Today, we will explore the topic of seasonal inventory along with the ups and downs it might provide. So, are you ready to find the answers to what is seasonal inventory in the supply chain?
Buckle up! We will give you detailed insights about seasonal inventory in supply and its associated difficulties.
As the name implies, seasonal inventory is a term used to describe specific seasonal products whose demand fluctuates throughout the year due to seasonal patterns, festivities, holidays, celebrations, events, weather conditions, etc.
So, without further ado, let’s find out more details.
What is Seasonal Inventory in the Supply Chain?
Seasonal inventory consists of goods whose sale increases on seasonal demand during specific periods. For example, almost all e-commerce sites start selling lights, gift items, and home decor during Diwali, rakhi during Raksha Bandhan, etc.
Similarly, the demand for winter wear increases during winter, while the demand for light cotton clothes, shorts, and swimsuits increases during summer. The seasonal nature of demand is what distinguishes this kind of inventory.
Here lies the main problem with seasonal inventory businesses- they need help maintaining appropriate stock levels as they face constant issues with overstocking or shortages to manage their supply chains effectively.
Considering this, let’s look at the seasonal inventory management challenges.
Seasonal Inventory Management: Challenges & Difficulties
Did this ever happen to you, like you ordered your inventory purchases well in advance, but variations in demand are impacting your stock levels? Worry not! We are here to guide you.
When planning to invest in your company’s stock, it is crucial to consider all seasonal considerations. Else, you have to deal with the following difficulties and challenges:
1. Disruptions in Your Supply Chain
Production delays, inadequacy in raw materials, or transportation delays may affect seasonal inventory management. This can lead to issues of both- (a) Stockouts and (b) Excessive Stocks.
Let’s look at the two issues in detail.
Stockouts
You should not restock your inventories before the peak times of the year arrive. If so, you are likely to face stockouts, eventually leading to dissatisfaction among your customers, and they are more likely to switch to your competitors.
On the contrary, your inventory might go out of stock during high seasonal demand because restocking the products takes time, particularly if you have shipment issues or delays from other wholesalers or distributors.
Excessive Stocks
The scenario is the reverse when you have too many stocks but very little or negligible demand for your products. Storing excessive inventory in your warehouses or shipment centres can also hamper your cash flow.
You might also have to face the danger of having dead stock if the inventory remains unsold for an entire year. Such a situation will bring only losses to your business, and to get rid of all your inventory, you have to give huge discounts to your customers.
Don’t you feel that there might be storage issues in case of excessive stocks? Let’s see.
2. Storage Issues
Due to seasonal inventory, retailers might also face a problem storing their products. In retail stores, seasonal products can occupy much of the space and cause expenses and handling issues.
So, how much inventory should you store? In this case, you must understand the expenses of meeting demand variations against the expenditures of keeping more seasonal inventory.
After seasonal issues comes another major challenge, which is related to demand prediction.
3. Prediction Accuracy
Predicting seasonal demand with accuracy becomes one of the main challenges regarding seasonal inventory management.
Due to constant changes in consumer behaviour, market trends, or other factors (for example, weather changes), seasonal demand is tough to predict.
Last but not least, let’s look at another significant challenge. Stay with us!
4. Checking the Efficiency of Order Quantity
You can check the efficiency of your order quantity by holding by analyzing and comparing the maintenance or handling charges of your inventory and the costs of placing orders.
Be careful while ordering your inventory since ordering too little can result in stockouts, while ordering too much might lead to surplus inventory.
By now, you must have had a clear idea of the challenges usually faced. Let us also look at some other factors affecting inventory controls.
Factors Affecting Inventory Controls
In the world of seasonal inventory, you can only sometimes be happy because there are factors that might spoil your plans. Keep reading! To know about these factors:
1. Factors Related to Finance
Inventory management can be significantly impacted by variables like the cost of borrowing money to keep more inventory in hand.
Since finance may fluctuate depending on your country’s economy, it is essential to monitor changes in interest rates to chalk out a budget plan.
Other financial elements that may impact inventory management are the tax expenses for stocking inventories, transportation expenses, and warehouse operations. So, think of ways to reduce such costs.
Next, comes another major factor- The type of your suppliers.
2. Type of Suppliers
To bring success to your business, you need trustworthy suppliers to organize your budget and schedule the output well. Meanwhile, unreliable suppliers might have a significant impact on inventory control.
Keeping this in mind, having a reliable supplier who will never cause product delays or shortages in your business is crucial.
Next, let us see another important factor.
3. Lead-time
It is the amount of time that passes between placing an order and when the item is delivered.
The lead time varies significantly based on the kind of product and the different production techniques used, so adjustments to these variables may necessitate changes to inventory control.
Did you ever think that items or products are also a factor in affecting inventory control? Let’s see how.
4. Items or Products
Inventory management should note the type of products in stock, as many items have shorter shelf lives. Ensuring these items are appropriately managed and replaced according to their expiry dates is essential.
Apart from these, there are also several external factors that can affect your inventory levels.
5. Other External Factors
External factors like economic recessions, climate changes, or too much competition may also affect inventory management. So, make your suitable plans while thinking of all these factors.
Let us now learn how to overcome the challenges and factors affecting inventory management for optimizing inventory levels.
Overcoming Inventory Challenges
After learning about the challenges and factors, did you think of navigating these challenges like an expert? Join us!
- Remain Flexible
You should always be prepared to modify your inventory levels according to the constantly shifting marketing conditions.
- Use Data
You can make wise decisions and predict demand more accurately using data analytics. Using this, you can also forecast sales and seasonal shifts in demand.
- Collaboration
You can minimize supply chain interruptions and maintain smooth operations by cooperating closely with your partners and suppliers.
- Customer-First Strategy
Ensure you always satisfy your consumers’ requirements and desires by keeping them at the centre of your inventory management plan.
- Discounting Slow-Moving Inventory
Slow-moving inventory can deplete your business’s resources, causing excessive stock and storage issues. You can sell these seasonal products at a discounted rate to avoid these.
- Monitoring Inventory Metrics
You should pick proper inventory metrics for measuring every keen detail about your product and monitor it carefully. This will enable you to make plans wisely.
FAQs: What is Seasonal Inventory in Supply Chain
Which inventory method can be used for adjusting to seasonal demand?
You can use the FIFO inventory method or the first in, first out method for adjusting to seasonal demand.
What are the main problems you can face with seasonal products?
Though there are many problems, the major ones lie in overstocking and a lack of stocks.
Is selling seasonal products a significant risk?
It depends on the seasonal market demands and fulfilling your consumer wants, whether you will profit or run at a complete loss.
Conclusion
Managing seasonal inventory in supply chain is usually challenging, so you should design a well-planned strategy for your organization that will help you satisfy your consumer demand and increase sales.
Managing seasonal inventory in supply chain is all about understanding the balance between demand and supply.
The ship of your supply chain can only sail when you understand the ups and downs of seasonal demands by knowing the challenges and factors affecting seasonal demand.
