Dr. Misty Blessley, Associate Professor of Statistics, Operations, and Data Science at Temple University, shares her insights with our readers monthly.
The COVID-19 pandemic changed the way people live. When viewing the demand side of a business-to-consumer (B2C) transaction, our behavior as consumers and the new normal are inextricably linked and continue to evolve. A recent Wall Street Journal article states that “merchants veered between product shortages and overstuffed inventories in rapidly changing consumer markets” as a result of the COVID-19 pandemic. But now that inventories have been worked through, companies are looking for better ways to manage the flow of goods on the fly and make sure they have merchandise where it needs to be to boost sales and maintain margins. What does this mean for post-COVID sales forecasting?
That past behavior is a good predictor of future behavior is the premise on which time- series forecasts (the topic of Chapter 4 in your Heizer/Render/Munson text) stand. Forecasts were based on known patterns of seasonality and the economic outlook over the forecast horizon. However, retailers increasingly recognize that boosting sales and maintaining margins requires them to see and respond to changes in demand as it is happening. In other words, in customer driven markets, the objective is to match the supply of merchandise to consumer demand.
Retailers are looking to new technology and analytics that are capable of capturing trends in data that predict future demand. For example, Dr. Martens (a $1.2 billion shoe manufacturer) is currently working to leverage a new order-management system containing a customer-data platform to provide better insight into customer spending. Macy’s Department Store has benefitted from a recent forecasting system upgrade, by recognizing and responding to increasing demand for work-wear over leisure-wear. Retailers are turning to sophisticated algorithms but are also increasing their communications with suppliers as part of having merchandise where it needs to be, in lockstep response to consumer demand.
Classroom discussion questions:
1. What “new normal” could have driven the change to work wear from leisure-wear for Macy’s?
2. Who should be included in a firm’s post-pandemic sales and operations planning (S&OP) process?
3. What is the role of operations and supply chain managers in creating new forecasting methods and then monitoring, controlling, and adapting the forecasts resulting from these new approaches?
