Demand variability: 4 action steps to take in a time of crisis

 Demand variability: 4 actions steps to take in a time of crisis

1. Maintain transparent, proactive relationships with your suppliers.

Ensure your key suppliers have full visibility in your projected demand, preferably in real-time, to secure inventory for building safety stocks. Having good visibility of both demand and supply enables an organization to manage demand signals more accurately, respond to customer requests faster, and smooth the effects of demand variation.

2. Activate alternate sources of supply

If you have multi-sourced key inputs, move quickly to activate secondary supplier relationships and secure additional critical inventory and capacity. Explore potential opportunities to establish shared resource pools for raw materials inventory.

3. Reduce lead times

Long lead times increase the probability of a bullwhip effect, so find ways to reduce lead time from sources of supply. It also allows you to react quickly to changing demand.

4. Update inventory policy and planning.

While timely review and proactive adjustments of the three buffers – inventory, time and capacity – ensure better handling of demand variability, most companies won’t have inventory buffers for the magnitude of disruption caused by the COVID-19 epidemic. Therefore, consider how you will refine your inventory strategy to mitigate the risks of potential supply shortages.