In the supply chain world, an ‘event’ is not a party – there’s no champagne, no balloons or streamers, no guest of honor. Rather, an event is a sales or marketing activity that is intended to change demand for certain products and/or markets during a particular time-frame. The problem with events, from a supply chain perspective, is that they are, by definition, intended to change demand, and the supply chain must proactively prepare for that change in demand.
Supply Chain Planning
The demand change is not anticipated by the mathematical forecast unless the event is repeated on a fixed schedule. A sale, promotion, or coupon event that runs at the same time every year is not an event in this context, it is a predictable part of the sales and marketing process. The demand change, from such a repeated action, will show up in the forecast as the system will assume that the same action will continue and the additional inventory will be needed. If the repeating action is discontinued, planners must adjust the forecast to avoid oversupply during the period when the action will not trigger increased demand.
In the case of a real event – one that is not simply a repeat of previous actions – planners must anticipate and provide for the temporary increase in demand that the event is expected to generate because the forecasting system has no way to anticipate this future action. It must do so far enough in advance to get the product into the distribution stream in order to meet the increased demand. Promotional cost and effort is wasted if there isn’t enough inventory in the distribution channel to support the increase in demand. It can be worse than just lost sales, too, because customers may hold ill will towards a producer that promises a special deal and then can’t deliver.
Supply Chain Inclusion
Planning for an event should involve all parts of the company including production, procurement, finance, distribution, executive management, and distribution partners (retailers, distributors, 3PL partners, etc.) so that all are ready to support the initiative. Informing customers ahead of time may not be a good idea – it could dry up demand prior to the promotion with a net result of demand shifting rather than a true increase in demand. Repeating a promotion at the same time every year can have the same effect, as customers or distributors may change their buying patterns to take advantage of the special offer again, resulting in a demand shift rather than an overall increase.
Events are a critical part of marketing and sales in many markets, but they can be challenging. They do change demand patterns (if they are successful) so supply strategy must be adapted to match those demand changes. A pattern of promotions can easily become expected and result in demand shifting, which adds variability to demand rather than increased demand. Variability is generally considered to be a bad thing – a major cause of “waste” as recognized by Lean Manufacturing, Just-In-Time, Six Sigma, and most other performance improvement programs.