Is Your Supply Chain Ready for Social Media-Fueled Demand Volatility?
Have you noticed how the clock speed of just about everything has sped up considerably in just a few years? Supply chain practitioners know trends like product line proliferation, shorter product life cycles, increased complexity, massive amounts of data and ever more demanding and unpredictable customers are accelerating. Add to that the dizzying pace at which new products and trends are promoted and spread online and via social media. Surveys have shown that consumers are 71% more likely to make a purchase based on social media referrals, and 47% of millennials’ purchases are influenced by social media1. Of course, today’s hot item can change on a dime. Seemingly overnight, hard seltzer became the drink of choice in 2019, and largely due to user-generated memes and Twitter posts, the White Claw brand shot to a 54% share of all hard-seltzer sales2 in the U.S. retail stores.
Given these staggering statistics, what are demand forecasters to do? Traditional planning systems weren’t designed to handle today’s supply chain demand volatility, service expectations and hyper-fast pace of new trends proliferated online. That means there are many companies out there struggling to make sense of constantly shifting demand data and to make smart inventory optimization decisions. The stakes are even higher when dealing with perishable products. Fortunately, you’re not powerless in the struggle. The Gartner report, Preparing Supply Chains to Deal With Hyper Demand Volatility From Viral Social Media Campaigns offers recommendations to help you better predict short-term demand and increase reaction speed for replenishment.
When social media product promotions overwhelm supply chains
Gartner uses the example of the Popeye’s restaurant chain, which in 2019 famously ran out of its chicken sandwich because it didn’t have the processes or resources in place to respond to the extreme demand volatility its social-media promotions created. The promotion started out as pure marketing genius, but quickly escalated like wildfire and when the restaurant announced on Twitter it had run out of the sandwich it faced backlash from disappointed–and hungry–consumers. According to Gartner, “The rise of digital business and the desire of brands to get closer to the customer require an agile
supply chain to better predict short-term demand and increase reaction speed for replenishment.”
How companies can react faster to social-media driven demand fluctuations
Gartner offers three recommendations to help achieve this goal:
1. Include Digital Marketing Insights in the Sales and Operations Execution Process
Perhaps one of the easiest ways to improve short term demand response and effectively ‘get out in front’ of the problem is for supply chain leaders to tap into data your marketing team is likely already collecting. You may be surprised how much of this data can be used as part of short-term supply planning and execution via the sales and operations execution (S&OE) process. Examples are: customer experience metrics, feedback on new product features and pricing, customer satisfaction and loyalty, and competitive intelligence. When you effectively use insights like these before new product launches, you can create different supply and demand scenarios. The key is to continue to track accuracy of the scenarios and any deviations so you can adjust supply to make sure you avoid both scarcity and stock-outs.
2. Capture Additional Demand Inputs to Better Predict Short-Term Demand and Increase Reaction Speed in Replenishment
Speaking of data, as you collect and analyze more types of data, you get a much richer picture of demand and what influences it. Gartner explains that, “As companies develop demand planning processes in line with their process maturity journey, they can begin to leverage demand signal management (DSM) capabilities to capture and harmonize multiple downstream data streams.” There are all sorts of data to tap into, such as social sentiment, point-of-sale (POS), inventory, on-shelf availability and more.
There are some key capabilities found in a supply chain planning software that can help you better predict short-term demand. A few are supply chain planning collaboration tools for use between retailers, distributors, and suppliers, and promotion planning to synchronize demand shaping campaigns and promotions with operations.
At ToolsGroup we’re strong believers in demand sensing as another way to keep your finger on the pulse of consumer demand. Typically forecasts look out a month to 90 days, during which planners are unable to make improvements. We’ve helped our own customers compress this time by sensing short-term sales history and related demand causals, so they get rapid, near real-time insights within the month to make forecast updates on a shorter-term horizon. You don’t need to be confined to the typical definition of demand sensing. There are many ways to sense demand and each new insight can speed reaction time and boost profits. Click here to learn steps for adopting demand sensing.
3. Design Contingency Into the Supply Chain Plan
Finally, amid constantly changing markets it’s critical to design contingency into a supply chain plan. A few ways to do this are: replenishment planning bills of materials for ingredients (in food and beverage products); capacity utilization optimization to manage both constrained and excess capacity, effectively balancing the competing objectives of customer service and manufacturing; and scenario planning to show the potential impact of different choices in different parts of the business.
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Gartner: Preparing Supply Chains to Deal With Hyper Demand Volatility From Viral Social Media Campaigns. November 2019. Analysts: Alex Pradhan, John Johnson, Scott Durie