How To Handle Consumer Demand Volatility

November 16, 2022


Warehousing and logistics are arguably two of the most sensitive industries when it comes to economic and shifting consumer behavior. When the economy is strong, purchasing increases and, therefore, so do order volumes. Conversely, when times are tough, people tend to buy fewer luxuries (sometimes cutting down on their necessities, too) and demand drops.

According to some economists, a recession is just around the corner. Others say it’s already firmly upon us. Either way, one thing is certain: We can expect a crash. So, how should businesses in warehousing and logistics prepare for the inevitable economic implosion and overall demand variability? Unfortunately, there’s no one-size-fits-all solution, but there are various strategies and demand management best practices you can consider implementing.

Let’s take a look at several of them:

Diversify your supply

As Tracc explains, sourcing raw materials or other goods from multiple suppliers is undeniably one of the most effective ways of combating the challenges of demand variability. When you put all your proverbial eggs in one basket (i.e. you rely on just one supplier for a certain type of product or even all your merchandise), you’re at the mercy of disruptions to their supply chain. You can mitigate this risk by widening your supply pool.

Use forecasting technology

Modeling your demand is a useful way to meet it. There are innumerable simulation programs available to help you anticipate what your order volumes are going to look like in a few months’, weeks’ or even hours’ time. This software relies on the variables and other input you feed it, so the accuracy of the results will be as good only as the data provided. As noted by Supply Chain, employing predictive analytics will also help you achieve successful demand management.

Increase visibility

You need to make certain that you and your suppliers, business partners and clients/customers have as direct a line of sight into your operations as appropriate. Communicate the results of your projections to stakeholders who need to be in-the-know. This is best done in real-time. According to Planet Together, to that effect, it’s prudent to set up alert systems that will notify you of any pertinent changes to supply chains that are relevant to your business.

Take advantage of automation

From movement sensors to data-driven inventory management AI, there’s a plethora of automated products and services from which business leaders in the industry can benefit. The inherent beauty of automation is that it typically requires very little manual labor and human intervention, which means it can withstand the impact of fluctuating workforce sizes. In essence, if you need to respond to economic fluctuation by downscaling your teams, automated software can help your business meet demand while you reshuffle your employees.

Regardless of which route(s) you take, it’s essential that you have plans in place to deal with both economic peaks and valleys. When it comes to fluctuating consumer demand, always prepare for the worst and hope for the best.