Global events such as COVID-19 heighten the interconnectivity of the food supply chain. European supermarket point-of-sale data are available to help food suppliers understand the impact of COVID-19 and the demand, inventory and replenishment effects predicted to be felt two to four weeks later in the U.S. market.
An example of this data is from DemandWatch, which helps retailers understand:
- What items spiked immediately after the outbreak.
- How long it takes to return to “normal” buying patterns for each item.
- Whether there a difference between fresh and frozen and fresh and canned in the short- and long-term.
- Who the “winners and losers” are each week based on their demand rate before and after the spike of the pandemic-driven surge.
It has been two months since a closure was first declared due to the pandemic in Scandinavia, which was approximately two to four weeks prior to the closures announced in the United States. The following trends were identified in the beginning of May, as the restrictions were beginning to lift:
- While fresh bread surged during the week the pandemic was declared, by 76% over average bread sales, sales have returned to only slightly higher than normal (8%).
- Frozen vegetables saw a spike of 52% during the week the pandemic closure was declared, and that spike continued for the next four weeks and returned only to typical buying patterns this week.
- Interestingly, alcoholic beverages did not see a surge during the week of the pandemic, but a month later, alcoholic beverages nearly doubled the average and remained significantly higher for the following weeks, retaining a growth of 20-40%.
- As the weather turns warm, there has been a steady increase in demand for ice cream, which did not see a surge at all during the week the pandemic was declared. This past week, there was a surge of 114% for ice cream.
Balancing production efficiency with demand and inventory requirements is challenging as consumer tastes become more volatile, product assortments grow increasingly complex and shelf life becomes shorter. Thus, the more dynamic and precise demand forecasts become at a granular level, the more production teams will be able to anticipate, plan and build finished and work-in-process inventories across all plant locations and lines.
Supply chain analysis has shown that consumption patterns are significantly less erratic than the ordering patterns of those in the upstream supply chain (retailers, wholesalers, producers and suppliers). Without alignment and visibility around a single, truly consumption-driven forecast, each upstream process generates its own forecast.
Biases, errors and “safety stocks” are compounded along the way, as each forecast reflects the order history and patterns, price fluctuations and real or perceived availability of inputs of each immediate downstream member across the supply chain. This creates what is known as the “bullwhip effect,” in which a +/-5% change in actual consumer demand can impact upstream suppliers by as much as +/-40%.
A highly visible, high-quality and high-confidence demand forecast helps tame this bullwhip — reducing both cost and waste — while still achieving consumer and customer satisfaction goals. As dairy suppliers aim to tame the bullwhip during a pandemic such as COVID-19, open communication between suppliers and retailers is essential.