How Best to Meet the Supply and Demand Challenges Presented by E-Commerce:
Even before the global pandemic in 2020 caused a spike in internet shopping, e-commerce was changing the concept of retail shopping and putting greater demands on companies to meet customer expectations.
As a result, businesses have learned to embrace sales and operations planning, or S&OP, as a fundamental practice within their organization to transform how they respond to market demands and customer expectations. Data is now king and using it in the forecasting practice more commonplace as a tool necessary to anticipate customer behavior.
The S&OP process involves increased collaboration among business divisions, the development of consensus across the business to assess revenue, manufacturing, and inventory, and sophisticated use of data to accomplish this. The idea is to align business plans with goals and to improve revenue.
The focus on using S&OP has increased since the COVID-19 pandemic, prodding companies to turn to the concept and its promise of predictability, more reliable forecasting, and inventory optimization. This has become even more crucial in the wake of supply chain disruptions brought on by the pandemic, after shutdowns impacting countries, industries, and businesses. The emerging use of online shopping by consumers already contributed to supply chain hiccups before the virus, but the pandemic magnified problems with the simultaneous increase in demand from new consumers flocking to the internet and decrease in supply caused by reduced manufacturing and limited components needed to produce products.
As a result, many companies have morphed into direct-to-customer businesses, eliminating the traditional retail middleman as they expand their operations online where customers have grown exponentially. To do this successfully, these businesses have adopted specific strategies.
First, they increased their investment in advance technology that can be used to effectively implement an S&OP process. The technology is critical to taking advantage of these efficiencies, including inventory optimization, hassle-free ordering, quick delivery, and real-time shipment information for customers.
Second, these businesses made the use of data and analytics a key component of their executive decision-making processes. This change in philosophy for many businesses has allowed them to take advantage of important insights that the data and analysis provide. This is not only a boost to their short-term planning, but also to their long-term decision-making exercises.
And third, the companies employ scenario planning and forecasting in their decision-making process. Of course, this is greatly enhanced by their use of data and analytics. It’s also evidence that the traditional method of forecasting is no longer acceptable as a way to measure customer demand and product supply. It’s more complicated now, but also easier to quantify through the use of more sophisticated tools that make the process simple and reliable. In fact, the more sophisticated tools make managing the supply chain much easier, leaders have found.
With all the challenges that businesses and manufacturers face in the wake of e-commerce expansion and the pressures presented by the pandemic, the S&OP process has offered companies an effective solution to tackle those problems and conquer new opportunities.
