Tips for Effectively Managing Seasonal Inventory
While the supply chains of all industries come with their share of challenges, seasonal suppliers face a particularly unique set of obstacles. Today, there are many companies that experience a recognizable “busy season” where spikes in customer demand occur. These periods typically fall around a major holiday or event such as Christmas, where certain retailers can experience as much as 30 percent of their profits in just two months. However, even summer goods have a busy season. Such is the case with Scotts Company, a provider of turf and lawn care products that tends to receive 70 percent of all sales between the months of March and August. Regardless of which season is the busiest, all of these companies have similar experiences in that their inventory and warehousing needs are lowered for large portions of the year, then expand dramatically for a few months to accommodate the busy season.
The Nightmare Before Christmas: Managing Seasonal Demand
While it might sound like a simplification of the supply chain to only experience demand for a portion of the year, it's the opposite that often holds true. Here’s why:
- Most warehouses require year-round contracts and inventory minimums. This represents a problem because seasonal suppliers may only achieve 5 percent to 7 percent of their annual sales per month between February and September, but still pay standard pricing for warehouse space during this period. Suppliers may also be contractually obligated to maintain standard levels of inventory in their warehouses during this time, even if demand is low.
- Inventory space is limited during peak seasons. As consumer demand escalates, many seasonal suppliers find that their warehouses lack the bandwidth to handle the sudden spike in required storage space and incoming fulfillment requests, making it difficult to capitalize on their most profitable season.
- Inadequate warehouse availability results in delayed fulfillment speeds. If warehouses are unable to cope with large scale spikes in seasonal storage and fulfillment needs, suppliers may be forced into lowering their inventory or altogether curbing production, which can impact order fulfillment speeds and result in more frequent stock outages. This in turn leads to slower delivery times and reduced customer satisfaction.
- Purchasing a warehouse is too expensive. By owning a warehouse, companies must account for the costs associated with hiring warehouse staff, paying for utilities and upkeep, and dealing with a broad range of other 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 isn't a cost-effective strategy.
On-Demand Warehousing Offers a Unique Solution for Seasonal Suppliers
Without the proper warehousing and inventory management solution, seasonal suppliers may spend a significant portion of their annual revenue paying for warehouse space they don’t need. However, consider an alternative option. 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 there are no long-term contracts or inventory minimums. This allows seasonal suppliers to minimize or altogether eliminate their warehousing expenses during the nonbusy months, and then rapidly scale up their inventory in time for the busy season without experiencing excessive costs or insufficient storage space.
- Real-Time Inventory Status and 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 can also leverage inputs provided by the user to determine optimal restock points and deliver alerts when inventory levels at any location drop below a certain threshold.
- Demand Planning and Sales Forecasting: As supplier data regarding inventory turnover, seasonal demand and customer deliveries accumulate within the system over time, businesses are able to leverage the on-demand solution to develop sales and demand forecasts. 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 Two-Day Delivery: On top of optimized inventory management, the leading on-demand providers also offer specialized fulfillment and delivery services. This means seasonal products can typically be shipped to customers within one day to two days. Given that 61 percent of winter holiday shoppers in 2018 waited until the last week before Christmas to buy their gifts, the guaranteed provision of two-day shipping offers massive advantages over current warehousing models.
Final Thoughts: If Inflexible Warehousing Impacts Your Margins, Consider an Alternative
If you're a seasonal supplier facing rigid warehousing requirements, it's strongly recommended that you consider an alternative warehousing solution. With the growing prevalence of on-demand models within the warehousing and logistics industry, there's no reason to stick with a provider that fails to address your specific requirements. Failing to seriously evaluate other options will only result in further lost revenues and reduced margins. With the 2019 holiday season projected to be another massive year, now might be the perfect time to switch.
Patrick Cadic is vice president of sales and marketing at Ware2Go, a company aimed at connecting small and medium businesses with warehouses to help streamline online orders.
Related story: Hidden Costs of Poor Inventory Management
Patrick Cadic is vice president of sales and marketing at Ware2Go (a UPS company), a nationwide fulfillment network aimed at connecting small and medium businesses with warehouses to help streamline online orders.
Patrick Cadic leads sales, marketing and customer success at Ware2Go (a UPS company), where he is scaling a team designed to disrupt the traditional fulfillment industry. With a unique background of progressing the financial services industry with applied uses of artificial intelligence and Big Data, Cadic is bringing a new perspective to an industry in need of change. Prior to Ware2Go, Cadic was Vice President of Sales at Zest Finance and Equifax, where he led an enterprise sales organization and built out the company's largest consumer data sandbox for advanced analytics.