Unprecedented, uncertain, unpredictable are some common words used to describe the impact of COVID-19. It has certainly impacted every industry, albeit the intensity varies. For some, business has doubled, for others specific categories have experienced a spike, while many have come to a grinding halt. This may have been triggered by global lockdowns and has resulted in highly uncertain consumer demand.
In such a scenario, reliance on past data and understanding of the market may not hold true. Forecasting demand based on pre-COVID19 models would be futile. Demand forecasting teams will need to refresh their models to forecast demand accurately and help businesses effectively manage supply during these uncertain times.
Here are 5 key factors to consider as you refresh forecasting demand models.
1. External Factors
- Impact of economic and health factors – How are government policies, advisories by economic and health organizations impacting consumer as well as industry behavior? Which guidelines are favorable?
- Industry demand – At an industry level, what is the demand? Which industries are performing well with surging demand and which are receding? For instance, luxury items are experiencing reduced demand, while health care items are experiencing increased demand across the globe
- Competitor initiatives – How is your competition coping? What initiatives are they rolling out?
- Pantry loading: Are consumers stocking up on certain categories? Are these categories with long or short shelf-life? Would they reduce buying these products soon?
- Channel preference: Have consumers changed preference of purchase channel? Is there a preference towards online channels over store visit? Is demand surging via online vs. in-store?
- New-normal demand (upwards and downwards) – How are categories behaving? Is there an exceptional increase or decrease in demand? Is this likely to be an on-going trend?
- Halo/Cannibalization trends – Are complementary or supplementary categories impacted either through halo (increased) buying or cannibalization (decreased) buying? For instance, has the low demand for Electronics cross-affected battery sales?
- Reduced support internally– Has there been a cut in promotions or planned promotion events, given lockdown or execution challenges?
- Reduced or neutral consumer response – For ongoing promotional events, has there been a drop in consumer response?
Businesses have also had to revisit their initiatives and strategies in the wake of this pandemic. Take into consideration changes made to either or all these factors:
- People & hiring budgets
- Operating budgets
- Marketing initiatives
- Product pricing
- Inventory & supply
Considering these key factors while forecasting demand will help businesses prepare despite the uncertainty. However, given this uncertain nature of the market, businesses need to recognize that refreshing forecasting models based on these key factors cannot be one and done. It is important to have the mindset and capability to make decisions through constant agile testing and learning. After all, COVID-19 is unprecedented, uncertain, unpredictable – what is true this week may not hold true in the next.