Seasonal demand variations: one of the most difficult things in business.
You have too much inventory one season. Not enough the next. Angry customers. Lost sales. Frustrated employees. Seasonal demand changes are a business owner’s worst nightmare.
And here’s the problem:
The majority of businesses still rely on old-fashioned methods to handle seasonal demand.
Spreadsheets. Guesstimates. “We’ll do what we did last year.” These practices are not only inefficient, they don’t work. If you’re serious about succeeding this season and every season after that, it’s time to get it right. Are you ready?
What you will learn:
- Seasonal Demand Planning: Why it’s Important
- The High Price of Being Wrong
- 4x Seasonal Demand Planning Techniques that Work
- Choosing the Right Techniques for Your Business
Seasonal Demand Planning: Why it’s Important
Seasonal demand is a fact of life for every business.
Retail? Holiday shopping crush. HVAC? The hot and cold weather extremes. Lawn and garden supplies? The spring buying surge. This cycle repeats itself, year after year.
The problem?
Most companies react to seasonal change instead of planning for it. They scramble to meet demand surges. They freak out when sales plummet. The problem is not seasonal demand. The problem is how most businesses respond to it. This chaotic and reactive approach wastes time, money and valuable opportunities.
The solution? Demand planning solutions for your business that actually work. Companies that invest in effective demand planning software gain the competitive advantage of stocking the right product at the right place at the right time. They see demand changes coming before they arrive and they prepare.
Sound simple enough?
It is. But it requires a delicate balance of historical data, market insights, and the right tools working in concert. Without these elements all singing from the same song sheet, even the best-laid plans can come crashing down.
See also: Optimizing Business Energy Use with Smart Power Inverters
The High Price of Being Wrong
Let’s crunch some numbers…
Inventory distortion is costing the global economy $1.6 trillion annually. Lost sales due to stockouts. Raked-over-the coals customers due to overstock. Theft and shrinkage. A large portion of that $1.6 trillion comes directly from poor seasonal planning and forecasting.
It gets worse.
When a customer can’t find what they want where they want it, two-thirds go to a competitor instead of waiting. Think one lost sale. Think permanent lost customer.
Why?
If your shop runs out of suntan lotion in July, those customers aren’t coming back next month for clearance prices. They’ve found a different vendor. You lost the sale and you lost the customer.
Conversely, having too much stock ties up cash in goods that don’t sell. Storage costs accumulate. Products get obsolete and shrink. Discounting savages your margins.
The reality? Getting seasonal demand planning wrong is not only expensive. It’s crippling. Getting it right is transformative.
4x Demand Planning Techniques That Actually Work
You didn’t come here to read theory. You came here to find solutions. I won’t keep you waiting. This is the meat and potatoes of the show.
These are the 4x demand planning techniques your competitors are using. The ones that are successfully navigating seasonal demand ups and downs like pros.
Historical Data Analysis
We’ve already talked about this. But it bears repeating.
The backbone of successful seasonal demand planning is always going to be historical data. Past sales performance is the starting point for understanding the patterns that will most likely repeat again and again.
Holiday season spikes. Summer sales slumps. Back-to-school season pick-ups. Look for these trends in your past data and use it to inform future planning.
The caveat?
Past performance does not guarantee future results. The economy changes. Customers change. New players enter the market and disrupt the status quo. That’s why savvy businesses will always use historical data in conjunction with the other techniques we’re about to explore.
Look at historical patterns as a baseline. Then adjust for changing market conditions using the best possible insights you have at your disposal.
Seasonal Indexing
Seasonal indexing is a statistical method that builds on historical analysis.
It works by calculating an index for each period based on how that period’s demand compares to the average demand for all periods. So if sales in December are 40% higher than the average monthly sales, the index for December will be 1.4.
This allows for more precise forecasting because it takes the magnitude of the seasonal change into account, not just the direction. How much does demand increase/decrease each month…not just whether it goes up or down?
Companies can then apply these index values to their baseline forecasts to get a much more accurate projection of what each month will actually look like.
Demand Sensing
The opposite of historical forecasting is demand sensing. This method focuses on the present.
Real-time data is used to identify shifts in buying patterns as they are happening. It captures what is hot in the moment based on current market conditions. Weather changes. Viral social media trends. A big sale from a competitor. These are the type of events demand sensing can pick up.
Demand sensing allows companies to react in near-real time. Instead of waiting for monthly sales figures to reveal a trend, they can adjust on the fly to account for shifting demand. In the middle of a seasonal transition, when sales patterns change quickly, this can be invaluable.
Machine learning is a huge asset when it comes to making this technique powerful.
Collaborative Planning
What most companies fail to realise is the most accurate forecasts are almost always the result of collaboration.
Sales teams know what’s selling and what customers are asking for. Marketing teams know what campaigns are coming. Suppliers can predict supply disruptions. Finance knows the numbers.
When planning comes together from all these different angles, you get the best possible forecast. Collaborative planning also helps create buy-in from the people who need to act on that forecast. No one fights numbers they helped create.
The trick is creating the right collaborative planning process. All this information needs to be organised into a coherent plan for it to actually be useful. This is one area where cloud-based collaborative planning software can make a huge difference.
Collaborative planning works best for seasonal demand because it’s almost always different departments that have pieces of the seasonal demand puzzle no one else is privy to.
Choosing the Right Techniques
Different businesses have different needs. Not every technique works for every company. Finding the right approach for your company will depend on a few factors.
Availability of historical data. Businesses with clean years or even decades of historical data can get away with using mostly statistical methods. Companies that are just starting out may need to rely on market research and qualitative methods.
Product/service characteristics. Fast moving consumer goods (FMCG) planning is going to be different from made-to-order industrial equipment. High velocity, volatile products need more sophisticated demand forecasting.
Cost of error. Is your product a high-margin luxury or a low-margin commodity? The answer to this question should inform how conservative or aggressive your demand planning and forecasting approach becomes.
Market dynamics. The more rapidly your industry changes, the more agile and responsive your planning methods need to be. Slow-moving, stable markets can use more basic forecasting techniques.
Successful businesses use a combination of these methods. Historical data gives you a baseline. Seasonal indexing adds precision. Demand sensing captures the micro shifts that might happen in the moment. Collaborative planning brings all the perspectives of the business together to make the forecast as accurate as it can be.
The Bottom Line
Seasonal demand planning is not an option anymore.
Between consumers’ rapidly evolving expectations and the high cost of inventory missteps, not planning for seasonal change is suicide. Stockouts send customers fleeing to the competition. Overstock bloats storage costs and crushes your margins. Both doom long-term growth.
The good news? Seasonal demand planning techniques that work exist and more companies are starting to use them:
- Historical data is the foundation.
- Seasonal indexing adds mathematical precision.
- Demand sensing captures real-time market changes.
- Collaborative planning adds cross-functional insights.
Businesses that plan for seasonal change not only survive. They thrive.
