestyle all over the world, comprising both sides of the Equator. Some of the Western countries are maintaining a discrete existence, while some other regions have accepted the ‘new normal’ and are moving on with their post-event recovery phase. Thus depending on the region and industry, the predictions may vary.
For e.g., as it is evident from the panic buying cases of toilet-rolls or basic food items, these will see an unusual elevation in demand, thus exhausting all other supplies.
However, fashion, entertainment and luxury, will see a substantial drop in demand. There will be a significant change in the user behavior as brick and mortar stores will see somewhat decline compared to the traffic surge in online shopping sites.
Post-Crisis Recovery Initiative
As demand forecast has crashed due to COVID-19, there will definitely be a commotion from this perspective. However, the best way to cope with this stage is to provide additional information to the forecast models.
If these additional information are not derived from the variables that have affected prior historical periods, future forecasts will be biased. This is the most crucial stage for any business. Because once things rebound, there happens to be a conundrum of how to remodel things that have gone haywire during the crisis period.
Here’s to, the “New Normal” (A Post-Pandemic World)
Sometime, in the distant future, we, as a civilization, will overcome this event and emerge as stronger than ever – thus accepting the new normal. Already, most of us have welcomed the new wave of work culture and are quite accustomed to the same. Kids are getting used to with online classes. Likewise, businesses have to re-frame their forecasting analysis and their existing demand forecast has got a severe blow.
However, the good thing is, while the world stages a restructure in their demand prediction techniques, many new things will come into our notice where we could learn and evolve. During the 2008 crisis, similar events occurred and forecast of total market demand went astray. It is crucial to observe that this period of emergency will give way to a new level of demand for months or may be years for some sectors.
Speaking of which, the travel-tourism sector, the entertainment media sector, the automobiles, amusement parks, banquet halls – all these sectors will be badly hurt and would stay the same for quite some time. However if you act quick and smart, taking support from competent partners, it gets easier to come up with the best defense mechanism. The ideal way to stay afloat is to implement analytic to neutralize the negative effects and seize the opportunities for the years to come.