Planning for the Unplannable: Rage Against the Storm

You're in Boston, buried under seven feet of snow, with more on the way. You want to buy a roof rake to keep your roof from collapsing, but the stores are all sold out. You want to get new gloves because your old pair wore out from shoveling  the last two feet that fell, but they're all gone too. You decide this is the year you'll finally invest in a snow blower, but none of the stores appear to have any of those left either. So you just rage against the storm — and perhaps against the retailers that didn't seem prepared.

Snowstorms, flooding rains, hurricanes and other predictable acts of Mother Nature pose unique challenges for retailers and their CPG suppliers. First of all, although these weather events are predictable, there is not a lot of certainty about their path or severity, evidenced by the "biggest storm ever" proclamations of New York City Mayor Bill de Blasio for the storm that never came. And who could have forecast ahead of time that Boston would get more than seven feet of snow in less than a month? Which raises the question of whether retailers and their suppliers can actually plan for these types of events or not.

The answer is "yes" you can plan for these types of events, but not with the planning systems most commonly in use today. These systems base their forecasts on historical shipments out of distribution centers. Not only are these forecasts not very accurate even in good weather (forecast error remains stubbornly high), but they are especially inadequate during adverse weather events because they cannot react quickly enough to rapidly changing conditions. What is needed is a new, agile and integrated process that allows retailers and suppliers to pre-position inventory in the right locations and then react quickly as storm conditions develop.

There are three major components of this new process, all of which must interact to form a cohesive response to changing conditions. The first is real-time forecasting and replenishment planning to continuously evaluate and update plans as the storm progresses. The second is an integrated execution capability, including distribution and transportation, that can rapidly react to changing plans. The third is store-level workforce scheduling and task management capabilities to get the influx of products on the shelves and handle the increased customer traffic.

Real-time forecasting and replenishment planning begins with the first weather forecast of an impending storm. Many of the latest forecasting systems can now incorporate weather forecasts into their planning algorithms. Based on past experience of sales patterns during previous storms, the system would factor the path and expected severity into its replenishment calculations. Additional quantities of merchandise likely to be in demand prior to and during the storm, such as warm gloves, hats and footwear, or snow shovels, groceries and snow disks, would be prepositioned at local DCs and in stores to meet expected demand. The key is that the forecast and replenishment plan must be continuously updated as the storm progresses; shifting more inventory to the areas where the changing storm track dictates and less to those areas that will likely be spared.

The prepositioning and shifting of merchandise requires integration with the second major component: constraint-aware execution. The old pattern of plan-then-execute must be replaced with a much more agile planning-and-execution loop that continuously adjusts both plans and execution as new forecasts and constraints appear. For example, there is no reason to create a plan to replenish X amount of inventory in each store in the impacted area if any of the following constraints exist:
  • There is insufficient inventory available within a given area and timeframe
  • There are not adequate transportation resources to make the deliveries
  • Road conditions will prohibit delivery within the needed window
  • There is insufficient labor available in the DC to pick, pack and ship the inventory
  • There is insufficient labor in the stores to unload and put the inventory on shelves
If any of these constraints are detected, the replenishment plan must be adjusted accordingly, a process that is repeated as new constraints become known. More inventory is quickly brought in from other locations or suppliers. Additional transportation resources are contracted. Additional associates are scheduled. And all of this must be flexibly adjusted as the storm track or constraints change.

The final component is in-store execution. Associates must be scheduled to unload the additional merchandise, stock shelves and restock as they are depleted. Others must be scheduled to assist customers and staff checkout lanes. And these plans must likewise be adjusted as storm conditions change or new constraints appear.

Thus, you can plan for unplannable storms with agile, integrated and constraint-aware planning and execution systems. Otherwise you will lose sales opportunities and customer loyalty as you rage against the storm.

Tom Kozenski is vice president of industry strategy at JDA.
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