In years to come, the extreme product shortages of the pandemic may seem like just another blip in the history of marketplace behavior, but they leave behind a permanent realization that the possibility of near-term events that can rapidly cause consumer demand to explode or supply to be interrupted is very real. Furthermore, these events seem to be happening more than ever before, and they can also defy market logic. Case in point – the recent unbowed demand for lumber despite prices that are more than four times the norm.
Over the past number of months, consumers have experienced both feast and famine in their local grocery stores unlike before the pandemic. Although there are fewer completely empty shelves since the first days, many consumers are still finding that they cannot rely on stores to have their favorite products in stock when they need them most.
Over the last three decades we’ve moved from maximizing resource utilization to operating demand-driven supply chains. So you can imagine my surprise when I heard a leading process manufacturer in a supply constrained environment, one that sells to large businesses, was considering returning to a fixed production schedule. The justification for the change – high demand variability and poor forecast accuracy – only furthered my disbelief.