Forecasting and Supply Chain Management Issues as U.S. Economy Reopens
Now that Massachusetts and Connecticut have joined the group of states that have re-opened, all fifty states are cautiously proceeding towards an economic recovery. March and April business results were down anywhere from 50% (e.g. automobiles sales) to over 90% in air travel and hospitality industries. Hopes for a V-shaped recovery were dashed as the reopening of the economy will proceed on a state-by-state and city-by-city basis throughout the summer, as states try to avoid a second wave of the pandemic in the fall.
Regional Approach to Forecasting
For forecasting, the most relevant statistic may be that while 40% of the nation lives west of the Mississippi River, only 20% of the CoVID cases are in that region. Rightly or wrongly, states in this region are opening quicker and should see a faster recovery in sales. In addition, some states in the Sunbelt, namely Florida and Georgia, are also reopening on a faster timetable. From a forecasting perspective, it is important to forecast at a regional, or even a state level to see the individual trends and roll-up the state or regional forecasts to get a clearer view of 3rd and 4th quarter sales. From a supply chain management perspective, inventory should be shifted from east to west and from north to south.
Product Mix Considerations
Drilling down into the demand forecasting issues, some of the more complex issues in forecasting will be the effects of the pandemic on product mix. There will be an uptick in demand for single use consumer items such as plastic and paper products. Commercial demand for smaller size boxes and packaging materials will continue to rise. As much of the workforce and student population remains at home, the outlook for laptops and desktops is more positive than for mobile phones, which has suffered problems in both supply and demand.
Issues in Life Sciences
In Life Sciences, the effect of CoVID has been felt as many healthcare professional offices remain closed or have limited appointment hours. For patients refilling medication, there is a growing trend towards patients receiving greater quantities of therapy at each refill resulting in fewer visits. Tele-medicine has been touted as the wave of the future in medicine, but it remains to be seen how successful this will be. For routine lifestyle medications and prescription renewals, tele-medicine may become the norm. However, for complicated specialty pharmaceuticals which require thorough physical examinations, multiple rounds of lab tests and in-person consultation, new specialty pharmacy prescriptions written may not recover to previous levels before September or October.
As the economy re-opens, RoadMap advises that clients take a bottoms-up approach to forecasting and supply chain management, realizing that there is no magic switch that is going to turn the economy back on everywhere. Every state has their own unique curve based on exposure, population and timeline and therefore should be treated as individual economies, similar to industries, products and services that are allowed at state levels but not nationally. “National” forecasting should now, more than ever, be aggregated from the most granular level. Forecasting reviews must also be frequent and flexible while heavily weighing the most recent few weeks of data, realizing the inherent uncertainty around forecasting with just a few relevant data points.