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Seasonal demand fluctuations: Addressing the predominant inventory management challenge

Not all your inventory sells at the same pace. While ebbs and flows are manageable, many businesses struggle to forecast demand during peak sales and navigate through slumps during the off-season. Be it manufacturers who need to produce the right number of goods, distributors who procure a stockpile of seasonal items to handle sudden spikes, or retailers wishing to capitalize on the demand, the ability to manage these fluctuations can make or break profits for a business.

With holiday sales peaking, can businesses mitigate these fluctuations better? Can they take advantage of this seasonal demand while ensuring proper inventory and logistics? Read more as we address this predominant inventory management challenge.

Understanding seasonal demand

Seasonal demand refers to the changes in consumer demand for specific products or services during specified time intervals. Consumer shopping patterns vary throughout the year. This variation can be attributed to multiple aspects, including changes in season, special occasions, migration patterns, or even income availability.

For instance, the demand for items like snow boots may spike during winter while hat sales can experience a boost during summer. While occasions or seasons are more easily predictable, consumer buying patterns and market conditions often associate themselves with uncertainty, proving it difficult for businesses to forecast demand.

What makes seasonal demand challenging?

A variety of factors can minimize a business’s ability to forecast demand and maintain proper inventory levels. This includes:

  • Poor planning

Often, businesses fail to balance supply and demand. Excessive demands, coupled with inefficient supply, can make businesses miss out on sales opportunities or fail a potential promise to the customer due to the unavailability of stock. Relying on non-data-driven planning processes or poor inventory forecasting can often present unforeseeable circumstances to businesses.

  • Unreliable historical data

While missing out on opportunities can’t improve revenue, overstocking can end up incurring losses for businesses. Anticipating future demand and stocking up based on unreliable historical data can clutter warehouse spaces. While storage is one problem, holding and carrying a huge inventory can also impact cash flow. Businesses end up moving dead stock through clearance sales, donations, or simply throwing them away, all negatively impacting profit margins.

  • Poor vendor relationships

Supply chain delays can also prevent businesses from gearing up for seasonal demand. These delays can be due to production issues, environmental or geopolitical factors, or even miscommunication with the vendors. Not having the right stock, at the right time, at the right place can not only delay sales, but also customer deliveries, crucial to help the business stay afloat in the long run.

Addressing the seasonal demand problem

Addressing the seasonal demand problem—striking the perfect balance between meeting demand and making more sales—is easier said than done. In order to tackle this, businesses can leverage inventory management solutions to anticipate and handle seasonal demand fluctuations better. Here’s how.

Optimizing inventory with the right metrics

Inventory KPIs can help businesses stay on top of seasonal inventory. Some of the popular seasonal inventory KPIs include:

  • Inventory turnover – Inventory turnover indicates how frequently a business refills stock during a specific timeframe. Frequent product inflows and outflows indicates faster stock movement.
  • Stockout rate – Stockout rate is the measure of unfinished orders to the total number of orders received. Reducing stockout rate minimizes the risk of failed or delayed deliveries.
  • Days to Sell Inventory (DSI) – DSI refers to the number of days a business holds inventory before selling it. A lower DSI indicates better business performance.

With an inventory management solution, businesses can create visibility into their stock with these metrics. As a result, you will be able to categorize seasonal products, move inventory faster by bundling items, and generate reports on multiple KPIs like fast-moving products, inventory aging, and more.

Making the best use of historical data

Past sales patterns, when analyzed appropriately, can improve forecasting. With this historical data, businesses get to procure inventory better, and understand what the customers are likely to buy and when. They can then adjust inventory levels without going out of stock or ending up stocking excessively. This historical data is available instantly for businesses when they use an inventory management software. Analyzing data and adapting to upcoming sales trends can help businesses forecast demand better. Identifying time periods where items experience the highest demand can help you plan better.

Forecast demand better

With demand forecasting, businesses get to determine the right quantity of purchase and production to meet consumer demand. With advanced analytics, you can plan for specific business scenarios based on your past sales while factoring in external variables like consumer habits, and market conditions. This can help you quickly adapt to changing conditions, and streamline your supply chain while reducing expenses and operational risks.

With the latest technologies, like AI and ML, used in self-service business intelligence tools, businesses can analyze their inventory data. This helps them understand the stock performance of each warehouse, the number of delayed shipments, speed of replenishment, and the optimal time to procure stock to plan strategically for the future.

Effective supply chain collaboration

Fostering great relationships with your suppliers or vendors can go a long way in addressing seasonal demand. Communicating your needs with your vendor beforehand and making timely payments, or agreeing on mutual payment terms beforehand, can benefit both parties.

With inventory software, businesses get to collaborate with vendors better, make payments online, and receive updates on shipments, bringing about data transparency and reducing bottlenecks throughout the supply chain.

Final note

Seasonal demands are becoming a norm among businesses, especially with the evolving trends and shifting buying patterns. Optimizing efforts and inventory levels can help maximize profits, while minimizing the risk of stockouts or increased shelf time. Building an effective strategy to utilize past data to capitalize on the present trends can help businesses navigate future demands better.

Zoho Inventory’s advanced features empower you to optimize your inventory for seasonal demand fluctuations. Make informed decisions about stock levels during peak seasons and streamline your day-to-day inventory processes. Get started with Zoho Inventory’s forever-free plan today. 

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