Over the past two years, we’ve seen just how dependent the world is on a fully functioning global supply chain and how quickly disruption can ripple through supply chain operations. From factory closures and materials shortages to capacity, transportation and labor issues, unanticipated challenges have forced supply chain leaders to adapt their strategies on the fly to mitigate risk and meet customer needs. As we begin to navigate a New Year – and continue to deal with pandemic- and market-related disruptions – there’s no question that new challenges will arise to test the strength of today’s supply chain networks. For supply chain leaders, transforming experience into expertise will be key in preparing organizations to weather future volatility.
Here are two supply chain issues that will likely make headlines in 2022, and how you can position operations to be proactive, instead of reactive, in the face of change.
Navigating unexpected spikes in demand with demand sensing
While supply chain shortages continue to complicate inventory planning, retailers are now tackling another hurdle – product virality. With certain social media apps gaining in popularity, today’s products can go viral in the blink of an eye, causing unplanned stockouts and backorders.
When a product’s popularity spikes and the item sells out, sellers are often tempted to rush a restock. However, according to flexport supply chain congestion and shipping times have nearly tripled, so it’s more likely that the trend cycle will pass and demand will normalize before the item can be restocked. In the end, you’ll be left to deal with the excess cost of producing, transporting, holding and then discounting the extra inventory you rushed to order.
As social media continues to influence consumer shopping behaviors, supply chain leaders must move away from this reactive (and costly) position and into a more proactive one. For instance, it’s now clear that using historical sales data alone for demand forecasting is no longer enough. Instead, inventory planning strategies should shift toward demand sensing, a technology that helps sellers proactively prepare for shopping trends. Leveraging demand sensing can help companies scrape social media data for product mentions and then analyze the influence of said mentions to track trends and better anticipate consumer demands. More concrete demand sensing through analysis of point-of-sale data is another early indicator of trends. These techniques can provide a 1- to 2-week head start for sellers to get additional reposition inventory in place and adapt orders to meet any product virality-driven spikes in demand.
Forecasting for extreme weather
Another issue supply chain leaders must prepare to tackle is extreme weather. In the coming years, expect to see major supply chain reconfigurations spurred by the continued rise of unplanned climate events, from fires in December to cold storms in July.
For instance, think of the impact extreme weather could have on a cold goods supply chain. Cold chains require a constant source of energy to keep warehouses and storage facilities at specific temperatures. A break in that temperature – like an unplanned power outage due to cold storms in Texas or wildfires in California – can cause products within the cold chain to go to waste, which can cost a business millions. In fact, the equivalent of 475 million tons of spoiled produce is lost each year due to ineffective refrigeration within failed cold chains. To avoid costly outages, consumer packaged goods (CPG) executives must keep a close eye on what regions are experiencing extreme weather events, how frequently these events are occurring and how the local infrastructure is holding up.
Leveraging technology like demand forecasting and digital twins can help CPG leaders plan multiple scenarios against models of their cold chain operations and identify potential points of failure across their network of warehouses and facilities. Leaders can also use predictive analytics to bring external signals – like real-time weather data – into their models and plans to anticipate climate-related disruption.
If the current trend of climate-related disruption continues, supply chain leaders will need to account for more and more environmental factors influencing their end-to-end supply chain operations, so they can pivot quickly and strategically in the face of extreme weather.
Preparing today’s supply chain for tomorrow’s volatility
While we can’t predict exactly what will happen in the future, we can anticipate that disruption – from a viral social post to a freak heatwave – will continue to challenge global supply chain operations in 2022 and beyond. Navigating this volatility will require leaders to adopt a more proactive and agile approach to supply chain planning; one where historical data is combined with external signals and third-party insights to help companies predict, prepare and pivot with confidence.