Seasonal Inventory: How to Plan, Track & Optimise | DHL Ireland

Inventory management and accuracy are crucial for any successful business. While it’s something you need to keep track of constantly, there are seasons in which it can make or break your business. We’re talking about the busiest shopping periods of the year that place an immense strain on businesses.

However, peak season doesn’t have to bring so much stress. Instead, it can be your opportunity to capitalise on demand spikes and benefit from rapidly increasing sales, so long as you have the supply to meet customer needs. 

So, what are the best practices for managing inventory during peak seasons? Read on as we break down peak season logistics strategies to ensure you’re on top of stock as the rush comes your way.

What is seasonal inventory management?

Seasonal inventory refers to stock that sees a surge in demand during specific times of the year, such as festive holidays and weather changes. 

These fluctuations necessitate seasonal inventory management, a strategic process that involves curating and maintaining stock to anticipate and respond to predictable demand shifts. For example, you may expect a rise in demand for Halloween decorations in October. After the holiday, demand is likely to fall. 

As such, you will need to plan carefully to avoid understocking popular products or overstocking unwanted items during the holiday. By managing your inventory strategically, you’re better able to capitalise on peak season demand.

Types of seasonality in retail

There are various types of seasonality in retail, each influencing demand patterns and requiring its inventory management strategy:

• Seasonal: Demand is directly related to natural seasons and weather. For example, the colder months often see more consumers buying winter coats.

• Holiday-driven: Demand spikes significantly around specific holidays, such as chocolates on Valentine's Day and flowers on Mother’s Day.

• Event-based: Certain events, such as major music festivals or sporting events, can cause a sudden peak in demand for specific products, including merchandise or camping gear.

Challenges in seasonal inventory management

Difficulty predicting demand spikes accurately

Businesses often find it challenging to forecast seasonal demand spikes accurately, especially when facing unpredictable consumer behaviour and market volatility. 

In turn, they may understock products that are actually in high demand, resulting in lost sales. Conversely, overstocks may become dead stock, taking up space and costing companies money. These issues can collectively cause significant revenue losses. 

However, aggressive stocking and heavy discounts alone cannot solve these problems. Therefore, you must plan and budget carefully to ensure your inventory matches demand as closely as possible. 

Limited warehouse space for seasonal stock

Seasonal demand also poses a challenge in warehousing as companies may struggle to accommodate unsold inventory. For example, storing large volumes of deadstock during off-peak times can be expensive and inefficient.

To address this, consider optimising your current storage layout or exploring flexible solutions to handle seasonal inventory without incurring excessive costs. 

Longer supplier lead times during peak periods

During peak seasons, you might experience a stretch in supplier lead times. For example, if you try to order extra festive jumpers in November, your manufacturers may already be swamped by similar orders.

This surge in demand across the industry can extend your usual ordering timeline, making it difficult to manage seasonal inventory effectively. 

Therefore, it’s advisable to place your orders in advance of peak periods to avoid the rush. Additionally, building a strong relationship with your supplier can also give you a competitive edge.  

Misalignment between sales and inventory teams

A common pitfall in seasonal inventory management is the misalignment between sales and inventory teams. Sales might push aggressive promotions without fully understanding current stock levels, while inventory managers may not be privy to upcoming marketing campaigns. 

This detachment can lead to inaccurate forecasts, resulting in stockouts during peak demand or costly overstocks. 

To avoid this, foster open communication and shared data between these departments to ensure everyone's working from the same playbook.

How to manage inventory for seasonal products

Predicting future demand can feel like staring into a crystal ball. However, by knowing what the best practices for managing inventory during peak seasons are, you can optimise stock levels, minimise risks, and capitalise on peak season demand effectively.

Forecast demand

Analyse historical sales data  

Numbers don’t lie – leverage your previous sales records as a yardstick for your customers’ preferences. This data can help you identify and isolate products that consistently sell out as well as those that do not. 

For instance, if you experienced a massive spike in waterproof jacket sales last winter, it’s an indicator that you might face similar demand in the upcoming season. The previous figures can help you determine how many waterproof jackets to stock, enabling you to manage the seasonal inventory more effectively.   

Consider market trends and economic factors

Staying attuned to wider economic and market trends is crucial for effective seasonal inventory management. Pay close attention to major shifts in consumer preferences and pinpoint specific times when spending typically spikes. 

For instance, key e-commerce dates like Singles’ Day and Black Friday often see a surge in purchases as consumers leverage generous promotions and discounts. During these periods, you might increase orders for popular items to meet the demand. 

Additionally, economic movements like inflationary pressures can change buying behaviours. As such, monitor these trends and adjust your forecasts accordingly.

Consider sales promotions and marketing campaigns

Strategic sales promotions and marketing campaigns are powerful tools for forecasting demand and managing seasonal inventory effectively. For example, campaigns targeted towards key retail events like Black Friday or holidays like Easter and Halloween can positively influence customer interest. 

In turn, you can better predict order volumes and adjust your stock accordingly, ensuring you have enough supply to meet anticipated demand. This tactic can even help to shift slow-moving items.

Set optimal inventory levels

The optimal inventory level is the amount of stock that meets customer demand without accumulating excess. To achieve this in seasonal inventory management, you'll need to analyse your demand forecasts, stock turnover rates, product types, and supplier lead times. 

By striking this optimal figure, you can manage peak season demand better, minimising holding costs and preventing stockouts.

Utilise inventory management software

Inventory management software can significantly aid holiday inventory management. These softwares track stock levels in real-time and automate order processing, reducing manual work. Additionally, you can integrate them with barcode scanning using HS codes for precise item counts. 

With such software, you can eliminate human errors and access accurate data, empowering you to make informed decisions when managing the peak season. 

Implement pre-order and backorder systems

Pre-ordering can help to guarantee sales by creating excitement about a product and increasing demand for it. With online prepayment options and a clear timeline, pre-orders can secure sales and ensure customers receive their products as soon as possible. This solution also helps you gauge actual demand before production to minimise overstocking.  

Meanwhile, backorders capture sales for temporarily out-of-stock items, preventing lost revenue. Use "notify me" tags for backordered products to turn a dead end into a sale, but be careful only to offer this option for items that you are confident of resupplying on time. This strategy helps you better manage peak season demand and seasonal inventory by selling before stock arrives.

Establish a strong relationship with suppliers and partners

Building strong relationships with your suppliers and partners is indispensable for effective seasonal inventory management. During peak periods, these relationships can be vital to securing timely deliveries and negotiating flexible terms, especially when dealing with unexpected surges in demand or supply chain disruptions. 

Additionally, engage in honest communication and show mutual respect to strengthen the relationship. These habits signal that you can rely on each other, helping you to manage peak season demand more effectively and avoid costly stockouts.

Inventory models for seasonality

Choosing the right inventory model is critical for efficiently managing seasonal inventory fluctuations. These models provide a structured approach to stock control, helping you optimise inventory levels and respond effectively to shifting demand.

First-in, first-out (FIFO)

The First-in, First-out (FIFO) model dictates that the oldest inventory is sold or used first. This approach is ideal for businesses dealing with perishable or trend-sensitive seasonal products, such as fresh food or fashion apparel. 

For example, a bakery would aim to sell older batches of Christmas-themed cookies before newer batches to minimise spoilage and maximise freshness. 

Last-in, first-out (LIFO)

Conversely, the Last-in, First-out (LIFO) inventory model assumes that the newest inventory items are sold before older ones. This method can be advantageous for managing seasonal stock control trends with rising costs or products that don't depreciate quickly. 

For instance, a hardware store might sell its latest shipment of garden tools first if material costs have increased, optimising profit margins on that seasonal inventory. 

Just-in-time (JIT)

The Just-in-Time (JIT) inventory model operates on the principle of receiving goods only as they are needed for production or sale, reducing holding costs. This approach is highly effective for managing seasonal inventory with predictable demand or for businesses with strong supplier relationships. For example, a retailer using JIT for holiday decorations can receive stock just weeks before Christmas, preventing excess inventory post-season. 

Economic Order Quantity (EOQ)

The Economic Order Quantity (EOQ) model calculates the ideal order quantity to minimise total inventory costs, including holding and ordering expenses. The formula is as follows:

This helps businesses set optimal seasonal inventory levels, particularly for items with consistent demand patterns. In turn, it guides businesses on how much to order. For instance, an outdoor gear company might use EOQ to determine the most cost-efficient order size for camping equipment for the summer season.

ABC analysis

ABC Analysis categorises inventory items based on their value and importance. 'A' items are high-value and critical, 'B' items are medium-value, and 'C' items are low-value.

This model helps optimise warehouse layouts and focus seasonal stock control trends on the most impactful products. For example, in a toy store, popular 'A' category holiday toys would ideally be displayed in easily accessible locations, streamlining picking during the festive rush. 

Benefits of successful inventory management

Well-executed inventory management doesn’t just help you survive the holiday rush — it helps you grow faster, deliver better, and operate smarter. Here’s what you stand to achieve:

Increased sales and profitability

Successful seasonal inventory management directly boosts sales by ensuring popular items are always in stock when customers want them. This reduces missed opportunities and leads to higher revenue. 

Maximised cash flow and budget efficiency

Optimised seasonal inventory practices free up capital tied in unsold goods, maximising your cash flow. This means you have more readily available funds for crucial investments or unexpected expenses. 

Lower holding and storage costs

Effective seasonal stock control significantly reduces expenses related to storing unsold or excess inventory. This means less spent on warehousing, insurance, and potential depreciation. For example, by precisely managing your Halloween costume stock according to demand trends, you can avoid paying for the storage of unwanted items long after the spooky season ends.

How do you know if you are successfully managing seasonality?

Measuring success is vital in seasonal inventory management, as it allows you to pinpoint areas of strength and identify opportunities for improvement. By tracking key metrics, you can ensure your strategies are effectively optimising stock levels and meeting demand.

• Inventory turnover: This measures how many times inventory is sold and replaced over a period. A higher turnover during peak seasons indicates efficient seasonal stock control trends.

• Stockout rate: This metric tracks the percentage of times an item is out of stock during a purchase attempt. The lower the rate, the more successful your holiday inventory management practices.

• Days Sales of Inventory (DSI): DSI indicates the average number of days it takes for inventory to turn into sales. A lower DSI, especially post-seasonal surge, signifies more effective management.

• Rate of return: This calculates the percentage of sold goods that are returned. A reduced return rate for seasonal products can reflect better forecasting and customer satisfaction.

Post-peak season analysis

Learning from experience is key to continuous improvement in seasonal inventory management. After the peak season rush subsides, dedicate time to analysing how your business performed thoroughly. 

This process can help pinpoint areas for improvement and give you a valuable head-start for the next busy period on your calendar. 

Here are some questions to consider:

• Were stock levels optimal, avoiding shortages or overstocking? 

• Did we accurately forecast demand? 

• Is our approach to inventory accuracy working?

• How effective were our warehouse operations? 

• Do we need more or less storage space?

• Did we need extra help to manage the inventory and outgoing orders? 

• Did external partners meet expectations? 

• Was communication beneficial to staff, suppliers, and customers? 

• Are our customers satisfied? 

How DHL supports your holiday inventory management

Mastering seasonal inventory management is crucial for capitalising on peak demand periods. To do so, structured forecasting and robust logistics are essential. 

Additionally, an experienced logistics partner can be invaluable. For example, DHL Express offers comprehensive holiday inventory management and fulfilment solutions designed to help your business thrive during seasonal surges. 

From on-demand delivery to e-commerce website optimisation advice, DHL Express provides comprehensive guidance and expertise to help you with the logistics of your business. 

Ready for unparalleled peak season success? Explore how DHL Express can help your business thrive through every seasonal surge today!