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Transportation and Logistics

How to predict supply and demand? Track the virus

Tracking COVID-19 across the globe can help increase preparedness in many sectors, including in supply chains.

Case in point: Long before the phrase “social distancing" would become part of our everyday vocabulary, before COVID-19 would be declared a pandemic and go on to paralyze the world, a Canadian-based artificial intelligence company, BlueDot, alerted people about the unusually devastating flu-like cases coming out of Hubei Province in China. By tracking a number of related variables including airline bookings out of China, BlueDot could even predict where the virus would spread next. Unfortunately, the warnings were largely ignored for three months.

Intelligence about the movement of the virus is useful for public health officials as it serves as a warning about where and how the  novel coronavirus will likely land and peak. Counties can prepare hospitals in advance and gear up for an anticipated increase in patients seeking medical intervention.

The same kind of intelligence, says Neil Saunders, managing director at GlobalData Retail, is valuable for another reason: to track demand and supply so supply chains can bolster themselves accordingly.

Virus infects consumer demand

While retailers are understandably worried about supply chain issues on the manufacturing side, it is also important to pay attention to consumer demand. “The biggest problem for retailers right now is that customers aren't buying [discretionary] items,” Saunders says, “Retailers are saying they can't sell stuff because their doors aren't open. It is why Gap has now cancelled its orders two seasons ahead,” he adds.

Even once stores do open gradually, companies need to track demand, experts say. Global consulting firm McKinsey advised  retailers to work on supply chain issues by keeping an eye on demand. “A crisis may increase or decrease demand for particular products, making the estimation of realistic final-customer demand harder and more important,” the report said.

3 ways to forecast a rise in consumer demand

  • Tracking the virus
    To track demand, track the virus. Our COVID-19 tracker might be a good place to start. “Different countries will have different curves of the virus at different times,” Saunders says, which means social distancing rules and enforced lockdowns in the wake of a growing number of cases will again depress consumer demand. The take-home message according to Saunders: the pandemic will likely go through cycles peaking and waning in infection rates. Keeping an eye on that rate will be a good way of forecasting consumer demand.
  • Tracking the opening of businesses
    The app StreetCred works by crowdsourcing data about places in cities. Users update information about the places they visit in real-time. The application has become especially useful during the pandemic as a way of letting users know which establishments in their city are open for business. Sushi Yu in Brooklyn, NY, we learn has changed its hours in response to the pandemic while Terrace Bagels is offering takeout.
    While these individual data points might not mean much, together they tell a tale about recovery (or not) from the pandemic, says founder and CEO Randy Meech. “By tracking these trends over time and geography, we can understand the short and long-term effects of the virus on specific local and regional economies," he says, “this data will become increasingly vital in determining a path forward." Equally important, like a canary in the coal mine, business openings can signal an uptick in consumer demand and supply chains can adjust accordingly.
  • Tracking pre-orders and backorders
    Retailers are offering pre-orders and backorders as a way of cushioning supply chain shocks. And consumers are responding. Judging the growth of such orders and consumer reaction to them is another way of keeping a finger on the pulse of consumer demand.

Accurately predicting consumer demand is one of the key ways of ensuring supply chain resilience. And tracking the virus around the globe might give retailers the crucial intelligence they need to make it through the pandemic — and beyond.

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