Five months ago, feels like five years, back in late 2019, I wrote, "CPG companies' online channel is rapidly growing … with sales expected to double in five years." My, how things have changed. In less than one month, there were 35% more e-commerce CPG buyers, Amazon could no longer meet its 2-day prime shipping promise, and I am still waiting for the desk that I ordered two months ago.
The panic buying and consumer demand shifts ravaged demand forecasts, leaving most CPG companies reverting to manual intervention to fix their stock issues. While unavoidable in the beginning, this event highlights the shortcomings of many forecasting methodologies: a basic assumption that demand is steady and slowly changes. Consumption sensing takes a new approach by creating a "conversation with the consumer" to predict consumer demand and identify shifts for near, mid, and long term forecasting and planning.
For almost all fashion-based retail, the current Coronavirus-related disruption is characterized more by what we don’t know versus what we do know. Length of store closures, consumer reaction when stores re-open, amount of sales transference between channels, and overall impact on demand are key unknowns. However, what is known is that when customers return to stores, there will be a lot of displaced inventory that will need to be managed. Retailers will come out of this crisis with an eye on cash position and costs, therefore managing that inventory and attracting customers to shop again will be of paramount importance.
Retail and CPG companies are now working overtime to maintain inventory supply and minimize shortages despite wildly erratic consumer behavior. Thanks to advances in planning and order optimization, real-time adjustments to major swings in demand, like nationwide school closings and shifts to online buying, are more easily executed. Nevertheless, this has meant long hours for everyone - from the manufacturer, to the planner, to store distribution teams - and every time a basic staple reappears on the shelf or online, we consumers appreciate it.
There is an increasing belief that machines can replace human activities. With supply chain becoming more complex, humans would need to make hundreds of thousands of decisions to stay competitive. Does this mean companies need AI and No Touch Demand Planning?