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Demand & Inventory Planning

Tips for Effectively Managing Seasonal Inventory

Demand & Inventory Planning
October 13, 2020
7 min read
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Long before the winter holidays arrive, seasonal suppliers are already prepping their supply chains to handle the uptick in demand. But without a warehousing and fulfillment strategy that is tailored to fit seasonal requirements, companies lose out on significant portions of their revenue due to year-round storage and inventory management costs. With this in mind, how does on-demand warehousing and fulfillment enable seasonal suppliers to avoid unnecessary expenses while still capitalizing on their peak season?

 

Topic At-a-Glance

  • Seasonal Suppliers Face Unique Demand Cycles. Whether triggered by holidays, sports seasons, or changes in the weather, cyclical demand presents a unique set of challenges for seasonal merchants.
  • Consumer Holiday Spend Continues to Increase. The holiday shopping season is by far the busiest for most merchants, and sales continue to grow every year. Holiday spending has consistently grown by 3%-5% each year since 2013.
  • The Nightmare Before Christmas: Managing Seasonal Inventory. Seasonal merchants are often faced with the decision to either leave warehouse shelves sitting empty during the slow season, depleting valuable resources, or bring all of their fulfillment inhouse, putting undue strain on their staff and storage capacity in the busy season.
  • On-Demand Warehousing Offers a Unique Solution for Seasonal Suppliers. The growing model of on-demand warehousing offers seasonal merchants a flexible and scalable solution that translates seasonal demand spikes into long-term growth.

Seasonal Suppliers Face Unique Demand Cycles

While the supply chains of all industries come with their share of challenges, seasonal suppliers have a particularly unique set of obstacles to navigate. Most merchants are familiar with some degree of seasonal demand with the holiday shopping season, but many merchants experience extreme seasonal spikes in demand in the summertime or around college football season. These seasons often make or break a merchant’s top-line revenue for the year, and while the rest of the year may be significantly slower, they need the resources in place to meet seasonal demand when it comes. From a logistics standpoint, this introduces several key challenges.

 

 

How seasonal inventory can shift by month

Holiday Spending Grows Year Over Year

The holiday shopping season is by far the busiest for many merchants, and holiday sales continue to grow year over year. Holiday spending has increased consistently from 3%-5% every year since 2013, and in spite of the economic upset of 2020, most consumers plan to spend just as much money on holiday gifts this year. 

 

Merchants who are accustomed to seasonal holiday demand face a new set of challenges this year, as sales into traditional retail and B2B channels have slowed and ecommerce sales spiked. This trend doesn’t show much sign of slowing down as 74% of consumers report that they plan to do more of their holiday shopping online than in years past.‍ Merchants with flexible supply chains are best equipped to succeed in the face of an unprecedented holiday season. 

 

Annual growth in U.S. consumer winter holiday spend

 

Managing Seasonal Inventory

These unique circumstances facing seasonal merchants often create a special set of supply chain challenges.

  • Most Warehouses Require Year-Round Contracts & Inflexible Agreements. This represents a problem because seasonal suppliers may only achieve 5-7% of their annual sales per month between February and September but still pay for warehouse space based off of your peak demand levels.
  • Inventory Space is Limited During Peak Seasons. With the rapid rise of ecommerce shipments, warehouse space is at a premium. Peak seasons like the holiday shopping season will only compound this problem. In fact, Amazon recently limited storage capacity for its third-party merchants in preparation for Amazon Prime Day and the holiday season.
  • Warehouse and Fulfillment Rates Spike with Demand. As demand for warehouse space and fulfillment services go up, so often do the prices. Merchants may be moving more inventory in their busy season but at a greater operational cost.
  • Inadequate Warehouse Availability Results in Delayed Fulfillment Speeds. If warehouses are unable to cope with large scale shifts in seasonal storage and fulfillment needs, suppliers may be forced to reduce inventory or curb production, which can impact order fulfillment speeds and result in more frequent stockouts. This in turn leads to slower delivery times and lower customer satisfaction. Given that seasonal suppliers only have a few months to achieve the majority of their annual revenue, these types of obstructions can severely damage their bottom line.
  • Purchasing a Warehouse is Too Expensive. While one might assume that the above obstacles could be avoided by simply purchasing a warehouse, this option is often more costly in the long run. Owning a warehouse comes with the added cost of hiring warehouse staff, paying for utilities and upkeep, and dealing with a broad range of other equipment and property management expenses. And, this still doesn’t solve the dilemma of only needing warehouse space for a few months out of the year. Given the limited need, purchasing a warehouse that must be maintained 24/7 is not a cost-effective strategy.

 

Comparison of how on-demand warehousing compares to traditional warehousing for seasonal inventory

 

On-Demand Warehousing Offers a Unique Solution for Seasonal Suppliers. 

Without the proper warehousing and fulfillment solution, seasonal suppliers may spend a significant portion of their annual revenue paying for storage space they don’t need. However, with the arrival of on-demand warehousing and fulfillment to the logistics space, businesses are now afforded with a much more flexible solution for managing seasonal demand. Here’s how:

  • Complete Storage Scalability. On-demand warehousing provides businesses with complete flexibility over the levels of inventory they maintain year-round. Warehouse space can be scaled up or down as needed, and with flexible contracts and no start-up fees, they’re a low-risk option that minimizes investment in fixed assets. Businesses pay only for the space that they use, when they are using it and rates are consistent year-round. This enables season merchants to keep overhead low during the off-season and rapidly scale up their inventory in time for the busy season without being sidelined by excessive costs or insufficient storage space.
  • Real-Time Inventory Status & Restock Alerts. By combining their network of warehouses with an online technology platform, the leading on-demand solutions provide businesses with real-time insight regarding the status of inventory across each warehouse location, as well as the status of outstanding deliveries and in-process shipments.The most advanced systems will also set automated re-order points and deliver alerts when inventory levels at any location drop below a certain threshold.
  • Demand Planning & Sales Forecasting. As supplier data regarding inventory turnover, seasonal demand, and customer deliveries accumulate within the system over time, businesses can leverage the on-demand solution to develop sales and demand forecasts. This allows them to effectively plot out required inventory levels over the course of the year. Ultimately, companies can use these insights to optimize the amount of inventory they maintain year-round, thereby avoiding the costs of excess storage space while also protecting against potential stock outages..
  • Guaranteed 2-Day Delivery. Looking beyond inventory management, on-demand warehouses offer a distributed network of warehouses to enable nationwide 2-day delivery. Given that 54% of shoppers wait until after Black Friday/Cyber Monday to purchase holiday gifts, a nationwide 2-day delivery network can be a major competitive advantage in attracting last-minute convenience shoppers.

 

How on-demand warehousing compares to traditional warehousing for seasonal inventory

 

Flexibility is the Key to Seasonal Inventory Management

With the winter holiday season fast approaching, many seasonal suppliers are already preparing their supply chains to handle the uptick in demand. But without the appropriate warehousing and inventory management strategy, a significant portion of their revenue will be spent on unnecessary fees and overhead. With the on-demand warehousing model revolutionizing the logistics industry it’s now easier than ever to find a flexible and scalable partner to transform seasonal inventory management from a pain point to a growth lever.

‍To learn how Ware2Go can help your business manage seasonality, reach out to one of our logistics experts.

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