As we move into this next phase of this Covid-19 global pandemic with countries, states and businesses beginning to open back up, the importance of sound judgement and forecasting is critical. With these new times will come new factors, new information, and potentially new disruptions.
At the same time, we can learn from what we’ve been through so far as we begin to plan for today and what will come post crisis.
Based on our town hall meetings, talking with experts in the field from around the world, best practices, and my own experience, I have extracted these 7 lessons for navigating forecasting and planning as we come out of the pandemic.
1. Focus On Data
The past few months may not be representative of what is to come but we shouldn’t throw out that data. What we need to do is better understand the multiple drivers and begin to cleanse some of this data. We need to see what we can learn from it and possibly even discover new external variables that drive our business forecasts. Now, as we move into this next phase, is a critical time to evaluate the data we have and continue to collect as much data as we can that will help us in the future.
There is also bias and emotion that you need to filter out when faced with new, untested information.
2. Don’t Overreact
This has a couple of meanings for the Demand Planner. First, be careful with statistical black boxes or best pick forecast models. Many of these overreact to recent history or new information without enough consistency and skew trends up or down. Secondly, consider yourself and your own reactions. As we begin this next phase of this crisis there are still many unknowns. There is also bias and emotion that you need to filter out when faced with new, untested information. It is important to try to understand what information is going in and not overreact to what’s coming out, even if it’s negative.
As Erin Marchant, Associate Director for Global Demand Planning at Collins Aerospace, said in a recent article “Don’t panic…The organization will need level heads to lead in a time of uncertainty, and demand planning can provide this leadership.”
Latency in forecasting can be costly and we need to be able to update plans often and efficiently.
3. Update Often
We have been witnessing business and life change at an astounding speed. There is no sign this will change anytime soon. As things change daily, you need to develop a rapid reporting capability or, if you have such a capability in place, keep reporting. Even though we want to make sure we do not overreact to new information, we still need to capture and understand new information as it is made available. As we continue to navigate new consumer demand and environmental factors, ad hoc planning and the running of multiple scenarios will be needed. Latency in forecasting can be costly and we need to be able to update plans often and efficiently.
Demand is not going to start looking like your historical data anytime soon so you need to look at the why consumers are making those purchases.
4. Continue To Ask Why (Predictive Analytics)
One of the big lessons companies are learning during this pandemic is that, in addition to forecasting with historical sales data, we need to look at external variables as well. Demand is not going to start looking like your historical data anytime soon so you need to continue to look at the why consumers are making those purchases, and why sales for certain products have risen while others have fallen. This is predictive analytics and maybe this pandemic is the impetus you need to get started with something you should have already been doing, or at least thinking about. These answers usher in a new era of predictive analytics and a forward-looking perspective that will help us navigate through this.
5. Don’t Focus Too Much On The “What”
The uncertainty has been horrible and it’s not getting any better. This correlates to poor forecast accuracy and sometimes bias. Measuring uncertainty by measuring forecast accuracy is important to tell other functions what to plan for and risk but does little to tell you how good of a job you are doing – right now your forecast accuracy will be poor and there isn’t too much you can do it about. Don’t focus too much on these numbers, rather focus on how you can use those numbers to improve your processes.
6. Communicate And Be Transparent
One of the best things a Demand Planner can have during these times is humility. We will be wrong, but what we are providing is a best estimate of what is going to happen based on data and collaboration. Do not be afraid to explain the uncertainty and do not shy away from forecast performance. Communicate a data-driven assessment and be transparent when it comes to risk.
7. Prepare For Possible New Norms
Part of humility is the willingness to change. We should expect that because of Covid-19 things will change. Consumers may purchase differently through different channels. Companies you deal with may change inventory policies or buying habits. The forecasting models you relied on no longer work. We must understand and not only prepare for possible new norms but be willing to abandon old assumptions that no longer provide the same results.
8. Get Ready For The Next Black Swan
While we cannot truly predict a black swan, we can see its shadows. Not surprising, history does, and will, repeat itself again and again. Rather than letting out a big sigh of relief and returning to normal routines when the crisis subsides, efforts should be made not to squander a valuable learning opportunity. Collect data now, focus on external variables and more predictive analytics now, and focus on a solid demand planning and forecasting function and best practices today. The one thing we have learned if nothing else is that preparing for the next crisis (or the next phase of the current crisis) now is likely to be much more effective than an ad hoc, reactive response when the next crisis hits.