Inventory Management Rx for Seasonal Inventory
By Chris Inglett, Absolute Value
As we roll into the dog days of summer, with fall lurking around the corner, many of us start to think of the upcoming shift from backyard barbeques, swimming, and other warm-weather activities to the apple-picking, leaf-watching, where’s my sweater(?) activities of autumn.
Purchasing agents and supply chain managers, on the other hand, are usually a step or two ahead. You can usually find them working feverishly on inventory forecasts for their seasonal items long before the new season arrives.
What parameters define a seasonal item? The general rule of thumb is that an item is described as seasonal if 80% or more of its sales in the previous 12 months occurred in just a six-month time period. It is important to note that since specific industry needs and product lines are different, your demand planning solution should provide you with some flexibility in setting parameters for seasonality.
However, while most forecasting systems do a good job of providing seasonal forecasts, they can be thrown off by unpredictable seasons – such as in the case of weather-based seasons.
With today’s increasingly volatile weather patterns, the question becomes: How can you be consistent with your historical data if the weather-related season does not always start at exactly the same time each year?
One option is to adjust history based on your anticipation of when the season will start. However, this requires a large amount of work.
An easier way
There is an easier way – consider changing safety stock to a higher setting early in the season, and then as the season comes to an end, taper it off.
Setting safety stock (represented in days), based on a beginning and ending date, enables the system to automatically bring in more inventory early in the season and reduce it as the season comes to an end.
This causes the inventory to be reduced automatically as the season ends, increasing the efficiency of the seasonal forecast. Doing this will also allow you to affect the amount of inventory that you carry in the off-season. It also helps to be doing this with software that gives you excellent visibility to your inventory, and enables you to adjust as needed whenever necessary.
If you would like to know more about how the Absolute Value Demand Planning system can help you manage your seasonal inventory, please reach out -- I would be happy to arrange a demo.