The period from September to the end of December is the absolute high season for many (online) retailers. As an e-commerce business, you can expect a significant increase in demand due to Black Friday, Cyber Monday, Halloween and Christmas. This increased demand can result in a sales boost and offer opportunities to attract new customers.
However, success during peak season is highly dependent on an effective demand planning strategy. Demand planning, the anticipation of future demand based on historical data and market trends, is crucial to a retailer’s ability to both meet demand and maintain inventory at optimal levels.
The threat of stockouts and excess inventory
Preventing stockouts (insufficient inventory to meet demand) and minimising excess stock (inventory that exceeds customer – and forecasted – demand) are goals in themselves for any e-commerce company. Stockouts can cost you sales and negatively impact customer satisfaction. Excess inventory can result in rising inventory costs, financial losses and the risk of obsolete products.
To prevent both stockouts and excess inventory, you need a well-thought-out demand planning strategy to find the right balance between supply and demand. In this article, we present demand planning to find – and maintain – inventory balance before, during and after the high season. Discover what you can do to prevent stockouts and excess inventory from analysing historical sales data and implementing forecasting to optimise clearance strategies.
Demand Planning for the high season
With effective demand planning you can balance and maintain your inventory to stock the right products when the high season starts.
1. Analysis of historical data to identify sales patterns
- Study past peak seasons to understand trends. An analysis of historical sales data forms the basis of an effective demand planning strategy. In this way, you as a company can gain insight into demand fluctuations and patterns. Are there specific periods when demand increased? Were there products that were consistently popular? As a webshop, you want to understand the sales cycles and peak times to prepare for future high seasons.
- Identify products with consistently high demand. By analysing historical data, you can identify products that show consistently high demand during different peak seasons. These products also belong to your A category (via the ABC analysis) and play a crucial role in maintaining healthy turnover – even after the high season. Focus on the availability of these products so you can reduce the impact of seasonal fluctuations.
By carefully analysing historical data and learning lessons from previous peak seasons, you can lay a strong foundation for effective demand planning.
2. Cooperation with suppliers and logistics partners
- Proactively communicate with suppliers to ensure product availability. Getting a grip on your supply chain starts with open and proactive communication with suppliers. Inform suppliers early about the expected increase in demand during the peak season. That way they can adjust their production and inventory levels when necessary. This not only prevents possible inventory shortages but also enables suppliers to plan and produce more efficiently.
- Collaborate with logistics partners to optimise transport capacity. Cooperation with logistics partners is essential to ensure that products arrive at customers on time and efficiently. Engage with logistics partners in a timely manner to discuss anticipated demand and share any specific requirements. This can vary from temporary capacity expansions to special packaging for seasonal products.
By proactively communicating with suppliers and working closely with logistics partners, you can lay a solid foundation for a smooth transition after the high season.
3. Application of forecasting
- Use Artificial Intelligence (AI) to generate accurate forecasts. AI-driven forecasting systems are able to analyse enormous amounts of historical data and identify patterns. These systems can apply complex algorithms to predict future demand based on historical trends and current market developments. This enables you, as a webshop, to more accurately align inventory levels with expected demand while avoiding the accumulation of excess stock.
- Consider seasonality, marketing campaigns and other factors that influence demand. A successful demand planning strategy goes beyond just analysing historical data. Consider several factors that can affect demand, such as seasonal fluctuations (holidays or special occasions) and marketing campaigns. Choose a comprehensive approach that takes all these elements into account. This results in more realistic and accurate forecasts that form the basis for effective demand planning.
By embracing advanced technologies and taking into account a wide range of influences, companies can strengthen their forecasting system.
Curious about what to focus on to keep your cash flow moving? Find in the white paper six smart ways to get a grip on your supply chain and avoid that cash getting tied up in excess stock.
Inventory optimisation during the high season
1. Use just-in-time inventory management strategies
- Minimise the risk of excess stock by ordering goods just in time. In an industry where accuracy and effectiveness are critical, embracing a just-in-time inventory management strategy is a smart move – especially during peak season. This approach minimises the risks of excess stock. Instead of ordering large quantities of products in advance you only order when there is actual demand. This reduces inventory costs and minimises the risk of unsold stock after the peak season. Close coordination with suppliers and an optimised purchasing process are important to ensure that the right products are available at the right time.
- Take advantage of drop shipping or direct shipping options. With drop shipping and direct shipping options, you can optimise your inventory management during peak season. With drop shipping, you work with suppliers who ship directly to the end customer. It eliminates the need to store and manage inventory and reduces the chance of stockouts and excess inventory. Direct shipping options ship products directly from the manufacturer to the customer. Both approaches require working closely with reliable order fulfilment partners and systems and can deliver significant benefits in terms of cost savings and inventory management.
2. Dynamic replenishment
- Continuously monitor demand and make adjustments where necessary. A dynamic strategy for your replenishment orders means that you continuously monitor demand and adjust your purchasing decisions based on current information. This requires an efficient system for tracking sales data and inventory levels. By monitoring demand in real-time, your company can quickly respond to changes and adjust purchase orders. This approach reduces the risk of unexpected stockouts and allows you to respond flexibly to shifts in demand.
- Identify replenishment thresholds to avoid stockouts. By setting threshold values for your replenishment orders you can prevent unnecessary stockouts. Establish minimum inventory levels that must not be exceeded. This way there is always sufficient stock to meet demand. Once these thresholds are reached or approached, you can move on to accelerating purchase orders or scaling up production.
Implementing inventory optimisation strategies allows you to respond resiliently to peak season dynamics while maintaining efficient inventory management.
Optimisation after the high season
1. Evaluation of demand expectations
- Analyse real-time sales data to assess the accuracy of forecasts. After the high season, it is essential to evaluate the accuracy of the forecasting models used. Analyse real-time sales data and compare it to the forecasts that have been generated. By identifying the deviations, you gain insight into the performance of your forecasting system. Were there areas where the predictions were accurate and where they deviated?
- Identify any anomalies and adjust the models for future peak seasons. Once you have identified the discrepancies between forecasts and actual sales figures, you can use this information to adjust and optimise forecasting models for subsequent peak seasons. This can range from adjusting algorithms and parameters to integrating new variables that you previously overlooked.
2. Implement effective inventory disposal strategies
- Set up discount promotions to reduce excess inventory. To reduce the remaining stock after the high season and make room for new products, consider setting up discount promotions. Temporary price reductions can encourage customers to purchase products that would otherwise remain on the shelf. Plan and communicate these discount promotions strategically to ensure a positive effect on sales.
- Work with marketing teams to create targeted promotions. Create targeted promotions in collaboration with the marketing team to reduce excess inventory after the peak season. Encourage the sale of specific products or bundle products to provide higher value to customers. Develop and advertise well-thought-out promotional strategies to not only reduce inventory but also increase your brand awareness and deepen your relationship with your customers.
By carefully evaluating performance, refining forecasting models and implementing effective inventory disposal strategies, you can optimise your inventory for the post-peak season period.
Curious about what to focus on to keep your cash flow moving? Find in the white paper six smart ways to get a grip on your supply chain and avoid that cash getting tied up in excess stock.