Dealing with Seasonal Inventory

Seasonality essentially refers to inventory with repetitive or predictable supply and demand patterns over a period of time. Manufacturers, distributors and retailers all need to contend with seasonal changes to supply and demand – typically the effects of seasonality ripple through the supply chain, affecting virtually every stage of production. How does seasonality impact on your business, and how can your business best manage seasonal demand?

Inventory Pressures and Capital Strain

Seasonal variations in demand and supply can place enormous pressure on growing businesses and their finances. Supply shocks can break fragile supply chains, cause input prices to rise and result in stockouts, missed sales and halted production lines. Peak seasonal demand typically results in similar pressure as businesses struggle to satisfy customer expectations with a very limited pool of stock.

Low demand in the off season can be just as disruptive. A decrease in accounts receivable for several months running can create significant cash flow pressures within a business, potentially compromising the business’ ability to meet all of its outgoings. Failing to carry out a stock take and clear excess inventory before demand slows can exacerbate the problem by burdening the business with higher than necessary inventory carrying costs.

Identifying Seasonal Inventory With A Stock Take

Determining the impacts of seasonal variations in demand and supply on your business is generally a simple process, provided that you have the right data. If your business has not been trading for long, there may be too little data to observe seasonal fluctuations. Likewise, if your business has operated using a paper or spreadsheet-based inventory system with periodic stock take, it may not be possible to precisely identify seasonal impacts. Implementing a real-time, perpetual inventory system is a great way to identify seasonal patterns. These inventory systems are simple to use and keep track of virtually every inventory movement. Rather than tracking inventory as at the date of each stock take, real-time inventory control involves recording a wealth of data to understand the ebbs and flows of your inventory over an entire season or year.