Winning inventory management strategies for this holiday season

February 29, 2024

Inventory. Having enough is everything. Along with demand for your product, customer delight, and strong financial fundamentals, it’s the lifeblood of your company. The holiday season is the most challenging and trickiest time of year to hit the mark with balancing inventory. It seems simple: purchase the right items, at the right time, in the right quantities. Of course, it’s not that simple. Too much inventory – and you face an overstock situation. Too little – and you are understocked and scrambling to increase product inventory. In either situation, you are eating into your profits You’ve worked hard all year building a great company. As the holiday season approaches you need to position your business to take advantage of the uptick in consumer spending and maximize your share of sales. After all, this is your best chance of the year to amplify your brand, bring in record sales, and create a buzz for your product and services.

So how, can you stay on track?

Think Ahead on Inventory

Did you know that in 2022, global online sales for the holiday season topped $1.14 trillion? Taking prudent steps now will ensure your business wins its fair share of the 2023 pie. Further, a key trend being predicted for 2023 is that due to inflationary pressures shoppers will delay buying decisions until much later in the cycle – as they wait for discounts. This means you will likely need to keep more inventory in “safety stock” as demand for your product and service will spike later this holiday season.

Planning now to have more safety stock to meet any inventory shortfalls will help you be prepared for the expected delay in the buying season. At all costs, you want to avoid a stockout situation, which usually occurs for 3 reasons:

  • Delays in the supply chain (usually outside of your control)
  • Poor cash-flow management, (you can control); or
  • Shortage of working capital (you can control)

So, what are the keys to hitting the perfect inventory balance?

Understand the market and your sales forecast.

  • Consumer spending will be unpredictable. Inflationary pressures and common sense indicate consumer buying will be lower than normal. However, we also know that in the aftermath of the global pandemic, and the spirit of the holiday season, consumers oftentimes splurge during the holidays and buy even more on credit. So, what do you need to know? Stay flexible and agile. And the best way to do this is to have cash on hand!
  • Consumers will delay buying decisions until late in the holiday cycle – December/January, as they wait for deep discounts on products and services. Here again, the advice is to stay flexible and have the working capital and stock on hand to deal with a late cycle, buying rush.
  • Factor these two trends into your sales and demand forecasting and invest NOW in a quality sales forecasting software program. It will be one of the best investments you can make.

Don’t Let This Happen

Don’t think it’s real? 

Take this nightmare scenario for example. Let’s say you sell through Amazon. Your inventory is low as you head into the holiday season. You may not have enough cash on hand to create a bank of safety stock. As the holiday season kicks off, there is sudden and unexpected demand for your product. Orders come in, but you find yourself short on inventory. What happens? Amazon removes your listing, and your company is marked “inactive.” And that means you can’t sell! Nobody is happy in this scenario – not your customers, not Amazon, and certainly not you.

In this situation, here’s what happens next:

  • Customer backorders – If you are selling a highly specialized item, your customers may be patient and be willing to wait. However, if it’s a holiday item or commodity product,  customers will go somewhere else to fulfill the purchase faster.
  • Customer Cancels – If you already received payment, get ready for cash flow and accounting headaches as you fulfill refunds and face potential cash gaps.
  • Customer shops elsewhere and moves on.

So, you can see there are dire consequences to not thinking through your inventory plan – among them -- loss of revenue, and customer and business partner dissatisfaction – and these can have long-term ramifications on your business.

Take Control with an Inventory Plan

There are three key elements to your winning inventory plan as we approach the holiday season:

  • Great Sales Forecasting – Use predictive sales data you’ve collected over the past several years and double down on sales forecasting accuracy. Due to inflationary pressures, you now know shoppers will be looking for late deals, meaning you will need to be prepared with on-demand inventory. Also, check with your partners. Amazon, for example, has tools that can help.
  • Flexibility – You need to enter the holiday season by making every aspect of your business as flexible as possible. Do you working capital on hand to weather the unexpected? How much safety stock do you have in inventory? Are you meeting regularly with your supply chain vendors to understand their challenges? Asking these questions now will help increase your business agility and prepare for the unexpected. 
  • Working Capital – Most important of all, you need working capital to ensure you have immediate access to cash to prepare now, and respond later, to changing customer buying pattern. You may be unsure of the best way to obtain working capital. Thankfully, there are innovative companies that can offer revenue-based financing (funding to cover a pre-agreed-to percentage of revenue). One such company is Stenn. In as little as 48 hours, you can obtain up to $10 million in working capital.

Make the most of your plan. Be ready. And have the cash you need to grow your business!