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High season inventory preparation in retail: 9 steps to increase efficiency
How to series

High season inventory preparation in retail: 9 steps to increase efficiency

9 min read
Helen Schepanyk
Helen KomInventory Optimization Product Director
Hot season preparation

Periods of high demand are often stressful for retailers. Preparing for a sales surge, especially during the holidays, is a significant challenge regarding inventory management. In the run-up to the "hot" season, ordering becomes much more complicated:

- Suppliers are overloaded, and the closer to the peak period, the more intense this load is. Therefore, it is necessary to prepare in advance to ensure that the required assortment is available in warehouses.

- It is difficult to predict which products will be in high demand during the season.

- A non-standard logistics process is required to ensure the gradual replenishment of stocks to avoid overstocking.

- There is a risk of warehouse logistics collapse if it is not balanced and prepared for unpredictably high demand.

- It is difficult to predict sales of new products unavailable in the range before the season starts.

The primary task for a retailer in such conditions is to prepare a balanced amount of inventory in the last days/weeks before the sales surge. It is essential to apply a different approach to calculating demand for various store formats. You need to plan and distribute the workload on logistics, procurement, and operational staff. And, most importantly, it is crucial to quickly adapt to changes and resolve force majeure situations that usually arise in preparation for seasonal surges.

To minimize the workload on staff and prevent losses, chains should optimize the process in preparation for the high sales season. With years of experience and dozens of successful supply chain optimization projects, the LEAFIO team has developed an action plan to help retailers prepare in advance without missing a single detail and synchronizing the team's work to achieve maximum results.

Step 1. Identifying the products that will boost sales

Identifying the goods that need to be ordered in additional quantities is one of the most challenging tasks for a retailer in preparation for the "hot" season, since you need to analyze the entire assortment and calculate the increase in sales in terms of individual products, not just categories. The SKU list may vary depending on the store format, location, and other factors.

By analyzing the results of our customers' seasonal sales, the LEAFIO team noticed relatively high surges in demand in non-obvious product categories. These can be items that, at first glance, have nothing to do with the circumstances. For example, there is an increased demand for household cleaners during the Christmas holidays. This example makes it clear that it is necessary to study the entire range of products without exception and increase their stocks before the season.

Seasonality report

The LEAFIO system, with its seasonality function, allows you to accurately identify the items that need to be increased. Using seasonality factors, the system calculates demand and expected sales at the chain, store, and SKU levels.

Step 2. Determining new SKUs that will increase sales

You need to identify new products that are expected to grow in sales. Due to the annual 30-40% assortment rotation, the number of such SKUs can be significant. It is difficult to calculate the potential demand for such products, and intuitive purchasing can lead to overstock or, conversely, loss of sales. 

The LEAFIO Inventory Optimization solution allows retailers to automatically calculate the potential demand for new products by analyzing historical sales data of analogs or substitutes. This way, the system will calculate the demand as accurately as possible and prevent critical errors in manual calculations or speculation.

Step 3. Synchronizing the promotional plan with the sales surge preparation 

Sometimes it is necessary to prepare not only for seasonal but also for demand growth due to promotions. When they overlap, it's essential to ensure your calculations are correct. First, you need to get a general picture of promotional activities and understand how many promotions are planned and what type of promotions they are, how they overlap at different periods, how many SKUs are involved, etc. It is important to avoid products competing in promotions. For example, simultaneous campaigns for related products or substitute products can reduce the effectiveness of both activities. 

All this data should be collected together and considered in the order plan. Note that it is vital to stop ordering additional goods in time, considering the promotion's end date, so as not to create overstock. 

Promotional calendar

The LEAFIO Promotion Intelligence module will help you prepare for the upcoming sale on time by automated demand forecasting for promotional items and planning orders according to the supplier's delivery schedule and the required number of replenishments during the campaign. The system's promo calendar lets you see all current and planned promotions (by chain, store, category, etc.). The analytical module allows you to track their effectiveness in real-time by key indicators. This not only prevents  overlapping campaigns but also proactively identifies problems and adjusts actions. 

Step 4. Planning the storage location for the additional goods

You should consider where you plan to store your inventory before the sales spike: in a distribution center (DC), central warehouse (CW), or directly in the store. Of course, this point is essential only for those retailers that have 2, 3, or more supply chain levels.

If there is no distribution center, the issue of store capacity becomes critical. In many chains, the sales floor and backroom space are so limited that it is impossible to store the increased amount of goods directly in the stores during the "hot" season. Therefore, it is necessary to allocate space for inventory at the central warehouse and increase the number of deliveries to stores throughout the entire period. The main thing is to provide a high level of product availability.

The LEAFIO replenishment system, based on a multi-echelon forecasting algorithm, allows you to accurately estimate demand and calculate the amount of increased stock when managing deliveries to a central warehouse or distribution center.

Planning the storage

For retailers with limited storage capacity in their stores, the LEAFIO Inventory Optimization tools will be helpful, as they allow you to set up the chain in the "empty warehouse" mode. The solution ensures maximum ordering accuracy and logistics planning so that the store can maintain optimal inventory levels without overstocking. 

Step 5. Creating a "queue" for replenishment by delivery priority

It is crucial to develop a delivery queue of goods in the order they should be shipped to the distribution center and/or stores. Usually, entire categories are prioritized and not individual goods. For example, haberdashery (small items) is often ordered and delivered first.

Calculate the total volume of goods needed for the "hot" season, and then divide the deliveries of different categories into several batches so that the stock of each SKU increases gradually. Although sometimes, from an economic point of view, it is more profitable to make a one-time delivery. But more often, chains divide the expected volume into 3-4 batches and decide what percentage of the total should be in each delivery. In this way, they do not disrupt logistics and operational processes. They can ensure the availability of the right amount of goods in the warehouse if the supplier turns out to be unreliable.

Replenishment queue

LEAFIO's automatic replenishment function will help you consider all factors when forming the order sequence. The system independently calculates the required volume of goods and generates orders factoring in delivery times, supplier schedules, demand, available stocks, and goods in transit.

Step 6. Determining the order dates in stores and warehouses

Calculations of specific order dates are necessary to make deliveries in accordance with the defined "queue" of goods and to make these orders on time. This is especially true if you have dozens of suppliers on your list that will make these deliveries. In this case, manual calculations are ineffective: due to the high workload and the influence of the human factor, errors and unwanted delays will likely occur. That is why this process must be automated.

With LEAFIO Inventory Optimization, you can place orders with maximum accuracy by systematizing and automating, creating a "queue" of goods based on order dates.

Step 7. Maintaining regular orders

Once you have the required inventory, it is critical to continue with regular orders. As we mentioned in point #3, this volume should be reserved before the start of the season. It is necessary to consider such stocks when forming both seasonal and regular orders.

In order to focus on urgent tasks, transferring regular orders to automatic mode is adequate. LEAFIO's automatic replenishment function allows you to focus on preparing for the high-demand season by taking control of regular ordering and delivery. A user-friendly dashboard helps you stay on top of the situation and respond quickly to emerging issues (or even prevent them) without needing in-depth analytics.

Step 8. Determining the demand surge's end date

As a rule, a demand surge occurs within a week. It is essential to stop ordering an increased quantity of goods in advance so that there is no overstock. The ordering end date depends on how many days are left before the demand surge ends. After the sales peak, you should not consider sales growth when placing orders.

Inventory balance line example

For example, sales of Asti Ice Martini sparkling wine spike before and during the Christmas holidays. This will be followed by a decline in demand with a significant increase on Valentine's Day. In such cases, it is important to be exceptionally responsive to demand fluctuations, increasing and decreasing inventory in line with expected spikes. Since Asti Ice Martini is a high-end SKU, forecasting and ordering errors can lead to a relatively high cost of overstock.

LEAFIO will help you avoid this problem: it will not only ensure that you have enough product before the hot season but also help prevent the formation of overstock and dead stock. LEAFIO Inventory Optimization will automatically start reducing the number of items in the orders and the inventory level before the expected decline date to gently exit the seasonal surge or holiday promotional period.

Step 9. High-season inventory management efficiency analysis

In the process of continuous improvement, it is fundamental to analyze the effectiveness of your work from the beginning of preparation to the end of the active sales period. This is an integral part of the process that allows you to better prepare for the next seasonal demand surges.

Performance analysis is mandatory for all departments of the retail chain that are responsible for and, in one way or another, involved in the preparation processes: category department, marketers, logistics, operations department, etc.

Teamwork, coordination, and critical analysis help to identify some bottlenecks and prevent them from occurring next season. Unfortunately, sometimes the team becomes exhausted and immediately returns to its usual routine, forgetting about drawing qualitative conclusions.

Lost sales reasons

In summarizing the results, the BI module from LEAFIO can be helpful to the retailer as a powerful tool for diagnosing the effectiveness of inventory management, which generates more than 40 in-depth analytics reports. The module allows you to track the dynamics of key retail indicators, comparing data with previous periods and recording existing problems.

Optimize your seasonal preparation process with LEAFIO Inventory Optimization

Most of the above tasks can be automated, turning the seasonal workload into a smooth routine with LEAFIO Inventory Optimization, a retail inventory management software based on artificial intelligence and machine learning.

Based on the results of more than one hundred projects, the following indicators have been observed on average using the LEAFIO Inventory Optimization solution: 8% sales increase, 15% waste reduction, 50% overstock reduction, 30% turnover acceleration, and 50% reduction in lost sales.

LEAFIO's Inventory Optimization tools improve your preparation for the high-demand season. The platform allows you to:

LEAFIO Inventory Optimization is powered by modern algorithms that quickly adapt to changing demand and various changes in consumer behavior. The automation of most processes helps you thoroughly prepare for the season: predict an increase in demand for specific products, plan replenishment, distribute and reduce the workload on logistics and operational staff. And most importantly, you can improve efficiency and maximize the profit of your chain.

Helen Schepanyk
Helen KomInventory Optimization Product Director



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