How to Mitigate Demand Volatility

In the past 10 years, the manufacturing industry has been burdened with demand volatility. This is because customers, particularly during the pandemic, have suddenly changed what they want and how they want it. More than ever customers want more of everything, and they want it now.

During COVID-19, manufacturers were encumbered with a bullwhip effect when people started panic buying. This created a ripple that affected suppliers, warehouses, and transporters. So, the question then becomes: what can be done about unstable and unpredictable demand?

Manufacturers must find ways to quickly adapt to the market. If they don’t, they could soon lose their competitive edge and future customers.

One of the first ways to do this is by using safety stock. It’s too risky these days to fill entire warehouses with stock but safety stocks can find a middle ground that keeps customers happy and supplies under control.

Manufacturers can further use tech, such as artificial intelligence and predictive analytics, to implement continuous inventory reviews and demand forecasting to optimize their safety stocks. One good rule of thumb is to look at past demand and try to predict future demand from it. This may not always work but it is a good starting point.

Furthermore, leaner supply chains can help identify and address obstacles quickly and efficiently while diverse product portfolios and partner portfolios can help companies better anticipate changing markets and safeguard supply chains.

Having distributed inventory also helps divide your available stocks into multiple warehouses and fulfillment centers in different locations to bring products as close as possible to the consumer. In the meantime, multiple sales channels effectively level out demand. This option may be able to create a more predictable level of demand, especially if you utilize both direct-to-consumer and distributor models.

Manufacturers should also practice “what-if” scenarios. This is a great way to prepare for the worst and see how it affects production schedules. That way you can be ready should any catastrophic or simply unpredictable situation arise.

Manufacturers could also shorten the span of their planning horizon. This enables them to make changes quicker and more efficiently as needed. Finally, manufacturers can set up alerts that warn them when stocks are too low and ensure visibility in the supply chain.

We have one solution that implements all the above-mentioned points. SHEA’s SMART Auto solution includes demand-driven material requirements planning (MRP) that can react to faster variations in manufacturing and part requirements more so than traditional MRP. This makes it the ideal solution for the auto industry to manage demand volatility. To learn more about our many solutions ranging from the aerospace industry to high technology, visit us at