The pandemic forced retail chains to go through years of growth in just a few months! e-Commerce and new fulfillment channels are no longer seen as a differentiator as customers expect to find the products they want no matter where and how they shop.

The only way retailers can meet these expectations is by upgrading to a data-driven, real-time demand planning approach. Retailers are already upgrading their demand planning capabilities to process more data or variables in the planning process at scale while relying on human planners for qualitative input and exception management.

Here are some of the key drivers driving demand planning innovation in the retail industry.

• Trust depends on retailers’ ability to deliver value and excellence in managing the inventory. Having the right product and getting it to their hands in their preferred channel is a great strategy to rebuild trust, According to Walter Robb, Former Co-CEO of Whole Foods, “Some customers say they want to be served in certain ways, such as grocery customers saying they want to pick up items in-store or have certain things delivered. It’s up to brands to develop the capabilities to serve customers how and when they want to be served. Brands earn trust when they listen to customers and are willing to meet their needs.”

• Fulfillment complexity is increasing with new channels graduating from a fad to becoming mainstream. In addition to e-Commerce and BOPIS, grocery retailers will soon have one more fulfillment center, i.e the customer’s home. According to Gartner, by 2025, ‘at-home replenishment as a service’ will surge to 5% of multi-channel grocery retailers’ total revenues. Amazon and Walmart are already piloting smart refrigerators and coolers that can be automatically tracked and restocked.

• Customer consumption patterns are also evolving and the pandemic created distinct consumption patterns that impacted demand planning for retailers. McKinsey identified four distinct consumption patterns during and after the COVID-19 pandemic:

• Pantry load and consume (consumption expands). Example: Cleaning supplies, vitamins, and supplements. Consumption increased during the pandemic and continues to hold ground even after the pandemic.

• Pantry load and preserve (consumption does not change). Example: Pet food and toilet paper. Consumption did not actually increase during the crisis, resulting in post-crisis volume declines.

• Now at home (consumption shifts). Work-from-home and shelter-in-place policies force consumers to shift on-the-go occasions for products such as coffee and alcohol from in-person food-service outlets to online retailers.

• Not now (consumption declines). Declining consumer confidence and a focus on essential categories lead to a decrease in purchasing certain goods during the crisis—for example, beauty, food, and beverages for immediate use. Purchasing levels for these categories are returning to normal after the crisis.

• While most retailers have a lot of valuable data, many of them still lag behind in their ability to extract meaningful business insights from the data on time. Considering the retail market is going through a dynamic growth phase driven by changing customer preferences, there is a need for innovative approaches to demand planning. According to Relex, a retail demand planning platform, retailers can bridge the data utilization gap by combining artificial intelligence and machine learning with statistical modeling and optimization, simulation, classification, as well as rules, and heuristics.

• Better demand planning requires an ability to crunch data at scale. Advances in in-memory computing, hybrid analytical/transactional data processing, and cloud computing infrastructure that can scale processing on-demand have allowed demand planning vendors to deliver innovative products for realistic scenario simulations.

• Reducing food waste is becoming a key challenge for grocery retailers. Increasingly socially conscious customers are looking to spend their money with retailers aligned with similar values. California’s SB1383 legislation mandates grocery retailers to follow specific guidelines to dispose of unsold produce. The goal of this legislation is to minimize produce being dumped in landfills (which contributes to pollution) and instead divert the produce to non-profit organizations. Retailers failing to meet the norms are liable to pay penalties.