Filter the news, interpret the data and consult external experts. Leave that to the panic-buying consumers.
Make quick decisions, but don’t allow yourself to be guided by emotions, fake news and hysteria alone. Set up a crisis team so that Purchasing, Production, Sales, Finance and Logistics can meet daily to discuss the necessary actions for that day. That’s the only way to take the right, data-driven stockpiling measures. If you don’t have access to the latest data, call or email your supply chain partners or set up a joint online dashboard. But make sure you do it smartly and with restraint, based on the concrete data about the demand dynamics in your supply chain. The question for data analysts is: how soon, and how extreme?
That is an inevitable consequence of our planning systems. Demand gets stuck on a logistics rollercoaster ride and drags inventory levels along with it. That’s what happened after the 2008 crisis, and it will happen again in the future once the coronavirus crisis is over. If the retailer at the end of the supply chain decides to order 10% less, the manufacturer at the start of the chain will eventually see a 50 to 60% drop in demand, subsequently followed by a sudden upswing. But as a manufacturer, do you know what is happening to the demand at the end of the chain and the supply at the start? There can be up to a dozen links in between.Īny drop in demand has an exaggerated effect on the upstream supply chain due to lower replenishment combined with a reduction in the safety stocks. After all, how many people know exactly how much toilet paper their household uses, and how much pasta they’ve got left in the cupboard at home? Most of them have no idea. This uncertainty is even causing panic buying among consumers, resulting in empty shelves in stores. One of the problems in the current coronavirus crisis is that, when it comes to medicines, intensive care capacities and face masks, there is uncertainty in both the supply and the demand. So what must you do as a manufacturer? Thou shalt improve your forecasting! Stockpiling makes sense, providing it is carefully considered and well informed. Otherwise, the end customer will be left empty-handed. How much safety stock is required depends on the uncertainty of supply and demand put simply, more uncertainty means more stock. The right buffer also helps you to recover again more quickly after a disruption. Safety stocks create breathing space in the case of disruption, such as when suppliers are out of action, customers have to close down for a while or your employees leave you in the lurch. You should always be ready for what might happen – and stockpiling should be part of those preparations, because robust supply chains need safety stocks… at suppliers and manufacturers, in distribution centres and in the sales channels. In supply chain management, the 5 P’s are ‘Perfect Preparation Prevents Poor Performance’.
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