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Texas was blanketed in white this month as the deadly winter storm and single-digit temperatures moved across the South. The cold blast continues to upend supply chains, resulting in restaurants having to throw out expired food, grocery stores to close early amid stock shortages and residents to struggle to find basic necessities.
The food industry is by far one of the biggest industries in the world. Unfortunately, it’s also one of the least efficient. In times of catastrophe, such as during the Covid-19 pandemic or this week’s winter storms, this inefficiency can become not only wasteful but also life threatening. This week’s deep freeze is a tragic example, as it has left many Texans struggling in need of power, water and food.
Amid this catastrophe, we must stop and ask ourselves: Could we have been better prepared?
Forecasting and demand planning tools are probably not the answer to getting through the current severe disruption to the food supply chain. But for future weather disruptions, demand planning is one of the few things that can help suppliers, restaurants and other players in the foodservice industry better prepare for the storm.
What's Happening Across the Food Supply Chain?
As if 2020 wasn’t enough, this storm is causing suppliers across the food supply chain to suffer additional woes and food shortages are felt at every step of the way.
Local farms have been wiped out by the cold in what will be remembered as the “Valentine’s Day Produce Massacre.” Besides fruit and vegetables, poultry and cattle are freezing to death, while reports are showing that $8 million worth of milk has been dumped because dairy plants are suffering from power outages.
In addition, most of the trucks in Texas are not equipped to drive on icy roads, not to mention that ever since the pandemic there’s been a shortage of truck drivers.
Some grocery chains that managed to remain open have been forced to close before sunset so shelves can be restocked overnight. Across all grocery stores, hard-to-find items include beef, bread, deli meats, frozen pizzas and milk.
Those who can are stepping up to help with relief efforts. Restaurants that have not lost power are welcoming people in, offering them a place to hide from the cold and free coffee. Food banks in Texas have gone into disaster mode and are ramping up operations to tackle the surge in hunger.
Weather Forecasting Applied to Supply Chain Management
The fundamental challenge of supply chain management is to match supply with demand in a responsive, accurate, and cost-efficient manner. The ability to meet this challenge can be seriously compromised by disruptive events such as this week’s storm.
Weather forecasts and history are crucial for understanding the mechanics of disruption, as well as options for mitigating the consequences and speeding recovery.
Indeed, weather has a profound effect on the food industry. Unexpected weather disruptions can lead to bottlenecks and longer lead times.
It can, for example, cause demand shifts due to spikes in demand for fuel and bottled water; prevent a factory or retail store from operating due to damage or power outages, leading to capacity reductions; or cause severe communication disruptions due to loss of cell phone, Internet, or point-of-sale systems.
Most suppliers across the foodservice industry understand that the resilience of the food supply chain depends on their ability to understand and respond to such disruptions. In fact, nearly half of all food industry professionals rank weather in their top 3 external factors driving consumer demand. It’s no wonder, then, that weather forecasting is becoming an increasingly popular planning tool among food suppliers.
Some ways retailers and suppliers are using weather data including:
- Sales forecasting in the short term
- Planning of stock availability
- Planning of deliveries from depot to store
The most obvious benefit to using weather data in planning consumer demand is improved on-shelf availability. This can be particularly beneficial in case of extreme weather conditions, such as the recent winter storms. In addition, weather forecasting can greatly improve sales forecasts, help reduce waste and enhance customer service.
Weather Forecasting & Demand Planning in Action
There’s no question that weather can greatly affect product demand. But how can retailers really prepare for supply chain challenges caused by weather disruptions?
The trick is to get it just right. On the one hand, inventory teams don’t want to be caught by surprise and and fail to order enough stock to meet the demand increase.
On the other hand, overestimating the weather’s impact and seeing less of a demand increase than what they’d planned for will result in excess stock. For shelf stable products this means a capacity challenge while for perishable products it means running the risk of suffering considerable financial loss from shrinkage.
So what information should suppliers across the food chain look at for better inventory planning?
- Analyze historical data: Look at historical sales by store location, product, and product category against the weather over time. This will help you draw lines between certain products and weather conditions. It will also help pick up on missed opportunities, where sales could have increased if the weather conditions was taken into consideration.
- Develop a product demand forecast plan: Develop marketing, purchasing, production and distribution plans based on historical consumer demand data and future weather forecasts.
- Prepare for a ‘What-if’ scenario: Even the best plans can become irrelevant in case of an unpredictable emergency. Since weather conditions are ultimately dynamic, there’s only so much you can actually plan for. What you can do, however, is to run ‘what if scenarios.’ Visualize the worst possible weather disaster and test your system to see how it handles deliveries, orders, stock levels, and spoilage throughout the supply chain. This is a crucial step in predicting potential financial losses and making informed, risk-based business decisions.
Facing extreme weather conditions and other supply chain challenges, having the product the customer wants, where and when they want it, is key to meeting consumer expectations and bottom line growth.
Distributors and retailers in general might not be able to guarantee smooth sailing through unexpected disruptions, but with increasing sophistication and accuracy, demand planning tools can put you one step closer to stocked shelves and happy customers.