COVID-19 has had an enormous impact on companies’ planning processes. “You can’t ignore it,” says Chainalytics’ Juha Martikainen. “The pandemic has taught us that you have to be prepared to deal with uncertainties. You need to adapt quickly to changing circumstances.”
Interview via Supply Chain Magazine
Based out of Helsinki, Juha Martikainen has been consulting on supply chain management and related planning processes for over 20 years. He advises companies on optimizing their demand planning, inventory management, and procurement processes. Chainalytics not only provides counsel but also helps implement strategies and tools. “We do that in a variety of verticals. In Europe, we work mostly with FMCG companies. However, certain regions have their predominant sectors – e.g., in Northern Europe, we are very active with companies in heavy industry. Our customers range from multinationals to large- and medium-sized businesses.”
He sees the pandemic having a long-term impact on the planning space for years to come. “Some companies have seen a huge boost from COVID-19 while others have come to a virtual standstill. In any case, virtually every company has felt the effects of coronavirus, and the importance of a continuous planning process has never been more apparent.”
“Companies that have prospered due to higher COVID-related demand have dealt with shortages of both raw materials and available capacity, Juha continued. “Those that saw their sales decrease had to slash costs quickly – and many have had to make major changes to their product portfolios. As a result, companies in both camps have an urgent need for a Sales & Operations Planning (S&OP) process or an Integrated Business Planning (IBP) process to be able to make those up or down planning decisions with an understanding of the effects on profitability.”
Some companies use off-the-shelf software to forecast – they put past sales in, and a prediction comes out. But what exactly happens is a mystery to them.Juha Martikainen; Principal, Integrated Supply and Demand Planning at Chainalytics
Relying on historical data in demand forecasting is doomed to fail.
“Most companies that engage in demand planning and forecasting, Martikainen explains, rely on historical data as a base for their statistical forecasts. But that is no longer possible because the pandemic has turned everything upside down. The values of the recent past no longer have any relevance. Some companies may use off-the-shelf software to make forecasts – they put past sales in, and a prediction comes out. But precisely, what the process entails is a mystery to them. That lack of insight is now taking its toll, and the disruption will undoubtedly continue for a good while longer.”
One answer to tackle the lack of accurate statistical baseline forecasting is the use of scenarios. Martikainen sees many companies now turning to the “what-if” approach. “You try to model the uncertainties. What happens if the demand for a certain product completely disappears? What happens if a certain raw material is not available? How should you react to that? Scenario planning used to be a nice option to have. The pandemic has made it a must-have tool for decision making.”
Martikainen has observed with satisfaction that employees’ knowledge and skills are now given more significant value. “Senior staffers with mountains of experience are now more appreciated than ever. But making full use of that experience requires that a company builds a structured demand planning process.”
Hasten change with artificial intelligence and demand forecasting as a service.
The pandemic has shown that companies must learn to deal with uncertainties as part of the ordinary course of business. They need to adapt quickly, perhaps even going as far as serving new markets with different products. “Many customers have data on hand to make use of the latest developments in machine learning as applied to demand planning, but they don’t have the data scientists who know how to employ that data as useful information for the demand planning process. At Chainalytics, we offer that skill set. But we can go beyond consulting and provide full managed analytics services to our customers, allowing them to access and apply the knowledge faster.”
Understandably, companies are increasingly asking themselves whether they should keep everything in-house. Data scientists, for example, are expensive and in short supply. Right now, companies need that capability as part of the planning process. It’s convenient and cost-effective to purchase that as a service and reap the benefits of the latest advancements in demand forecasting. “We work with state-of-the-art planning tools, with built-in artificial intelligence. You need that in a world where traditional statistical forecasting just doesn’t work any longer.”
Enjoy the Supply Chain Magazine article in the original Dutch here.
Is your tried-and-true demand planning process no longer delivering the goods? Maybe you need to bring new brains and brawn to bear on the task. Drop us a line and see how managed analytics from Chainalytics helps you get a new process online quickly enough to matter. Using one-of-a-kind tools and approaches like digital assets and managed analytics services, we consistently deliver actionable insights and measurable outcomes to our clients.
