Erin Marchant, a senior leader in demand planning in the aviation industry, draws on her experience to reveal how to plan during times of disruption. Forecasting models have their place, she says, but it’s specific market, customer, and industry knowledge that are going to win the day. And for that, cross-functional collaboration and consensus are key.
In the past few months, the world has been keeping a very keen eye on the developing COVID-19 epidemic-turned-pandemic. How will the disease be contained? Will this just be an Asia-Pacific issue? Oh, okay, now Europe is experiencing similar challenges in stopping the spread of the disease. Now international borders are closing. Will it spread to North America?
Okay, WHEN will it spread to North America? In my industry, aviation, the spread of the virus and its significant impact have been studied with a certain amount of incredulity. How could an industry that has seen such explosive growth in the last few years suddenly be pondering frightening worst-case scenarios? I am sure that our industry is not unique in these stunned feelings.
That’s how Black Swan events work. They force you to consider worst-case scenarios that would have been unthinkable just months or even weeks prior. They surprise us with their breadth and depth and leave us scrambling to make sense of a “new normal.” They are, by definition, unable to be predicted. So what does this unpredictable, unprecedented time mean for the demand planning function in an organization?
The short answer is that demand planning is needed more than ever during a Black Swan event. The organization is waiting on pins and needles for the resident experts in market and customer behavior to weigh in on what this unprecedented event means for the business. How far does the organization need to cut back on expenditures? Will reductions in headcount be required? Do we need to determine creative solutions to continue to meet customer requirements in an environment where economies of scale are not able to be achieved? The analysis of these and many other issues hinges on an evaluation of the demand plan. What follows are some insights into how demand planning should move forward to provide this business support in a time when many tried-and-true inputs no longer make sense.
There will be significant pressure to complete all analysis of the future demand plan very quickly. This makes logical sense, given all of the critical business decisions predicated on it. There is a balance to be struck here between taking the time to properly consider this new business environment and waiting too long to take action. Many industries, my own included, are going to find that the information trickling in from customers and market analysts is going to be incomplete, speculative, and sometimes contradictory. Your customers are likely in the same position as your organization: uncertain of where to proceed from here and receiving incomplete information. This is where the specialized knowledge of the demand planning team is going to become crucial to the organization. Demand planning is the function best equipped to review the existing dataset and make educated conjectures about what may happen in the future. We do it daily, even when there is no global crisis, and are comfortable with the ambiguity. The organization will need level heads to lead in a time of uncertainty, and demand planning can provide this leadership. Stay calm, use the data at your disposal and your accumulated knowledge, and push back if the time parameters to complete the work with efficacy are unrealistic.
Black Swan events are a pivotal time to involve all stakeholders in the construction and finalizing of the demand plan. Unpredictable times are not made for the often idealized “nerd in the corner,” who can whip up a fancy algorithm and predict the future. These are events that are, by definition, unpredictable! While some modeling may help set the context, specific market, customer, and industry knowledge is going to win the day. Given the extraordinary circumstances and potential decreases to demand that may take the organization well below its previously targeted operational and financial plans, additional, supply-side considerations may also need to be considered.
In a “normal” environment, everyone in the organization seems to have an opinion about what the demand plan should be. In many instances, those insights are grounded in fact and when shared with demand planning are a catalyst for a better demand plan. During a pandemic… maybe not so much. Demand planning could encounter a fair amount of emotional pushback as they present the facts as they are known today. There could be “sticker shock” at the demand changes proposed, or even a lack of feedback from stakeholders as they reel from the amount of uncertainty being presented and the proposed length of time to recovery. There could be a hesitancy to provide insights or align on the proposed changes, and that’s born out of fear. It is the role of demand planning to assuage those fears with the available facts and help drive the stakeholders to a decision they can feel reasonably comfortable with under the circumstances. Now more than ever, the demand plan does not just belong to the demand planning organization – it is the plan that runs the business and all stakeholders should feel some level of ownership.
Document, Document, Document
Demand planning is no stranger to the often non-value add phenomenon of perfect hindsight – after an unexpected event, there will undoubtedly be some members of the organization – perhaps even within the planning function – that will begin to ruminate on why we didn’t act faster or clearly see the signs of this monumental event headed our way. The pitfall of 20/20 hindsight is, rather unfortunately, another tenet of Black Swan Theory. It’s difficult to rationalize how something so major could have blindsided us. This is why the documentation of demand planning assumptions is so key – both in “normal” times and even more so during these abnormal events. As the skies begin to clear, organizations sometimes develop amnesia about how cloudy the weather once was.
Demand planning is often called upon to be the historian of the organization – reminding the various stakeholders of the decisions that were made in the past and why we made them. As industries recover, this historian function will be ever more important as we become farther and farther removed from the initial crisis. In order to move forward, the organization may need a clear picture of where we have been that is free from any Monday morning quarterbacking.
Stay the Course
Organizations around the world and across many industries are finding themselves facing a future they were not expecting even a few weeks ago, and will be looking toward their demand planning teams to help them make sense of what future demand will look like. It is important that we adhere to our established processes as much as possible, and remain a calm and objective voice of reason for our stakeholders. You will be called upon to make sure the organization stays focused, doesn’t get caught in a victim loop, and takes action as appropriate. Finally, be ready to remind the organization of where it has been once the crisis has been averted. In these ways, demand planning can continue to provide value and context to the organization during uncertain times.
Hang in there, everyone.
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