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Predictive Planning: Optimal scenario planning in times of crisis

Predictive Planning: Optimal scenario planning in times of crisis

April 9, 2020

This time the crisis has taken all companies by surprise. When we first heard about it around the turn of the year 2019/2020, it was still a distant roll of thunder that few people saw coming. Suddenly, a few weeks later, we stay at home, close our shops and work from the home office to avoid getting infected with Sars-CoV-2. Of course, this crisis has had a significant impact on the global economy.  
Companies could have seen a case like this coming. With the right contingency plan and predictive planning component, volatile times can be planned in a targeted manner and help decision-makers to reduce uncertainty. 

Initially, companies with economic ties to the Asian region noticed the first effects of Sars-CoV-2, and then other companies quickly felt the changes when the virus made it to Germany a few weeks ago. Due to slumps in sales and government restrictions, some companies are already experiencing high sales losses. Hamster purchases are straining the supply chains of retailers and are causing bottlenecks. Nevertheless, the few companies that have not been directly affected so far firmly expect significant negative effects on the 2020 financial year.

Flexible business strategy for Plan B in the crisis

Soberly considered, it is only one variable that has had a massive impact on various areas of society and the economy: It is the way we have to maintain social contacts in order to keep the corona pandemic in check in the best possible way. The consequences are far-reaching: production is stopped or curtailed as a result of declining orders, businesses remain closed, online retailers are confronted with weakened supply chains, not to mention the more than battered travel industry. In addition, the more traditionally oriented German SME sector often has no technological digitalization solutions for the home office, for example, and many employees still have to get used to this way of working.

All of the above measures serve the short-term protection of employees. But what about the long term? How can companies in these times secure their liquidity and thus jobs in the future, apart from short-time work? In order to be prepared for a crisis like this, a resilient and flexibly adaptable business strategy is essential. Plans need to be drawn up that can protect the business model over volatile times. Two questions are essential for the design of such a crisis plan:

  • What is the purpose of my business 
  • What scenarios do I see as challenges or threats and how could they affect my business?

As part of a robust strategy, there should always be a plan B for various extraordinary situations. Predictive planning can help you to assess the situation more accurately and to run through possible scenarios, especially in such cases.

Preparing for the crisis with predictive planning

Predictive, at best integrated corporate planning is indispensable for an appropriately rapid response to the crisis. Companies that have had the opportunity to simulate best-case and worst-case scenarios may have seen COVID 19 coming and could prepare themselves. After all, they had time to establish a crisis team, for example, and to initiate necessary measures such as setting up remote workstations and focusing on less affected industries. 

Even companies on which the crisis may well have a positive impact can use predictive planning to create an even more favourable starting position. For example, manufacturers of protective masks or respiratory equipment, as well as their suppliers, could have predicted a dwindling risk of overproduction at the beginning of the year. At the same time, car manufacturers could have "guessed" that a remote sales offer could be essential to maintain customer satisfaction in the coming months. 

In principle, for successful scenario planning, every company must be able to examine its economic fitness against various backgrounds and take countermeasures. It is vital to work out individual strategies, because even within a single industry, various influencing factors must often be taken into account for such a predictive planning model.

Taking the right measures thanks to predictive planning

In AI-based forward planning, internal business data as well as scientific studies and other external empirical values are included in the examination of scenarios. This enables precise statements to be made about the probability of risks and economic fluctuations occurring, which can then be incorporated into planning. A company could have used predictive planning to assess the effects of COVID 19 on the market economy, its own industry and the company and to activate plans and scenarios for crisis prevention. Even during the crisis, scenario planning helps to control measures more target-oriented and to estimate the effectiveness of countermeasures.

Smart economies despite the crisis

Most organisations still have sufficient reserves to keep their heads above water in the face of dwindling orders or internal challenges. From now on, it is therefore necessary to manage cleverly in order to at least emerge from these difficult times as a survivor. 

Since a situation like this is often decisive for the redistribution of market share, some of you will certainly be able to derive strategic benefit from the situation and perhaps even emerge as winners.

 

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You want more information about AI-based planning? 

Please feel free to contact us. We are happy to help you.

Hans Krefeld

Director Business Intelligence 
+49 251 26341 
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