Managing the Impact of COVID-19 on your Supply Chain

The rapid global spread of COVID-19 means few answers and lots of supply chain uncertainty across all industries. As nations strive to protect their people’s health, the impact on productivity and consumer demand is inevitable – leaving supply chains disrupted. As nations close their borders, temporarily, each organization is forced to take a close look at their own supply chain, highlight areas of disruption, assess the impact and find alternative ways to stay competitive. To focus your efforts, start with your key products and map out key suppliers, that means 1st , 2nd and 3rd tier suppliers, and work closely with them to monitor supply continuity. Transportation lines connect everything so don’t forget to map out threats to the product flow.

AGR Dynamics can help you stay agile and flexible in these strange times by systematically managing the volatile demand patterns. The AGR forecasting engine is quite adaptive, utilizing exponential smoothing and multiple other methods that often focus on latest sales rather than older historical data. This helps your forecasts adapt to the current climate of uncertainty. However, it’s not a bad idea to also utilize demand smoothing and possibly some additional manual adjustments to your forecasts. One AGR customer, who is already using promotional smoothing, has for example marked the COVID-19 affected items as a promotional period so they will get the sale on those items smoothed in the future automatically. Smoothing out sale peaks can also be done manually but this can be a big task to undertake. Our team of consultants would be happy to apply sales smoothing logic to your product portfolio, so feel free to send them an email to servicedesk@agrdynamics.com.

Furthermore, we have compiled some ways that companies can mitigate the supply chain effects of this global pandemic, but it is important to remember that every business has their own challenges and not all the advice compiled here will apply to everyone.

Stocking up on the right products

If your supply chain strategy entails securing supply on key products for the next few months, use our order constraint feature to scale up the order volume to match the demand period you want to secure. This will save you a lot of time.

In the order view, start by grouping all your items by their ABC specification in order to prioritize your items.

In order to stock up on critical A items (or certain strategic items that aren’t generally considered A items), you’ll want to use the order constraints feature to order more than usual. This will give you extra stock of those key products that are paramount to your business operations, helping you weather the current uncertainty within the supply chain.

Simply select the behavior and constraint and apply to your order in process. In this example, you can order more of your A/strategic items in the same order as your B and C items, making your ordering more efficient and better preparing your business for the current situation.

Expediting Orders

In our reports use the “Move In Report” to highlights items that have a pending purchase order but are likely to go out of stock before they arrive. Use the report to contact your suppliers, see if they can expedite your order.

The image above shows an example of an item with an imminent stock out period indicated by the reversed red triangle, and absence of stock (the blue background)

Delaying Orders

For a drop in demand, use the “Move Out Report” to see if you can cancel or delay incoming undelivered PO’s, to avoid overstock and protect cash flow.

If you don’t have these reports currently setup in your AGR system, you can create them with the following:

‘Move In Report’:

Filters

• Closed = 0
• Advanced: Days until stockout committed < Days cover committed

Columns: Item id, location, primary vendor, item no, item name, stock units, undelivered, Days until stockout committed, Days cover committed, lead time, ABC, safety stock for order period.

‘Move Out Report’*:

Filters

• Stock out expected = No
• Advanced: Estimated stock next delivery date > safety stock for order period + 2*(forecast for order period)
– the proportion, here 2, can of course be changed

Columns: Item id, location, primary vendor, item no, item name, stock units, undelivered, Estimated stock next delivery date, Safety stock for order period, forecast for order period, stock out expected.

*The Move Out Report is a bit more complex and can differ from company to company, so let us know if you need any help creating it.

We understand that there’s a lot going on right now, so feel free to contact your consultant and they can add these reports for you.

Smoothing Demand

For a sales peak or sales drop, that in no way reflects demand going forward, it is a good idea to apply demand smoothing to keep your forecast data accurate. Volatile demand patterns like sale peaks and sale drops can reduce forecasting accuracy and increase the level of safety stock needed to keep up a certain service level.

To smoothen demand manually, click the edit button on your item card and drag a sales peak down or a no sales point up, to reflect average demand.

Adjusting Safety Stock

If you find that your sales are going down and you want to adjust your safety stock levels, adjust the confidence level of your items in item details.

For more information on safety stock levels, see our previous blog “Safety Stock: What is it and Why is it so High?” here

Overriding the Sales Forecast in the Planner

As these are unprecedented times it might be a good idea to overwrite your demand forecast subjectively through the AGR Plans feature, keeping your business operations more agile and current.

In the image above, you can see that the user expects sales to be down by 30%, and makes this adjustment within the Baseline Plan. For some companies, they might expect to have no sales, so you could put -100% for the next month or two, and then make adjustments as the situation around the world becomes clearer.

If you are currently not utilizing the planning feature of AGR, then an AGR consultant can easily help doing similar above mentioned changes to your companies items demand.

Thankfully, COVID-19 is a temporary crisis and business is bound to go back to usual at some point, the question is when and how? We want to make sure that when demand picks up, your AGR forecasts are ready too.