Market modelling in the pandemic theater
“All plans fail.” This commonplace has never been truer than today. This crisis, which already is estimated to be far worse than the 2009 European sovereign debt crisis, has every ExCom, from small business to large enterprise, running amok. While C- Suites are stuck 12 hours a day in meeting rooms, trying to glue the broken pieces, it is important not to forget that in order to enact effective short-term policies, such measures must be put up with a mid- to long-term picture. For this purpose, market models and forecasting are vested with particular relevance in order to provide decision-makers with the matter in which to (re)build their company’s future.
With market predictability at an all time low, an interesting step to be taken is to assign a taskforce to feed the ExCom with insights on the ongoing conditions of the market. We can no longer expect automatic or statistical forecast to perform anywhere near satisfactorily.
Therefore, all company forecasts must shift to a detailed manual generation and validation process. A taskforce comprising marketing, supply-chain planners, demand planners, sales, procurement, and other elements of the S&OP process collectively possess the necessary knowledge of the market, data, and tools at the company disposal.
These specialists should be entrusted with several tasks, such as the following:
1 — Examine demand with a clinical eye, and understand tendencies to under- and overorder, so supply can match;
2 — Analyze which components of the supply chain (including upstream and downstream players) are most vulnerable to the crisis;
3 — Design a set of alternative assumptions that have a decent likelihood to be proven true, and conduct a best/worst-case scenario simulation exercise;
4 — Explore the available sales channels and how demand can be lead through the most sustainable ones.
A logic of evidence-based decision making will be pivotal to decide who sinks and who stays afloat. Being fed with timely, accurate and actionable insights, decision-makers across all sectors might reasonably be able to take the pressing decisions of the moment:
- How can production resources be reallocated to match the new demand mix?
- Which are the new bottlenecks and how can we remove them?
- Can our products or delivery mode be adapted to the new market circumstances?
For the longer term, the pandemic will likely force companies to adopt a more resilient approach to their supply chain. It is interesting to consider supporting suppliers for critical parts and introduce more redundancy in the upstream chain. The aforementioned taskforce can be recycled into a risk-management office to deal with such catastrophic events.
But foremost, the COVID-19 has shown the importance of supply chain agility and especially the ability to quickly generate market scenarios for evidence-based decision making. Sometimes jokingly, the pandemic is appointed as the strongest driver for digital transformation. New data sources, process automation, new algorithms and web-based applications for real-time access anywhere will increasingly be a part of the managerial landscape, not only given the benefits for day-to-day operations, but also their elevated relevance in mitigating present and future shocks.
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