- \n
- Christmas tree sales are always at their peak during the Christmas season.<\/li>\n
- Demand for winter jackets will be high in the market during winter.<\/li>\n
- There will be high sales of notebooks and other stationery items at the start of the new academic session.<\/li>\n
- Demand for raincoats, umbrellas, and other waterproof wear increases during the rainy season.<\/li>\n<\/ul>\n
The duration of demand may be short or long depending on the product type and market. Therefore, the inventory manager should always analyze peak and off-peak periods to determine appropriate stock levels.<\/p>\n
Why is seasonal inventory management important?<\/h2>\n
Seasonal inventory management is quite valuable for retail businesses. It helps them in the following ways:<\/p>\n
Improves demand forecasting<\/h3>\n
Businesses can easily predict future demand through previous sales records and customer buying patterns. They can compare forecasted demand with actual sales results. This allows businesses to identify gaps and shortcomings for the upcoming season.<\/p>\n
Reduce excess and dead stock<\/h3>\n
With a better seasonal inventory planning, businsses gets clear idea on product purchasing. This reduces the situations such as dead stock, excess inventory or markdown after season ends.<\/p>\n
Better supplier planning<\/h3>\n
A proper seasonal inventory gives rise to improved forecasting. The early prediction allows retailers to clearly and on time share their requirements with suppliers. This ensures timely production, delivery, and sale.<\/p>\n
Prevents missed sales<\/h3>\n
While maintaining the seasonal inventory, businesses can ensure sufficient stock. This leads to product availability for consumers during the peak. As a result, businesses never miss sales and experience continuous revenue and cash flow.<\/p>\n
Types of seasonality in retail<\/h2>\n
There are various kinds of seasonality in retail, which are categorized as follows:<\/p>\n
Climate and weather seasonality<\/h3>\n
Weather changes directly impact consumer demand. For example, demand for jackets will peak during the winter season. Similarly, the demand for swimwear will be high during the summer season.<\/p>\n
Holiday seasonality<\/h3>\n
This seasonality refers to the festive season and cultural celebrations. Consumer demand typically increases for the products used during such times. For instance, Halloween costumes and decoration items are in high demand during the Halloween festival.<\/p>\n
Calendar seasonality<\/h3>\n
Calendar seasonality refers to the holidays, events, or recurring dates that influence customer behavior. This type of seasonality relies on fixed dates and other commercial events. For example, sales increase on Black Friday and Cyber Monday.<\/p>\n
Back-to-school seasonality<\/h3>\n
Back-to-school seasonality is closely tied to the start of a new academic session. There is a high peak in demand for notebooks, school bags, books, and other educational materials. For example, stationery shops experience high sales when schools reopen.<\/p>\n
How do I manage seasonal inventory effectively?<\/h2>\n
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<\/p>\n<\/div>\nHere are some essential seasonal inventory management ways you must follow:<\/p>\n
Forecast demand accurately<\/h3>\n
You must consider historical data and purchasing patterns to accurately forecast demand. Deploy technology and other forecast tools where possible. This reduces guesswork and gives accurate outcomes.<\/p>\n
Create a stock plan<\/h3>\n
Outline a solid inventory plan that ensures optimal stock levels. You must consider the following questions:<\/p>\n
- \n
- Which product to stock?<\/li>\n
- How much inventory to purchase?<\/li>\n
- When to replenish inventory?<\/li>\n<\/ul>\n
Your seasonal inventory planning should cover historical sales data analysis and monitoring inventory levels. Also, it should include reorder timing and the ability to adapt to unexpected demand.<\/p>\n
Adjust pricing strategically<\/h3>\n
Pricing can influence sales, attract customers, and drive sales. With a few pricing adjustments, retailers can increase demand during peak seasons. Also, they can offer discounts at the end of the season. This helps to clear remaining stock while selling all the products.<\/p>\n
Use inventory management software<\/h3>\n
Inventory software reduces manual work, speeds up the process, and saves time. It also provides real-time visibility into stock, inventory movement, and sales performance. Businesses also get clear inventory insights through the reports and takes the decision wisely.<\/p>\n
\nAre you managing inventory manually?<\/strong><\/p>\n
Effortlessly track your stock levels in real time with inventory management of Moon Invoice.<\/p>\n
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KPIs to monitor seasonal inventory<\/h2>\n
There are key performance indicators you can use to evaluate the effectiveness of your seasonal inventory.<\/p>\n
Days to Sell Inventory (DSI)<\/strong>: This KPI is also known as Days in Inventory or Days Inventory Outstanding. It indicates the average number of days it takes the business to sell its inventory.<\/p>\n
Formula:<\/strong><\/p>\n
DSI = (Average Inventory \u00f7 Cost of Goods Sold) x Number of Days<\/strong><\/div>\n<\/div>\nRate of return:<\/strong> It indicates the percentage of products sold that are returned during a specific period. A high rate indicates product quality issues and customer dissatisfaction. On the other hand, a low rate indicates higher customer satisfaction and reflects better product quality.<\/p>\n
Return rate (%) = (Number of returned items \u00f7 Total items sold) x 100<\/strong><\/div>\n<\/div>\nStockout rate:<\/strong> It is another KPI used to measure seasonal inventory workflow. It measures the percentage of customer demand that cannot be fulfilled due to stock unavailability.<\/p>\n
Formula:<\/strong><\/p>\n
Stockout rate (%) = (Number of stockout events \u00f7 Total inventory items or orders) x 100<\/strong><\/div>\n<\/div>\nInventory turnover:<\/strong> The inventory turnover ratio<\/a> indicator measures how frequently stock is replenished over a specific period. A low rate indicates high product stock, whereas a high rate indicates smooth inflow and outflow of the product.
\nFormula:<\/strong><\/p>\nInventory turnover ratio = Cost of goods sold (COGS) \u00f7 Average inventory<\/strong><\/div>\n<\/div>\nAverage inventory = (Beginning inventory + Ending inventory) \u00f7 2<\/strong><\/div>\n<\/div>\nSell-through rate:<\/strong> It measures the percentage of seasonal inventory sold compared to total inventory available for the specific period. This helps businesses identify how quickly they are selling the seasonal products.<\/p>\n
Formula:<\/strong><\/p>\n
Sell-through rate (%) = (Number of units sold \u00f7 Number of units available) x 100<\/strong><\/div>\n<\/div>\nBackorder rate:<\/strong> It measures the percentage of customers who didn\u2019t receive their order due to a stock shortage but later received the item. A lower backorder rate indicates better inventory levels, whereas a higher rate indicates insufficient inventory.<\/p>\n
<\/div>\nFormula:<\/strong><\/p>\n
Backorder rate (%) = (Number of backordered orders \u00f7 Total orders) x 100)<\/strong><\/div>\nCommon inventory strategies to manage seasonal inventory<\/h2>\n
Here are the common inventory strategies that you must use to manage seasonal inventory:<\/p>\n
First-In, First-Out (FIFO)<\/h3>\n
In this model, the oldest product is used or sold first while the newest product remains in stock. Therefore, it is particularly useful for perishable products with a limited lifespan. This helps to reduce inventory obsolescence and spoilage.<\/p>\n
First Expired, First Out (FEFO)<\/h3>\n
This strategy is commonly used for expiry sensitive items such as food, beverages, pharmaceutical. Under this, the product with the earliest expiration date is used or sold first. This leads to prevention of inventory loss and expired stock.<\/p>\n
Just-in-time (JIT)<\/h3>\n
Rather than storing, this inventory model focuses on minimizing inventory levels. It means products are produced or ordered only when they are in high demand. However, this reduces the preparation for an unexpected increase in demand.<\/p>\n
Seasonal stockpiling<\/h3>\n
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