It's the breakthrough moment! Your product gets a notable press mention or goes viral online, and the orders start pouring in. Rejoice briefly, but then take stock. How you manage your surge when it arrives can make or break your business. Supply-chain management expert Hau Lee, professor of operations, information and technology at the Stanford Graduate School of Business, offers tips on how to act fast and smart to take advantage of sudden demand.
How can startups prepare for sudden growth at the outset?
You have to work with potential growth in mind. When you launch a product into the marketplace, it's important to already have a plan in place for how to scale up production and distribution in case it becomes successful. Research suppliers to identify beforehand which ones could process a sudden increase in your orders. You can also line up two or more factories to handle big orders. You need to make sure you have the potential structure you'll need--from sourcing components and production to supply-chain management--to accommodate sudden growth.
Are there any indicators to help alert 'treps that a surge could be coming?
Sometimes there are early signals. When you demo and test the product with early users, their feedback will give you a good idea of whether it has the potential to be a hit or not. If you can track the traffic on the web or how people talk about your products on social media, that's also telling. Always have a good process in place to track your sales, especially if you're using the retail channel, where it's hard to get information instantaneously. If you're selling on your own website you can get that information quickly, but if you're relying on Target or Best Buy, they don't give you that information in as timely a manner. Even a few days' notice can help you update your production plan so that you can respond promptly to demand changes.
How do you estimate how long the high volume will last?
Different products have different life cycles; some last much longer and some die down sooner, so you need to have a good understanding of the typical life cycle of your product. And beyond tracking your own sales, you have to monitor the auxiliary products of the larger ecosystem that your product lives in. If you track the products related to yours, their sales potential could be indicators of whether your product is dying or has more life.
If product does get backed up, what should you communicate to customers?
When you're out of stock, information about when you expect the product to become available is very important to the customer. If you simply say, "Sorry, we're out of product," the customer will go away. But if you clearly communicate why you are backed up (e.g., "my supplier is running slow") and give an idea of when you'll have product again--even though that's difficult because you yourself may not know--that communication is key to keeping them. Allowing customers to place an order like a rain check also keeps them from walking away. Even though they may end up not buying your product, at least you've created a good pipeline to keep them informed and connected to you.