As COVID-19 hit us hard globally between Jan 2020 to April 2020, we have all shifted to ab-normal buying habits both online and in stores with spikes especially for essentials, which now include hand sanitizers, toiletries and a lot of baking essentials and equipment’s. Earlier e-commerce for essentials was mostly associated with product positioning based on convenience and cost. This trend has definitely changed to both positioning and buying based on availability and speed of delivery, versus convenience and cost.
The Causal loop diagram below explains how the current situation which includes the infection rate fluctuations & associated restrictions have caused outages and delays even on the safest buying option which is online.
Following are the 3 key loops which have the impact on availability and price as shown above
- Red loop : The Red loop show –ve impacts and reduction in availability with higher depletion rates of essential stocks .
- Green loop: The healing green loop normalizes the impact.
- Blue loop:
- Blue turning red : When red impact is higher than green, the blue loop will become red causing Prices to rise and stocks of goods to reduce. This loops causes a high impact on labor, production and supply chain due to un-reasonable spikes, eventually causing the impact on stocks and availability.
- Blue turning green: Balancing energies such as high price (beyond affordability), or reduced infection rates and reduced restrictions causes the blue loop to turn green, bringing back availability and speed in delivery.
The Blue loop turning RED is the un-desirable outcome and its hard to predict spikes and plan responses to make stocks available even with high tech tools like AI.
But recently I have looked like subscription purchase options online for essentials like my favorite coffee, and that could be great option to pre-plan for both consumers and suppliers in this new normal. Imagine planning for coffee, sanitizers, soap, basic groceries online with a weekly, bi-weekly, monthly refill option. Subscription allows the consumer to plan monthly delivery of 4 coffee packs and 1 pack of 3 small bottles of hand sanitizers.
Pre-planning and adjusting subscription quantities in advance for essentials can help minimize depletion rates, since e-commerce players can now work with production and supply chain partners based on revised numbers in advance to minimize the bullwhip effect, and keep online and retail stocks available.
The Diagram below shows the importance of Subscription model(in-orange) which balances the stock depletion rate and provides much better planning options for production and supply chain.
Emphasis on the Subscription model by E-commerce can help “Availability and speed” and then take the E-commerce business on a much more predictable track and ensure that we, the consumers always get what we want and when we want at a decent price.
This is a great idea but I believe there is still another underlying aspect that needs tackling – retailers/producers need to get better at forecasting and gauging consumer behavior and consumption – and using this to plan ahead to help mitigate COVID-19 like situations.
As an example, I have a monthly Amazon subscription to cleaning supplies – this is a pre-planned and annual subscription that arrives every month on a set date. However, during the peak of COVID-19 in the UK, the seller was unable to keep up the subscription and provide the supplies between Mar-May. This is despite the seller being aware (and presumably having forecasted) of the type of goods and the quantities required on a month by month basis.