Forecasting | Manufacturing, your supply chain and COVID-19
This series looks at manufacturing supply chain challenges and opportunities resulting from COVID-19. See the full list of topics covered at the bottom of this article.
COVID-19 has disrupted manufacturing supply chains around the world. As we are all learning, the situation is dynamic and no one-size-fits-all solution exists to get around problems. Industries and regions differ and so do the challenges that each business faces.
That said, there is some advice that may be of help generally, which you can adapt to fit your unique circumstances.
First off, let’s talk forecasting. Before you can move to address any manufacturing issues, you need to examine your forecasts and see what has changed.
Re-evaluate your forecasts
- Re-evaluate the accuracy of your forecast: Any manufacturing exercise requires a good forecast of volumes and timing. This is hard at the best of times, but COVID-19 brings with it more random unknown factors. Therefore, before trying to fulfill your old forecast in these new conditions, first re-evaluate the accuracy of your forecast. Sources for this include your founder, your customers, and leading indicators (see below).
- How do you re-evaluate your sales/demand forecasts? Forecasting is a dynamic situation. Revisit your sales and volume forecasts. If you’re finding you can’t get orders in, take a step back and think of what a new sales forecast looks like. Figure out what those implications are and reset targets, volume and timing. If you don’t know when the design/launch date will be, start to plan for that uncertainty.
- How do you plan for uncertainty? Learn from sectors that deal regularly with uncertainty and random demands, such as weather-driven businesses and disaster recovery and international aid organizations. They build their supply chains to minimize all lead times so that they can respond quickly (e.g., pre-purchasing long lead-time items and partially built sub-assemblies). Adopting these strategies can help you hit the ground running while your competition is stuck in the old paradigm.
- Volume and forecasts—use leading indicators from customer behaviour: It’s important to reassess scenarios based on demand. Review your supply chain in terms of both cost and timing. And experiment with opportunities. Manufacturing is driven by sales, so you need to figure out what the new demand curve is.
- Monitor your leading indicators from industry suppliers.
- Track leading indicators from your sector, but ones for longer lead-time products: For example, say you supply water heaters to contractors just before they finish building new homes. Watch the pace and numbers of building permits being issued—this would give you a six- to 12-months lead time of when you’d be receiving orders.
- Reaffirm factors such as timing, volume and variations that you can’t control: Identify your options on how to fill the supply need (e.g., using a local company, flying in products, or doing it overseas). Your supply chain is driven by external factors and your manufacturing strategy has to respond to that.
Prepare for growth
For some businesses, COVID-19 is driving unprecedented growth in product commercialization and production volumes. This can pose a challenge for large and small companies. What strategies and steps can you take to facilitate sudden growth? Keep in mind that anticipation is always the best strategy.
Recalibrate for the new world
As you try to solve the supply chain problems you may be facing, remember to build in the effects of the new world. Approaching the issue as one where “things are just running late” isn’t going to work. That said, monitor the situation over the longer term and continually adjust. Be careful not to reset your entire supply chain around a situation that may never occur again in our lifetimes. Down the road, the extra costs of this protection may cripple your business model against other competition.