Most inventory-based businesses experience seasonal swings in demand for their products. Depending on the sector and clients, a company might experience a boom around the winter holidays, a summer spike, or a back-to-school rush in the fall. Instead of getting caught off-guard by these seasonal fluctuations (which can vary greatly from standard demand), businesses can use seasonal demand forecasting to predict these changes, stock inventory accordingly, and best meet customer needs.
What is Seasonal Demand Forecasting?
What exactly is seasonal demand forecasting, and how is it different from “regular” demand forecasting? Seasonal demand forecasting is a strategic tool that helps businesses predict seasonal patterns in consumer habits. By accurately anticipating these fluctuations in demand, companies can improve service levels, reduce excess carrying costs, and elevate customer satisfaction.
Seasonal demand forecasting functions as a supplement to regular demand forecasting, which works to anticipate expected buying habits. While standard demand forecasting will operate off of “typical” data and buying habits, seasonal fluctuations can be outliers. For example, if operating off of typical buying data, a forecasting model that does not take seasonality into account might predict that December’s demand will be the same as September and October.
However, when a forecasting model accounts for seasonality, it will adjust its predictions to reflect real-world fluctuations in buying habits.
Why Does Seasonal Demand Forecasting Matter?
Seasonal demand forecasting can be extremely beneficial for both businesses and their customers. Firstly, it can help businesses stock their inventory appropriately. Customer needs can change dramatically between seasons (for example, you typically don’t see a high volume of swimsuit sales in the middle of winter). Forecasting seasonal changes in demand can make a huge difference in your stock levels—and with accurate demand forecasting, you can avoid stockouts, overstocking, and missed sales opportunities.
Seasonal demand forecasting also helps improve the customer experience. Keep in mind that customers have increased holiday spending by about 8% year over year, and this season, are expected to spend more than $1,700 per person. If the products they want are out of stock or delayed, it can negatively impact the experience they have with your company. Subsequently, this can damage your business’ reputation.
There are many other benefits of seasonal demand forecasting. When businesses plan for seasonal fluctuations, they can:
- Optimize production schedules: Businesses can avoid costly production runs, deliveries, and overtime pay by planning for demand spikes in advance.
- Lower shipping expenses: With proper planning, you can minimize the need to expedite shipping due to last-minute ordering. Keep in mind that transportation is often already expensive for businesses, and can cost nearly 58% of total logistics expenses.
- Improve resilience: Seasonal demand forecasting helps companies prepare for and adapt to market changes, both expected and unexpected, which can improve resilience. For example, by identifying periods of high demand, businesses can adjust inventory, staffing, and production capacity to avoid bottlenecks and shortages, ensuring smooth operations.
- Reduce waste: Overstocking products can lead to inventory sitting unsold on shelves. While this itself can lead to excess storage costs, it can also lead to waste, due to products either becoming obsolete, expiring, or falling out of fashion.
Ultimately, seasonal demand forecasting not only improves the customer experience and inventory management but helps companies better respond to changes in demand.
Tips for Improving Your Seasonal Demand Forecasting
Accurate seasonal demand forecasting is mission-critical for optimizing inventory, staffing, and financial planning. While there’s no one-size-fits-all approach, here are some tips to help improve the accuracy of your forecasts and build a more responsive inventory strategy.
1. Know your seasonal stock
First, it’s important to understand which parts of your inventory are typically impacted by seasonal shopping habits. While seasonal demand can vary greatly from business to business, there are several major trends you can keep an eye on, such as:
- Holiday sales: Many items fluctuate around certain holidays, especially decor and gift items.
- Back-to-school: Back-to-school season means an increase in the sales of technology, school supplies, clothing, and dorm supplies.
- Fashion seasons: Many clothing items have distinct seasons that you need to consider.
- Recreational items: The sales of some recreational and leisure items fluctuate throughout the year. For example, camping gear might be more in demand in the summertime.
Pay careful attention to your seasonal stock and which items customers are most likely to need at different times of the year. Your seasonal stock will depend on your business’s unique inventory.
2. Understand customers’ seasons
It’s one thing to know when items will be in demand: it’s another to know when customers will start buying them. What do we mean? Consider the fact that when it comes to shopping for holidays in December, many customers start picking up items months in advance. For example, in 2023, studies show that most shoppers planned to begin their holiday shopping in October or earlier. Similarly, around 59% of back-to-school spending may take place before the end of July.
On that note, get to know customers’ seasons and how they have changed from the previous year. Knowing these habits is a crucial part of executing your seasonal demand forecasts.
3. Pay attention to your supply chain
As you forecast seasonal demand and the needs of your customers, you must look at your supply chain to properly plan your inventory. In many cases, you may need to make allowances for slower-than-usual shipping times during certain seasons, for example. By paying careful attention to supply chain challenges and needs, you can better prepare for the needs of your customers and ensure that you’re ready for increases in sales.
4. Include information about trends
Historic seasonal demand data can help give you a reasonable idea of what sales may look like in the current year, but it won’t tell you the whole story. Current trends, shortages, and consumer needs can have a heavy impact on spending and the inventory you may need to have on hand. Even social media can greatly impact shopping habits, with more than half of consumers saying they purchased something after seeing an influencer use it.
By including information about current trends in your seasonal demand forecasting, you can get a better idea of what sales will likely look like in the coming season, allowing you to prepare your inventory more effectively.
5. Use advanced demand forecasting technology
Accurate seasonal demand forecasting requires complex algorithms and calculations. And for that, you should turn to the advanced software that’s available today. Demand planning software will not only analyze historical data but also consider seasonality and other factors (such as market changes).
By using advanced seasonal demand forecasting tools, you take a lot of the guesswork out of the equation for your seasonal inventory needs. Your demand forecasting platform can tell you what you need, when you need to order it, and when you may need to adjust your plans. Automating the process will also ensure that you receive critical reminders when you need to order seasonal items.
StockIQ: Your Partner in Accurate Seasonal Demand Forecasting
Are you looking for tools that can help you improve your seasonal demand forecasting? StockIQ can help. StockIQ is advanced, user-friendly supply chain software that specializes in forecasting demand, and it can help you overhaul the way you handle your inventory.
Contact us today or request a StockIQ demo to learn more about our demand forecasting and inventory analytics tools and how they can help you manage the changing seasonal needs of your business.
