Handling Seasonal Supply & Demand

By the time a chill hits the air, I am often found at my local coffee shop buying every seasonal flavored coffee and treat they come up with that year. Nowadays, it does not really feel like winter unless I have a peppermint mocha or cinnamon swirl latte, and I suspect I am not the only one.

 In fact, Twitter was buzzing with reports of pumpkin spice latte shortages at Starbucks this past season. The flavor hit peak popularity in the fall of 2014 and continues to roll on: everything from yogurt to vodka seems to have a pumpkin spice variety on the shelves. Despite the rumors, though, it turns out that Starbucks was covered and that only a few select stores were plagued with a temporary shortage due to an increase in demand. The coffee crisis was averted.

It does bring up a valuable point, however: seasonal fluctuations can be taxing on inventory. To combat the influxes of demand, many organizations implement sales and operation planning (S&OP). Companies that integrate S&OP into their overall corporate strategies are equipped to address order forecast variances, as well as production and capacity limitations. Companies who neglect to make S&OP a major initiative often lack the insight they need to not only meet demand, but also capitalize on seasonal trends.

S&OP is a decision-making process that ensures tactical plans in every business area are aligned with the company’s overall business plan. This is especially important for supply chain experts, as it will help identify gaps or opportunities to manage resources, time and money better. Additionally, market intelligence plays a critical role. With a bird’s eye few of the market coupled with historical demand data, companies can forecast their sales and subsequent inventory needs.

Without S&OP due diligence, organizations face product shortage issues. In the short term, supply does not meet demand, and customers go to competitors. I know I skipped over to Dunkin Donuts one ill-fated morning when my Starbucks was out of my favorite holiday syrup. Others even decided to take the process in-house, working on their own pumpkin spice latte recipes at home.

The longer term problem is grounded in customer satisfaction and subsequent brand damage. In the case of Starbucks, fans were regularly tweeting about shortages, causing a sort of panic. Despite the shortage being isolated, the story had significant viral power and caused some to believe Starbucks was not adequately prepared and/or avoided Starbucks altogether in favor for a more reliable brand.

If Starbucks were able to forecast more accurately, it possibly would have avoided the pumpkin spice problem altogether. S&OP provides a more realistic expectation of supply and demand and prepares organizations with visibility into trends that will greatly impact their supply chain. As far as upcoming seasonal S&OP, let’s hope the chocolate industry is locked in before February.