For many small, independent businesses, managing inventory is one of the most challenging aspects of running a business. Unfortunately, inventory management can be even more challenging when firms operate seasonally. Here are four ways to make sure you are well placed to manage stock throughout the ups and downs of the year.
Forecasting is critical to success
It’s obvious and boring, but the importance of forecasting should not be understated. Sales forecasting is vital in a seasonal business as by nature, sales will fluctuate throughout the year. Know your busy months and how much revenue you can earn during this period. It is important to be realistic and to calculate your expected sales as opposed to a best-case scenario situation. Use previous figures when available combined with a general knowledge of consumer habits and the economy to have a general idea.
Stock takes are important, but perpetual inventory is better
Knowing how much inventory is in stock is particularly important for seasonal businesses. It is never too early to start conducting a stock take of your inventory – either manually or through inventory management software. In the Southern Hemisphere, certain industries such as swimwear, barbecues and sunglasses process the majority of their yearly sales between November and February. On the other hand, warm clothing, heavy bedding and heaters sell largely between June to August. Depending on your business, make sure you understand your busy months and ensure you have enough inventory to keep sales up during the busy season. The best way to keep track of your inventory is to use a perpetual inventory system.
Adjust inventory levels throughout the season
Inventory is a hard aspect of a small business to optimise. As a business leader you should constantly be considering how much inventory your business needs to meet customer demand. Depending on your industry, it may not be appropriate to reorder on a monthly basis – you may need to reorder fortnightly, weekly or even daily. Undergoing stock take is a reasonable way to keep track of your inventory, although there are potential accuracy issues and a major time cost. A strong alternative is an automated inventory management software that tracks inventory levels for you, and can send alerts if stock levels get too low. This means the team has more time to do more value-added task instead of counting stock!
Remember, there is a fine line between not enough stock resulting in lost sales, or too much stock taking up precious space in your warehouse. Consider that different suppliers will all have different order lead times, factor this into the reordering process.
Make use of the down season
Seasonal businesses are, by nature, inconsistent. Despite this, it is possible to leverage the down season – the traditional “quiet months” are not simply waited time with minimal revenue. Discounts can be a valuable tool to keep customers coming through your door all year round. Discounting is one of the many methods to help clear dated stock. You can also use the off-season to focus on the next year’s business planning. This is a good time to reach out to key customers and suppliers to identify and iron out inventory and supply chain issues.
Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.