Nowadays, managing seasonal inventory in the warehouse and the efficient operation of logistics for sales is extremely important. In turn, proper inventory planning allows you to reduce business costs and remain competitive in the e-commerce market. Want to learn what seasonal inventory is and how you can manage it? Learn with us how to deal with seasonal demand and how to make sales during peak demand.
What is seasonal stock?
Seasonal inventory refersto products that sell much faster during certain times of the year. It should be noted that almost every retailer, regardless of industry, experiences an influx of seasonal demand. Retailers should consider preparing seasonal inventory depending on the season (e.g., building materials in the spring), major sporting events (e.g., sports equipment and accessories in the event of a world championship in a particular sport), or for smaller holidays (e.g., for Valentine’s Day or Grandma and Grandpa’s Day).
However, all seasonal demand, whether related to the peak holiday season or not, forces retailers to choose between two options for inventory management. The first is to contract with a logistics company for storage and fulfillment to cover peak sales, which comes at a cost for unused warehouse space during the off-peak season. The second option is to maintain continuous sales operations, in-house, throughout the year and overtax your own resources during peak demand.
However, to meet the needs of merchants, logistics companies offer an on-demand storage option. This gives merchants a much more attractive option for managing seasonal inventory: they can pay only for the storage space they need and operate it only when they need it. This allows them to scale up quickly to meet seasonal demand. This approach makes sales much more profitable for vendors by reducing operating costs throughout the year.
Monitoring seasonal inventory, and KPIs
KPIs (Key Performance Indicators) should be understood as key performance indicators. Using them, companies can measure the efficiency and effectiveness of their operations. KPIs make it possible to check the progress and verify the company’s activities against the set goals and the effectiveness of their implementation. It should be noted that the use of KPIs improves the overall efficiency of a company’s operations, and systematic measurements can positively influence its development.
In the case of sales, we can distinguish the following KPIs:
- Total sales volume – this determines the assumed volume of sales in a given period, such as a month, quarter or “season”.
- Length of the sales cycle – in this case, the KPI helps to verify the lead time of all stages of sales – from making a purchase to delivery.
On the other hand, in the field of logistics services, the following KPIs are worth pointing out:
- Turnover rate – which indicates how long inventory is kept in stock. This allows you to determine whether the chosen model of cooperation with a logistics service provider is financially beneficial.
- Inventory flow indicator – which provides information about the flows of incoming and outgoing goods to/from warehouses during a given period. It allows you to determine predictions about the volume of inventory in the coming period.
- Order indicator – gives you information about on-time shipment (order fulfillment). The customer wants you to deliver orders quickly and efficiently? With this KPI, you will verify the percentage of orders that were delivered within a certain time.
As you can see, KPIs are very useful, both in monitoring the sales process and in verifying the quality of logistics services. They allow you to predict the volume of sales, the time of its execution and determine the required inventory. It is worth using them for seasonal inventory planning, as they show the status of each product unit and help predict demand.
Is it possible to plan the size of seasonal inventory?
While KPIs allow you to effectively monitor seasonal inventory, there are also strategies that allow you to better forecast sales or accelerate them significantly. Ultimately, the issues that can help reduce the uncertainty associated with seasonal sales are:
- Planning and logistics. By anticipating sales peaks, you can reduce the period from the start of deliveries and reduce volumes. Currently, logistics companies have the ability to support sellers and have the necessary tools to manage seasonal inventory.
- Determine sales volume. By analyzing the volume of sales in the past, reviewing the current economic situation and the state of the sector, you can predict in advance the interest of customers in a particular product. In this way, you can plan the size of your seasonal stock and ensure the necessary inventory. By doing so, you will reduce the time it takes to deliver a product to its destination and avoid delays.
- Shipment tracking and communication. Seasonality of sales puts stress on the entire supply chain. Meanwhile, the ability to have as much information as possible about the status of shipments and efficient communication, between logistics providers and customers, makes the job much easier. In fact, knowing the location and status of shipments in real time allows you to quickly identify and eliminate delivery problems.
Seasonal inventory management methods
There are three main methods of inventory management. Each can be suitable for managing seasonal inventory, depending on the required speed of sales, or current business operations. These include:
- First in First out (FIFO) – this method involves using the oldest inventory (First in) to fill orders first (First out). It is suitable for perishable and highly seasonal products.
- Last in First out (LIFO) – this method uses the newest inventory (Last in) to fulfill orders with it first (First out). It is used to quickly get a return on inputs purchased at a seasonal price, both at the level of raw materials and finished goods.
- Economic Order Quantity (EOQ) – helps determine ideal inventory levels using three indicators: customer demand, acquisition cost and holding cost. This method helps reduce inventory holding costs. However, EOQ requires proper demand forecasting based on sales history.
It should be noted that the rise of Internet sales has forced companies to use the above methods for inventory management. This has also increased the importance of logistics services, especially for operations characterized by seasonal fluctuations in demand. Therefore, ensuring optimal inventory levels and maintaining proper stock levels is crucial, especially for seasonal sales.