I was recently laid off along with some other very talented employees. Like many people in my situation, my departure was not performance based; it was simply an outcome of business results not meeting expectations. My former employer expanded during COVID expecting the prior year’s record growth to continue. I was hired (along with others) as departments were expanded to handle the additional growth during these go-go times only to find that as the fiscal year progressed sales did not materialize,  and demand dropped to pre-Covid levels.

After working through the grief associated with a job loss, I began to reflect and notice many headlines and stories of organizations struggling with excess inventory having over projected their demand in reaction to the COVID frenzy for inventory. There are seemingly weekly news stories of one retailer or another offering steep discounts to sell through older excess inventory. I get emails daily from premium clothing companies offering 50-70% discounts on assorted apparel. Recently, Funko, a toy company, decided to landfill $30 million in toys. In mid COVID, we heard stories about Peloton over estimating demand as “work from home” brought on other nesting behavior and a forward buying pattern on their exercise equipment. Nike and Adidas are still struggling with their tremendous accumulation of inventory. It seems like many businesses are struggling with excess finished goods or raw material inventory levels, while sales are falling short of projected demand growth.

I consulted with my friend and mentor Pat Bower to get his thoughts on what was happening. Pat offered the following, “the simplest of inventory equations is on-hand inventory minus demand to arrive at some requirement for purchase or production – unfortunately most organizations expected the COVID spiked demand to be permanent and increased their forecasts, which in turn increased their inventories.

As supply chain issues began to diminish over the last six months, many organizations are now realizing this mistake, and lowering their forecasts. We now are being snapped by the end of the bullwhip where we have diminished demand slowly consuming excess inventory. The sad part of this equation is that organizations hired people, like you, based on the increased forecasts. It is one thing to carry excess inventory, it is completely different to impact people’s lives and professional standing.”

Organizations hired people based on the increased forecasts

Pat’s words made my job loss less painful. It did make me wonder about my own planning behaviors during COVID and what I could have done differently. After chatting with several colleagues and considering my own actions, I came up with a few changes I think might help others when the next disruption happens. I share these below:

Actively Manage Lead Times

During my conversations with Pat Bower he offered that “many planners did not track the ever-changing lead-times so when the transportation times gradually declined on the back end of the COVID disruption, most planners were slow to react. Nearly every disruptive event alters lead times, so it is prudent to constantly monitor this critical supply chain parameter”.

Pat noted that many folks have written or talked about lead-times during COVID to explain what happened, yet few have talked about what should have been done. Best practice suggests that lead-times need to be re-evaluated and updated routinely to maintain proper data integrity in your MRP planning system.

It is very clear to me that during a disruption, lead-times should be tracked and adjusted rigorously. Regularly updating lead-times enhances an MRP’s ability to calculate realistic planning schedules, projected inventory levels, and future delivery requirements to maintain service and inventory balances. As the COVID backlog started to clear at the Port of LA, planners should have correspondingly tapered down lead-times. We all collectively underreacted to these improvements – this was an important learning for me.

Rationalizing Demand Surges

Receiving large orders that exceed projections is exciting; however, it is crucial to consider their impact on future demand. Treating them with optimism is natural but if COVID taught us anything, skepticism is essential. For example, if Peloton’s leadership approached their COVID induced demand surge with skepticism, perhaps they would have considered demand was being “pulled forward” from the future due to the extraordinary circumstances and adjusted their future forecasts accordingly to account for the accelerated demand – but they didn’t. Peloton’s CEO John Foley said during a call with shareholders, “It is clear that we underestimated the reopening impact on our company and the overall industry”. In January Peloton reported pausing production of new bikes as warehouses were filled with excess inventory.

If Peloton approached COVID induced demand with skepticism, they might have known demand was being pulled forward

During post Covid discussions with colleagues it became obvious that we experienced a few different types of demand surges. As an example (unlike Peloton), we experienced some noticeable increases in demand (both quantities and frequency) for some product families that were experiencing raw material shortages and increasing backorders. During our demand and supply review meetings we discussed the likelihood that the demand surge might be caused by the bullwhip effect – but, in the end, we still held our higher, less rational forecast levels. Eventually, many of these bullwhip orders were cancelled, depressing sales, and bloating our inventory. We believed the story we told ourselves of increasing demand. Unfortunately, when demand dropped post COVID, our financial plan took the hit.

In both examples, it was a challenge to fully understand what was driving the surging demand. Was it pent up demand, was it bullwhip, was it changes in the market, was it overall material availability? What impact should the changing demand patterns have on forecasts? Do we forecast the growing trend or account for other variables?

We read the demand signals incorrectly and overestimated future demand and over ordered materials

The demand surges created a lot of changes that we didn’t fully understand. The stepped-up volume was not because we were different, offering a better product, or were more cost competitive. It may have been because we had product on-hand, or that customers were trying to hoard available inventory. In each example we read the demand signals incorrectly and overestimated future demand and over ordered materials. We could have done better at evaluating what was driving the increased demand. We failed to rationalize or contextualize demand surges.

Customer Inventory

One of the most important learnings was something Pat said, “most companies failed to even ask the question about how much inventory a customer was carrying, yet it was the first thing I did. I built models to track customer inventory to see if they were hoarding”.

I realized we didn’t check our top customers’ inventory levels as we should have. COVID changed many demand patterns making it even more important to check customer inventory levels to help explain changing or surging ordering patterns. Pat mentioned that at the start of COVID Amazon began to noticeably increase order sizes, in some cases quadrupling their normal order quantities. He began to question the increased order volume and did an analysis to evaluate Amazon’s likely inventory position.

Amazon began increasing order sizes, in some cases quadrupling their normal quantities

Since they have POS consumption data, they were able to estimate inventory levels. The analysis did not support Amazon’s increased order volume, and to prevent hoarding, his company worked with Amazon to reduce their orders. This simple step maintained the supply and inventory balance, avoided disruptive inventory builds, and protected other customers. Checking customer inventory levels made a difference and was a missing element of my analysis.

Inflection points

Many businesses ignored the early signs of softening demand as sales began to miss inflated forecasts as COVID was winding down, influenced by the positive bias that the strong, year-over-year sales growth would continue without understanding what exactly had inflated them. Businesses were slow to react and even loaded the early misses back into future months believing the record sales growth trends would continue.

Having been a part of many of these conversations in demand review consensus meetings, I can attest to the difficulty they present. Forecast reductions are difficult for business leaders to admit to – no one likes a negative Nelly. Increasing a forecast doesn’t generate the same hard questions and actions like dropping a forecast might  Lowering a forecast will meet with far more resistance.

Forecast reductions are difficult for business leaders to admit to

However, to prevent overplanning and excess inventory we need to be intellectually honest and provide equal scrutiny to both raising and lowering of forecasts. Further, and collectively, we could have done a much better job estimating where we were in the disruption cycle; if we knew we were in a recovery phase we would have made decisions to not build inventory, or to lower forecasts earlier. During disruptions, short term information is better than long term information and should be leveraged to make better short-term decisions that would have prevented spreading an increase in volume over a longer horizon. This is the long way to say that a down period should have created a reduction to the forecast. It did not. Lesson learned.

Final Reflection

A few thoughts immediately come to mind. First, not understanding demand surges (during a disruption or otherwise) is just negligent supply chain behavior. Second, having happy ears may be good interpersonally, but not when supply chain planning – it is best to be “Joe Friday” of Dragnet fame and be about just the facts. Third, visibility into a customer’s inventory tells you what they are doing. During disruptive times, your customer may be hoarding and that could be creating a false demand signal.    Understanding their inventory may be instructive on managing your supply chain in a more stable fashion.

COVID was disruptive, but the abandonment of best practices was also evident. I am temporarily out of a job as a result. Lesson learned for me – and hopefully my journey has been instructive.

As another tumultuous year draws to a close, it goes without saying that our lives have been impacted like never before. And this is no different, particularly for our IBF membership base, as well as other demand planning and forecasting professionals who have had to navigate their companies through this unprecedented time.

This pandemic is arguably the largest global disruption in recent decades, affecting not just what consumers purchased, but when they made purchases, the quantity they purchased and, of course, how they made their purchases in terms of the platforms used.

These behavioral changes have been extremely compressed – what typically takes years to evolve, took place in a matter of months or even weeks.

Consumer behavior is one heck of a thing. Along with supply shortages, one of the key reasons demand has been so difficult to predict is fear. During the pandemic we saw a type of fear known as food insecurity – a primordial reaction to scarcity of food, or at least the perception of it. This wreaked havoc on demand patterns making business planning even more difficult than ever before.

In this new environment where historical data offers little insight into the future, our IBF members were looking to us to learn how to manage supply and demand. As a result, just like many school systems around the world, we created virtual programs to disseminate the knowledge they needed, helping professionals guide their companies to success in the most difficult of times. Plus, as our face-to-face conferences and meetings came to a screeching halt, I am proud to say the IBF was quite prolific in developing new products and services in an effort to help companies and planning professionals remain confident during times of great uncertainty.

IBF Showed Planning & Forecasting Professionals How To Survive The Pandemic

At the beginning of the lockdown, we kicked off our first Virtual Town Hall back in March of 2020. This was a free program with open discussions with top leaders at global brands with the aim of helping our tribe navigate the rough waters of the pandemic when we knew our forecasts were going to be severely wrong.

For that first Virtual Town Hall we had 3000 people attend – an IBF record! Do you think IBF delivered? Actually, we didn’t. At least not on the first attempt. So what happened? Well, if the whole world jumped on Zoom at the same time, what do you think would happen? Think rush hour traffic times 1000. Our webinar system crashed – another victim of changing behavior during the pandemic. (Of course, the irony was not lost on us that a webinar about managing demand was impacted by excess demand). So, what did we do? We asked everyone to send in their questions via email and we recorded the town hall panelists without an audience. And then, we disseminated the recording back to the community which was very well received.

You can see that first Town Hall recording here. It’s as relevant now as it was when lockdown started. Plus, you can watch all of our past IBF Town Halls online and other valuable webinars. It’s all FREE.

Through our monthly town halls, we delivered regular webinars that shared how to make confident planning decisions, step-by-step. Much of it centered around modifying S&OP to react quicker to demand shifts, and the crucial component of planning in good times and bad – cross-functional collaboration.

And of course, delivering forecasting and planning education being a part of our DNA, IBF transitioned its multi-day corporate training seamlessly to the virtual sphere. We delivered our Demand Planning, Forecasting and S&OP/ IBP Boot Camps virtually. We delivered our Corporate Training for enterprise members virtually as well. Essentially, we continued to teach the fundamentals to ensure planners had the tools and knowledge to manage during this difficult time. You can find out more about our Corporate Training.

And I urge you to check out our events page where you can register for upcoming webinars and town halls too.

Plus, with our members holding back on travel, and still having a strong desire to learn and develop professionally, our eLearning platform surged with registrations during the COVID-19 crisis. This platform allows professionals to learn the fundamentals of demand planning and S&OP at their own pace, on-demand. :

The Planning Community Showed Resilience In A Crisis

For those that were furloughed, the IBF gave free access to conferences for those who had lost their jobs. The idea was to keep them active and prepared when they would be welcomed back into the workforce, and to let them know the community was in some way supporting them.

The planning community as a whole wasn’t idling by either – several hundred planning professionals passed through our Certified Professional Forecaster (CPF) program in 2020 and 2021. In a downturn when layoffs are happening and many people are forced to apply for new jobs, this certification is a way to let employers know that you’re at the top of your field and can hit the ground running in a forecasting, demand planning or S&OP/IBP role.

And of course, such credentials give confidence to the professionals themselves that they know what they are doing and can approach planning roles knowing they have the skills to deliver. On that note, IBF has recently improved its Jobs Board, where companies can post their planning and forecasting positions to reach the largest group of S&OP and forecasting professionals in the world. Again, this is FREE!  So if you’re looking for your next move, or are hiring, go check it out. We also have our highly popular LinkedIn jobs portal page connecting thousands of job seekers and hiring managers/recruiters.

It wasn’t long before companies realized that a return to growth in this period of unstable demand and supply shortages required planning professionals. We were needed, and continue to be needed, to sort out this mess, and planning job vacancies started appearing again.

Beyond that, we launched the IBF On Demand podcast, led by Eric Wilson, to advance these discussions. It is available on YouTube, Spotify, and whichever service you use for podcasts.

IBF Provided Forecasting Expertise To The Government

We also volunteered our expertise to government agencies as Dr. Chaman L. Jain, Editor-In-Chief of the IBF’s Journal of Business Forecasting and author of our Fundamentals of Demand Planning and Forecasting, IBF’s body of knowledge book, was part of the Center for Disease Control’s (CDC) COVID-19 forecasting team, predicting numbers of cases and deaths. Dr. Jain’s forecasts regularly achieved 99% accuracy, which was not too shabby. He continues to provide forecasts on COVID every week at Demand-Planning.com.

IBF Launched Its S&OP Maturity Model Self-Assessment Tool

We also launched IBF’s S&OP maturity model to help companies identify gaps in their S&OP across People, Process, Data, and Technology. You can complete this free S&OP self-assessment on ibf.org, for free. It will give you tailor-made recommendations and resources to help you reach the next stage in your S&OP maturity.

We also relaunched our consulting services, providing word-leading guidance to companies looking to implement or improve S&OP and demand planning/forecasting processes. To gain a sense of what we could do for your company, click here and reach out to us for a discussion.

IBF Launched A New S&OP Certificate

We also launched our S&OP certificate that is a gateway to full CPF certification. It’s a quick and affordable way to show employers that you have a solid foundation in the field. It’s also the only certificate of its kind. They are associated with our S&OP/ IBP Boot Camps, with the boot camp training providing the knowledge required to earn the certificate. Information on the certificate and boot camp can be found here.

IBF Launched A Corporate, Enterprise Level Certification

During the pandemic, we launched our IBF Corporate Certification. This pandemic has really been a stress test on our S&OP processes, highlighting any underlying weaknesses. Corporate Certification validates a company’s capabilities and shows that they can withstand not only pandemics, but natural disasters, new legislation, and other unplanned events.

IBF Launched A New Predictive Analytics Book

This year, we released IBF’s new book, written by Eric Wilson, Predictive Analytics For Business Forecasting, which is now required reading for IBF’s Advanced certification program, ACPF. It is your guide to leveraging advanced analytics in the age of big data. Make no mistake, data is forcing the field to evolve, and this will help you keep pace with cause-and-effect models and proper data management, including use of internal and external data, and structured and unstructured data.

IBF’s new book is available on ibf.org and Amazon.

IBF Chapters Continue To Grow

We’re also forming IBF student chapters, the latest being at the University of California, Berkeley, led by energetic and bright young minds. That’s in addition to our existing New York Metro and New England chapters. For more information on attending a chapter meeting (or starting your own!), click here.

IBF Returned To Face-To-Face Events

October 2021 saw our return to face-to-face events with our flagship Orlando conference. It was a much welcome opportunity to connect with old friends and new. At the core of IBF conferences is learning new approaches, new methodologies, and new technologies. That’s not to mention taking advantage of new opportunities to improve the companies we work for and our skill sets, and taking charge of our careers .

Our full schedule of conferences and face-to-face training is available to view here. For 2022 we have events in Chicago, Orlando, Chicago, Las Vegas, New Orleans, Scottsdale, Seattle, and more.

In October 2021 IBF made a return to face-to-face events in Orlando.

IBF Is Celebrating Our 40th Year Anniversary

2022 marks the 40th year IBF has been fostering the growth of demand planning, forecasting, S&OP/ IBP, predictive analytics and the careers of those in the field.

We couldn’t sit on the sidelines to wait this thing out. Our team at IBF remained intact and we stand ready to serve the planning and forecasting community for our 40th year and beyond.

In 2022, IBF is celebrating its 40th anniversary.

I want to take this opportunity to thank our IBF members for your support, and all professionals who have contributed their knowledge to a conference, town hall, webinar, article, book, panel discussion, or podcast over the last 2 years during this transformative period. This knowledge exchange is what keeps the community going, keeps myself going, and the field advancing – in good times and bad.

Thank you.