Seasonal inventory: What is it and how do you manage it?
Correct management of seasonal inventory in the warehouse is key for efficient logistics operations. The objective? For the company to be able to fulfil orders at the height of the season.
In today’s ecommerce environment, product seasonality and SKU proliferation abound in logistics facilities. Therefore, digitising stock control is an effective solution to absorb peaks in demand and adapt to seasonal changes.
What is seasonal inventory?
Seasonal inventory is stock whose turnover increases — i.e., that’s sold more quickly — during particular times of the year. This type of inventory is characterised by having seasonal demand. Therefore, warehouses should employ flexible supply-chain procurement that allows them to raise or decrease the quantities of products and change their locations according to season.
To efficiently manage seasonal inventory, logistics managers should take into account factors such as:
- Duration of seasons: it’s important to identify high-demand and off-peak periods, how long they last and in which order they occur. Knowledge of product demand is a decisive factor in good stock control.
- Procurement lead time: seasonal inventory management should also incorporate product procurement policies. Periodically analysing the demand of each item lets managers devise procurement strategies that improve their businesses’ logistics operations.
Based on these factors, logistics managers identify the turnover for each SKU and design and implement logistics strategies to boost warehouse throughput. For example, they can apply warehousing techniques such as chaotic storage and flexible slotting to ensure that high-turnover products are in the most accessible locations for operators.
KPIs to monitor seasonal inventory
To manage seasonal inventory efficiently, it’s essential to track a set of supply chain KPIs (key performance indicators). These enable managers to visualise the status of each SKU as well as product demand.
Here are several KPIs that logistics managers use to control inventory during peak season:
- Inventory turnover: indicator that shows how often stock is replenished over a certain period of time. Fast inventory turnover means that there are high product inflows and outflows, while a low turnover could mean the company has too many goods stored.
- Stockout rate: formula that indicates the percentage of incomplete orders compared to the total orders received. All organisations should minimise this rate to meet customer demand.
- Days sales of inventory: KPI indicating the number of days an item remains stored before being sold. With this information, companies can better plan replenishments, identify products entailing excessive storage costs and compare the profitability of their business with other similar ones.
- Backorder rate: variable that notes the number of orders that can’t be filled when customers place them. Seasonality increases the pace of order picking in the warehouse. Therefore, to avoid stockouts, it’s vital to keep tight control over pending orders.
These are some of the most common KPIs. But each logistics manager should analyse the most relevant ones for their warehouse in terms of business type and facility needs.
Seasonal inventory management strategies
To control seasonal inventory, you have to analyse the characteristics of the SKUs stored as well as seasonal changes in demand. Implementing strategies that let you forecast product demand facilitates seasonal inventory control: the warehouse can replenish the exact quantity of goods needed to fill customer orders without incurring storage cost overruns.
Using knowledge on the state of the stock and demand, the logistics manager must design a strategy that enhances accessibility to the SKUs with the highest turnover. However, product seasonality requires a flexible logistics structure. That is, it should be capable of scaling up resources during peak season and adjusting needs when product demand goes down.
In facilities with a high percentage of seasonal inventory, a very effective logistics (and manufacturing) method is just-in-time. This strategy is based on the premise that the warehouse should receive raw materials or products only when orders are placed. In other words, the company has the exact quantity of goods it needs at exactly the right time to meet product demand.
Another efficient strategy to manage seasonal inventory is on-demand warehousing. This consists of outsourcing operations such as goods receipt, storage and order processing to a logistics service provider for a specific period of time.
Software to control seasonal inventory
Managing seasonal inventory manually can lead to errors and incomplete orders, affecting warehouse productivity. One solution for eliminating the risk of mistakes in your facility is to digitise your logistics processes. A warehouse management system (WMS)distributes goods in storage locations according to criteria and rules preset by the logistics manager. Mecalux’s Easy WMS software ensures product traceability in real time, as well as comprehensive control over goods and orders received.
The most advanced programs also have solutions that control changes in product turnover and demand peaks at particular times of the year. For example, Mecalux’s WMS is offered in the SaaS (software as a service) model to increase or reduce the number of licenses in line with workloads. Software scalability is key when dealing with seasonal inventory and demand peaks that require more licenses during specific periods.
Easy WMS also has an advanced functionality to enhance seasonal inventory management: Warehouse Slotting Software. This module determines the optimal position for each SKU by regularly analysing product demand. After examining turnover, the program suggests a redistribution of the storage locations to facilitate order picking.
Seasonal inventory: high performance in peak season
The consolidation of ecommerce has made logistics operations more complex, especially in companies that sell highly seasonal products. Against this backdrop, efficient inventory control is crucial to ensure optimal stock levels.
There are multiple strategies to improve seasonal inventory management, e.g., just-in-time logistics and on-demand warehousing. Nevertheless, seasonal inventory control involves digitising operations. Software like Easy WMS from Mecalux eliminates the risk of error in inventory management and ensures product traceability across the supply chain. Get in touch to find out more. One of our expert consultants will advise you on the best solution for your organization.