Demand Planning in Retail: Buying Surges Cause Stockouts and Scarcity

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Thanks to panic buying, there is one industry that seems to be thriving as the novel virus COVID-19, nicknamed coronavirus, spreads across the world, and that is the hygiene industry. According to demand planning in retail reports, sales of hand sanitizers has spiked 1,400% from December to January.  And toilet paper is the new item panic buyers are purchasing in bulk.

Stores cannot seem to keep enough on the shelves, and some stores have started limiting their products as panicked customers start stocking up.

Hand sanitizer is so scarce in Asia that the South Korean government has imposed a fine of $42,000 or a maximum 2-year prison sentence for anyone found hoarding protective masks and hand sanitizers. Meanwhile, Thailand is encouraging people to make their own hand sanitizers to guard against the coronavirus outbreak. Although extremes like these have not happened yet here in the US, some stores like Publix and Kroger have put a limit on certain items.

A quick online search for hand sanitizer reveals that e-commerce giants like Amazon or Walmart are completely stocked out, aside from some third-party sellers, which have raised prices to meet the skyrocketing demand.  Even Bath & Body Works has reported seeing increased demand for their scented soaps and hand sanitizers.

At first, it was masks, and then hand sanitizers, and now the newest panic buy is toilet paper. Even though toilet paper doesn’t offer any protection against the virus, stores across the globe are finding their aisles cleared. One Australian family went as far as accidentally buying a 12-year supply of toilet paper.

So why are people panic buying?  The main reason is that the coronavirus is new, and there is still a lot that is unknown. When there are conflicting messages about how seriously preparations should be, the message tends to resort to the extreme, and panic buying brings about more panic buying. Seeing pictures of empty shelves online leads people to believe that they need to go out and purchase toilet paper while supplies last. What starts as perceived scarcity turns into actual scarcity. People start panic buying out of fear. Even by purchasing toilet paper, it can return a sense of control in what otherwise may feel like a helpless situation. 

Demand planning in retail strategies help, but when it comes to something like a global epidemic, you just can’t always predict future trends.  The best strategy is to have tools and strategies in place that prepare your company to be flexible and adaptive to sudden spikes in trend in hopes of minimizing response times. 

Global supply chains are now being tested on their preparedness by implementing what once were theories of adaptiveness to now becoming today’s action plans. Some of our Vanguard Predictive Planning clients may be affected by panic buying, but our demand planning in retail software has prepared them to be able to rapidly respond ensuring their best business decisions moving forward.  As a solution provider, we thrive from the challenge of keeping up with demand, especially in situations like these, which pushes us to improve our tool to ensure our clients are best equipped for the next panic.