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Planning Ahead: A Guide to Effective Seasonal Inventory Management

vijay

Vijay Kumar

Senior Specialist - Marketing @ Shiprocket

January 26, 2024

8 min read

Seasonal products are always in high demand during the holidays, like Diwali or Christmas. From lights and candles to mistletoe, the demand is never low. Even occasional products like goods relevant to a specific cricket match are in extreme demand during the event. 

Stocking and having just enough of these seasonal items can be daunting for retailers. As these items are only popular for a short duration, retailers must ensure sufficient stock to meet the demand. As this balance is very delicate, inventory management is crucial. Data from past sales and trends certainly helps at times like these.

Seasonal Inventory Management

This blog will dive into seasonal inventory, challenges in maintaining a season inventory, real-world scenarios, and more.

Seasonal Inventory Planning: What Is it All About?

Seasonal inventory items sell more quickly on certain occasions of the year. During the holidays, most retailers see an increase in seasonal demand and may stock more products. Other businesses could see seasonal sales increases of specific items due to weather variations, sporting events, or ancillary holidays like Father’s Day or Valentine’s Day.

By using on-demand warehousing, businesses have the option of handling their seasonal inventory. It allows them to pay only for the warehouse space and personnel they use, keeping operational costs at a minimum. As they are not obligated to place the same number of orders during the off-season, they can swiftly scale up operations to meet seasonal demand. Due to lower running expenses year-round, this new alternative solution majorly impacts retailers’ profitability of seasonal sales.

To negotiate cheaper storage costs and Service Level Agreements (SLAs) for retailers with seasonal and cyclical demand, it is vital to combine the volume of several retailers. This is termed resource pooling or co-warehousing and is beneficial to both merchants and 3PLs (third-party logistics) looking for a steady stream of orders. 

Real-World Scenarios of Seasonal Inventory Planning in Action

The requirement for inventory varies seasonally, and the demand is also different for most businesses. It could be anything from apparel to household items and even beyond. The following are some of the forms of seasonal inventory: 

  • Holiday or Festival Merchandise: 

Holiday or festival merchandise is probably the first consideration for most retailers when thinking about seasonal inventory. Diwali, Halloween, and Christmas are a few examples of holiday inventories. Retailers sell particular goods that people only purchase around these times. For instance, during Diwali, there are typically many lights, decorations, sweets, and puja items in demand throughout the season. Businesses might run specials to attract clients and boost sales. 

  • Seasonal Clothing: 

Clothing for the summer or winter is the simplest example of seasonal inventory for garment retailers. Swimsuits, shorts, and tank top purchases rise in the summer. Sales of such items may suffer during the chilly winter weather, but customers will switch to purchasing coats, hats, and gloves.

  • Event Register: 

Events like the FIFA World Cup, Super Bowl, and cricket matches affect the event inventory, including kitchenware, flags, pint glasses, decorations, and clothing like hats and T-shirts.

Categorising seasonal items can be tricky. It is done based on the following variables:

  • Product Life Cycle: 

Sales of some goods are tied to particular occasions, like Easter or the summer. These products shouldn’t be sold outside of the appropriate season. Diwali decorations and lamps are a good example; any still in stores the day before Diwali become liabilities the moment the store shuts.

  • Duration of the Season: 

The time up to which it is possible to take action to sell seasonal products is generally determined by the length of the season. It is important to differentiate between short seasons, for which you must prepare by supplying the anticipated demand to the stores, and longer seasons, which let the stock be refreshed multiple times.

  • Lead Time: 

Following the lead time to buy the seasonal products, additional items might be bought during the season, or the selection must be made in advance. It establishes a high degree of risk associated with judgements on purchases made before the start of the season. Purchase selections must be made well before the season if the lead time is lengthy. On the other hand, a short lead time allows for the use of sales during the season to predict demand and guide further purchasing choices.

Overcoming Hurdles in Seasonal Inventory Planning

Below are a bunch of hurdles in seasonal inventory planning and solutions to get over them:

  • Demand Forecasting: 

Demand forecasting can be challenging when looking for seasonal products. Understanding how dynamic the market is during this time is extremely complicated, and leveraging data from the past can help you overcome this hurdle. 

Understanding what consumers want and are more likely to buy can help you adapt your inventory levels. Seasonal trends and sales forecasting can help you predict what you need to stock up on. 

  • Understocking: 

Another crucial challenge is losing out on high-margin profits due to understocking. If you fail to maximise your sales when product demand is at its peak due to insufficient stock, you tend to lose large amounts of money. 

Employing ERP (enterprise resource planning) and inventory management software will allow you to forecast trends based on historical data easily and accurately, eliminating the risk of understocking and losing valuable business. 

  • Overstocking: 

Overstocking is even worse than understocking, as you must manage and store the inventory until the next season. You might also be charged operational costs to hold these items. Hence, your funds will be frozen. 

To avoid this, careful planning is needed to understand how much you will need for a specific item during seasonal times. Finding the balance of having the right amount of inventory can be done through buying history and enabling your customers with an option of pre-ordering. 

  • Storage Issues:

If you need extra stock in hand during the high seasonal demands, storing your inventory becomes challenging. As you must wait to put out your products until the season, you must have a fine storage place to store your inventory. These will further increase your operational costs, so finding the right alternatives is necessary. 

You can save on these costs by using pool storage or simply paying for only the storage facilities and personnel you use. The best solution is to only stock up as much as required through precise and effective planning. 

Top 5 Strategies for Successful Seasonal Inventory Planning

The top 5 strategies for successful seasonal inventory planning are listed below:

  • Combine Related Products as Hampers: 

To better enhance seasonal inventory control, grouping related products into sets would be useful so buyers can be persuaded to buy those bundles. Bundled discounts are a great way to improve your sales for seasonal products. These promotions can reduce storage costs and unsold goods by efficiently moving inventory.

  • Discount Slowly Moving Inventory: 

Inventory that moves slowly can deplete your resources, freeze your cash flow, and even lead to stockouts. Thus, it’s essential to clear it out by offering discounts, creating room for other products.

  • Streamline Order Processing: 

The most vital and practical approach to managing seasonal inventory effectively is to enhance your order fulfillment process by streamlining it. Managing all operations, from choosing products, packing inventory, shipping, and handling returns, may be challenging due to a rise in demand during the busiest season. Thus, attempting to simplify order processing is crucial.

  • Monitoring Inventory KPIs: 

Logistic managers keep track of some of the major KPIs like inventory turnover, stockout rate, backorder rate, days sales of inventory, and sales rate so that they can effectively control the seasonal inventory. Managers can quickly take action for any inventory problems using these KPIs as they help shed light on the condition of each SKU (stock-keeping unit) and demand for every product. Logistics managers assist retailers in boosting revenue and reducing costs during peak and off-peak periods by continuously tracking relevant KPIs.

  • Analyse Sales Trends for Demand Forecasting: 

Understanding prior sales trends is one of the most effective ways to anticipate seasonal demand. Doing this enables you to determine what and when customers are most likely to buy. You can adjust inventory levels as necessary using this knowledge.

Conclusion

As you’ve seen above, managing seasonal inventory can be challenging. However, it’s not entirely impossible! If you place an early order for seasonal inventory, you might be trapped with unsaleable goods. And it would be worse if you have insufficient inventory! Insufficient products will result in stockouts and unhappy customers. 

You can’t become an expert in managing seasonal inventory overnight. However, you can pinpoint data and trends from past sales to help you during seasons of peak demand. Inventory management and warehouse management platforms can help sellers manage their product pipeline by forecasting demand and planning accordingly.

Why is seasonal inventory important?

Seasonal inventory can have a significant impact on the supply chain. It can help businesses prepare for peak seasonal demand for particular goods and maximise sales. 

How seasonality can affect inventory?

Seasonal inventory may pose a significant challenge for inventory control and management. If the seasonal demand for the products drops sooner than expected, businesses are left with excess stock to deal with. 

What are the challenges of seasonal inventory?

The several challenges associated with seasonal inventory include accurate demand forecasting, understocking or overstocking, availability of storage space, additional storage costs, and more.

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