Don’t let panic worsen the COVID-19 crisis: Let data run the supply chain

A quick shout out to my co-worker Charles, as he had a very good comment: “As we work alone, together…”. And it serves to remind us that even though we are all hunkered down in our safe spots, we are all in this together and must work as a group to get through this and be in a better place.

I thought of that as I roamed the grocery store and stared at the rows and rows of empty shelves. This should not have happened. The problem was that panic set in and when that happens, people tend to act irrationally.

Today’s supply chain

Thanks to many modern technologies, the supply chain has become extremely efficient. Using IoT and RFID sensors, retailers and distributors know where all the items are at any given time. Using advanced analytics, predictions are made as to what will sell quickly and what will not. Forecasting and delivery models allow retailers to keep the bare minimum of product on the shelf needed to last until the next shipment arrives. This extends back to the manufacturers and distributors where “Just in Time” inventory cut costs and “Cross Docking” strategies decrease time to delivery.

All this ensures that the right item, is at the right place, for the right customers, at the right process. It all works great, until something (or someone) creates a problem.

How panic buying makes it worse

Given there is such a tightly integrated path from manufacturing to retailer to us, any unforeseen blip causes a ripple throughout the system. Usually it is a small ripple, like when a school decided to have their choir wear a special outfit (true story) and there was suddenly a run on a certain type and color of shirts at one shop. This caused a depletion of inventory and special orders had to be placed. This leads to more shirts being shipped which left less room on the truck, and so on.

In today’s case, it was not a small blip. People radically altered their buying patterns. Most famously, people are buying hundreds of rolls of toilet paper instead of the common 4 pack. Others bought out hundreds of digital thermometers, taking the inventory meant to handle a weeks’ worth of purchases in a single swoop. This, in turn, creates holes in the inventory so other people start to panic that “their” stuff will soon be unavailable and the cycle continues.

Certainly, some items are at a higher demand than before the virus hit us. Items like cold medicine, perhaps fruit juices or other beverages to stay hydrated, or health care items make some sense. What doesn’t make sense is the run on chips, frozen pizza, or cereal. All of this puts more pressure on the supply chain as all involved must increase across the board instead of dealing with a blip within a contained class of items.

The lasting effect of the panic

Currently, companies are starting to dig out of the hole created by the panic buying. People are being shamed on social media for the hoarding and re-selling of items, and things are being given a chance to return to “normal.”  Products will be back onto shelves soon; the manufacturing and distribution channel will settle and life will go on.

But there will be some lasting effects of this for some time to come. Many companies use one- or two-years’ worth of data to predict demand and influence production. Analytic models will need to be trained to see the anomaly and discard the outliers.

Some will be better off with this than others. Those that have automated forecasting algorithms may overproduce or overstock for the next few seasons. Those that have the depth and breadth of data to see and correct for outliers will be better prepared to effectively manage the year-to-year anomalies.

A good lasting effect of all this will be better preparedness for the next crisis by being able to look at what happened and determine what the trigger signals are that predict these types of situations. All of this means that once again data and analytics, and the effective utilization of them, will make companies more effective and more responsive to their customer needs.

Even alone, we all work together

At Teradata, our mission is to “transform how businesses work and people live through the power of data,” and I firmly believe that is true. I have seen how this has occurred for over 30 years as we helped various industries become better, which in turn allows people to live better lives.

Think about that as we go about our daily lives, physically separated but still connected in the giant web of community.