Seasonal Inventory Management: 9 Steps to Prepare for Peak Season

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

The primary task for a retailer in such conditions is to prepare balanced inventory levels in the last days/weeks before the peak season starts and the sales surge. To improve seasonal inventory management, it is essential to use a tailored approach for accurately forecasting demand across different store formats. You need to plan and distribute the workload on logistics, procurement, and other business operations. And, most importantly, it is crucial to quickly adapt to changes and resolve force majeure situations that usually arise in preparation for peak seasons.

To minimize the workload on staff and prevent financial losses, chains should optimize the process in preparation for the peak seasons and their seasonal inventory management strategies. With years of experience and dozens of successful supply chain optimization projects, the LEAFIO AI team has developed an action plan to help retailers prepare for holidays and seasonal surges in advance without missing a single detail and synchronizing the team's work to achieve maximum results.

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

By analyzing the results of our customers' seasonal and holiday sales, the LEAFIO AI 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 customer 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 holiday season.

The LEAFIO AI system, with its seasonality function, allows you to accurately identify the particular holiday inventory items and categories that require higher inventory levels during the sales surge period. Using seasonality factors, the system calculates accurate demand forecasting and expected seasonal sales at the chain, store, and SKU levels.

Identifying new products with growth potential is essential, especially with an annual assortment rotation of 30-40%. This can involve a significant number of SKUs, making demand planning challenging. Relying on intuition for purchasing holiday inventory can lead to either excess inventory or stock outs. 

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 enables accurate demand forecasting and prevents critical errors in manual calculations or speculation.

Sometimes it is necessary to prepare not only for seasonal but also for increased demand due to promotions. When they overlap, it's essential to ensure your calculations are correct. When starting a promotion planning, it is essential to get a general overview of the upcoming activities. This includes understanding the number and types of promotions planned, how they overlap during different periods, and the number of SKUs involved. 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. 

Related:  Retailer's guide to AI-driven trade promotion management

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, to avoid overflowing your warehouse with too much stock.

The LEAFIO Promotion Intelligence module will help you prepare for the upcoming retail holiday sales or seasonal surge on time by automated demand forecasting for promotional items and planning orders according to the supplier's delivery schedule and the required number of inventory purchases 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 performance indicators. This approach not only prevents overlapping campaigns but also enables proactive problem identification and swift adjustments, leading to improved inventory turnover, increased sales, and enhanced customer satisfaction.

You should consider where you plan to store your seasonal 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 holiday season. Therefore, it is necessary to allocate space for holiday inventory at the central warehouse and increase the number of deliveries to stores throughout the entire period. The main thing is to have enough stock to provide a high level of product availability.

The LEAFIO Atumated Replenishment system, based on a multi-echelon forecasting algorithm, allows accurate demand forecasting and determines the optimal increase in inventory levels when managing deliveries to a central warehouse or distribution center.

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 supply 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 excess stock. 

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

Calculate the total volume of seasonal inventory needed for the peak season, and then divide the deliveries of different seasonal inventory categories into several batches so that the stock level of each SKU increases gradually. Although a one-time shipment may sometimes be more cost-effective, retail chains typically prefer to split the expected volume into 3-4 batches. This approach helps manage shipping costs and storage costs more efficiently, while also preventing disruptions in logistics and operational processes. It ensures that the right amount of goods is available in the warehouse, even if the supplier proves to be unreliable.

Automatic replenishment system in retail function will help you consider all factors when forming the order sequence. The system independently calculates the required quantities of goods and generates orders factoring in delivery times, supplier schedules, fluctuations in demand, available stocks, and goods in transit.

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 inventory optimization tool you can place orders with maximum accuracy by systematizing and automating, creating a "queue" of goods based on order dates.

Once you have the required seasonal 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 holiday season. It is necessary to consider such stocks when forming both seasonal and regular orders.

In order to focus on urgent tasks and manage seasonal inventory efficiently, transferring regular orders to automatic mode is adequate. LEAFIO's automatic replenishment function allows you to focus on preparing for peak seasons 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.

As a rule, a demand surge occurs within a week. To effectively manage seasonal inventory and avoid accumulating too much stock, it is crucial to halt ordering increased quantities of seasonal inventory in advance. 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.

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

LEAFIO AI will help you avoid this problem: it will not only ensure that you have enough product before the peak season but also help prevent the formation of excess inventory and dead stock. LEAFIO Inventory Optimization will automatically start reducing the number of seasonal inventory in the orders and the average inventory levels before the expected decline date, smoothly transitioning out of the seasonal sales surge or holiday promotional period into off-peak seasons.

In the process of continuous improvement, it is fundamental to analyze the effectiveness of your seasonal inventory management 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 peak seasons and 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 peak season. Unfortunately, sometimes the team becomes exhausted and immediately returns to its usual routine, forgetting about drawing qualitative conclusions.

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

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

LEAFIO AI inventory management system improves your preparation for the peak season. The platform allows you to:

LEAFIO Inventory Optimization is powered by modern algorithms that quickly adapt to changing demand, seasonal events, and various changes in consumer behavior. The automation of most processes helps you thoroughly prepare for the season and manage seasonal inventory: 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 of your inventory management strategy and maximize the profit of your chain.