Though social media could drive up the brand of a company, it can also cause big disruptions in the supply chain operations of a company. A great example that happened recently is where Popeyes Louisiana Kitchen chain ran completely out of chicken sandwiches. Everyone was wondering how a fast food restaurant could run out of chicken sandwiches? Well, there could have been a lot of factors in play here, however, I would like to highlight some of the supply chain planning and forecasting takeaways that could be learned from this incident.
Due to the intense competition in the chicken sandwich restaurant business, Popeyes recently rolled out a different variety of chicken sandwich nationally. Basically, it was a fried chicken patty on a brioche bun and was served with a pickle and mayo. Be it the taste of their sandwich or tweet exchanges between Popeyes and various other chicken sandwich restaurants, but this new sandwich became an overnight sensation on social media. People were lining up at the stores even before it opened. Various drive-throughs were backed up so long that municipalities in Nevada had to shut them down because it was causing too much traffic. The result of this sudden increase in demand meant that Popeyes got sold out of their sandwiches in two weeks.
The CEO of its parent company said that they did not anticipate this much demand even though they had forecasted optimistically. He mentioned in an interview that moving forward they need to add another item in their planning checklist: “What happens if we break the internet?” Essentially, to do a what-if analysis primarily on social media responses.
All in all, marketing was very happy because they got millions worth of free marketing and brand promotion, but on the flip side, the supply chain and planning team was being looked down upon because the company did not have a good supply plan to meet the demand growth. From a supply chain point of view, this failure to meet demand creates lost sales and customer dissatisfaction.
To zone in on this topic, let’s try to understand how to go about reducing the impact of this sudden increase in demand to your supply operations and come up with a better forecast. The following are some of the questions that one should ask when trying to forecast such a demand:
- Is this a Limited Time Offer (LTO)?
- Have we done similar products before? How was the response then?
- How does the media spend differ from the last time?
- Does competition offer this type of product? How much do they sell?
- Do these types of launches in our industry follow a particular profile?
There are a few approaches that one can take when trying to come up with a better forecast. The first of which will be:
Collaborative Planning Forecasting and Replenishment (CPFR)
One of the very basics is to have a collaborative planning and forecasting process in place. This sits on top of a baseline statistical forecast. This type of planning allows inputs from various departments within a company while creating a forecast. This means that marketing, sales, product team, finance, supply chain, and various other teams get to provide their input when forecasting. Then the planning system should be able to allow a way to consolidate these inputs and come up with a consensus forecast. This allows the company to tap into the minds of various people who can have specific inputs that can impact the anticipated demand.
Point of Sale (POS)
This is another important piece of information specifically for consumer-facing industries. POS data should be tightly integrated and should be visible all the way up in the supply chain network for real-time demand signals. This helps not only in reducing the bullwhip effect but also in suppliers providing a better response to the changing demand pattern.
In today’s tech-savvy world, social media plays a very important role not just in connecting people but also in supply and demand planning. One cannot afford to overlook this, especially if one’s business is in a direct consumer-facing industry.
Demand sensing essentially means navigating through the web or social media platforms and assessing a general sense of a product’s demand.
The marketing team is usually involved in sending the word out to the general public regarding new product introductions and creating a brand image; also, in most places, they are the ones who manage company’s social media presence. Using the right systems, they should be actively looking out for and be able to sense a general market sentiment on various social media platforms about the company and its products. Eventually, this should go as an input into the forecasting process as and when deemed necessary. If possible, just like real-time data sharing, we should have real-time social sentiment analysis to be able to provide this as an input into the demand planning and forecasting process.
Every forecasting should involve a what-if analysis to plan for various non-traditional scenarios. Be it supply disruption, natural calamity, divestiture or political changes, the companies should spend some time planning for these situations so that they can have a plan B when needed. The company should also include a social sentiment what-if to this part of forecasting. The marketing team should work in close collaboration with supply chain to understand the growth of social sentiment so that they can come up with plans to mitigate the risks.
In conclusion, when it comes to forecasting, the company should exercise the fundamentals of collaborative demand planning to begin with; provide visibility to the demand pattern wherever possible, and last but not least should constantly be wary of social sentiment on various platforms to provide market feedback to the planning process.