Forecast Configuration Guidelines to Cope With Hoarding and Out-of-Stocks in the Retail Supply Chain
The current uncertain economic environment and legal restrictions has made it hard for retailers to plan their operations and in particular for forecasting and replenishment planning the effects of COVID-19 are dramatic. In most countries many shelves were out of stock for several weeks including paper products, pasta, rice and several sauces and soups. Usual planning methods are not working any longer since consumer demand is shifting – for some products demand is exploding, for others it is drastically reduced. Products are out of stock because of hoarding, people have to cook more often and more in general with kids being at home all day (I can assure this one!). Some categories such as hand soaps are selling out very quickly even after initial post hoarding replenishment runs. Instead of buying as needed on a very frequent basis, now planning ahead is required to go out just once week – which probably has a negative impact on fresh food such as bakery, meat and fish. Store traffic is different for stores in vicinity to closed borders.
In some cases, these effects are most likely and hopefully for a short period of time only, but also long-term shifts of consumer behavior can be expected, e.g. that consumers will keep online shopping habits once started for some products. Nobody really knows at this point in time exactly how sales pattern will develop. But one thing is clear: Manual intervention is now needed to stabilize the supply chain and to help setting it up again for smooth operation after the crisis. And there is a need to vary a mitigation strategy by category and location.
This is why we collected some food for thought in note 2909006 around forecasting configuration, both for short and longer-term strategies. The idea is to provide recommendations and advice on how to configure the Unified Demand Forecast (UDF) or the forecast of SAP Forecasting & Replenishment in order to help to minimize the impact of the crisis on forecast accuracy and the downstream processes.
We hope very much that you find this useful and that it helps you running your business better.