Home improvement and DIY retailers know hurricanes are business disruptors that bring significant demand fluctuations, increased sales of specific item categories, and faster-than-usual inventory turnover. But while retailers may be able to anticipate these demand increases, the unpredictability that accompanies any extreme weather-related incident means that traditional forecasting methods fall short in measuring and managing them.
Because hurricanes vary in intensity and duration, their impact may be felt differently at different stores – even those within the same region. Making changes across the full inventory and for all locations will negatively impact stock levels unnecessarily, and planners cannot simply increase orders based on sales that occurred during or after previous hurricanes.
Unfortunately, as we said in the earliest days of the coronavirus crisis, there’s no way to fully automate processes for exceptional demand periods. For this reason, traditional hurricane management has often involved manual calculations on standalone spreadsheets, with planners basing decisions on yearly forecasts, personal experiences, and guesswork. However, this process can lead to out-of-stocks and overstocks at a time when maintaining accurate inventory levels is critical.
Instead, a granular, localized approach to hurricane management based on active testing of impacted items and hands-on adjustments is required. This can be accomplished with an inventory management system that can allow for data-based decisions, continue to automate forecasts for business-as-usual inventory, and relieve the already-heavy burden on planners during a crisis.
Use an Inventory Management System to Monitor Weather-Related Demand Spikes
When the team knows that a hurricane is coming, planners can go into their inventory management system to make manual adjustments to the forecast based on categories that they know will be impacted by a storm. They can also update the system to take into account anticipated store closures. However, the specifics about when spikes in demand will occur, the extent to which items will be impacted, and how long sales will be affected after a hurricane are nearly impossible to predict. For these reasons, the hurricane management process truly begins after the storm lands and its unique impact has been reviewed and addressed.
Planners must determine the appropriate review period needed to analyze a hurricane’s impact on sales based on their business processes and sales patterns. To ensure that recommended changes to the forecast are based on information from hurricane-affected days, the system should begin capturing sales data after a hurricane has lasted at least the length of the review period. Then, the system can create a weighted average to compare to the baseline forecast (the forecast without the impact of the hurricane) and modify the forecast at the product-location level.
Once the hurricane has hit, the system should establish an “event” to identify the specific categories that have seen increased sales. The system should be able to test these items against the recent sales data it has captured (as noted above), issue exception alerts when targeted items exceed established thresholds, and incorporate the identified uplift into the current forecast as needed.
With no predictable end date for a hurricane’s influence on demand, tests must be run on an ongoing basis. Planners can use the management system to review items identified as having significant sales spikes and revise inventory levels as needed. Over time, as the hurricane’s impact begins to wane, planners can manually limit the categories that the system tests to avoid false positives.
When a properly implemented event is in place, planners can rely on the system to automatically manage and monitor the broader inventory while they focus instead on the hands-on management of hurricane-affected items. The system can assist in the continued local identification of impacted items. In addition, the creation of an event will enable the system to isolate impacted items from the general assortment and keep related data separate so it is not used to calculate future forecasts.
Save Planner Time and Improve Availability
This process of establishing events and using them to manage inventory on a granular level can be used for any unpredictable occurrence without a finite end date that impacts demand, such as the COVID19 crisis. Because such situations arise so quickly and inconsistently, planners need access to a system that gives them the flexibility to make corrections on the fly, without requiring complex programming or direct vendor involvement.
When best practices are followed, DIY and home improvement retailers can ensure adequate stock at each location during and after a hurricane, which can go a long way toward helping those who have been personally affected by a storm. Customers can feel confident that they will have access to the essential items they need while working to repair, rebuild, and recover over time.