Seasonal inventory is stock which is in high demand during particular times of the year, such as during Christmas or Halloween. Other companies may experience seasonal spikes according to changes in weather, sports seasons, or secondary holidays such as Valentine’s Day or Father’s Day.
As you might expect, investing in seasonal inventory means increased costs to your business, since you will often have to stock up on the inventory well in advance of the surge in demand. Hence, you must ensure you have enough cash on hand to continue operating until the expected sales begin to increase when the time arrives.
It is important to keep in mind, seasonal inventory can be unpredictable, even though you may be able to predict a general surge and decrease in demand. While you may be able to predict that demand will increase during Christmas, for example, it may be difficult to predict exactly when demand will begin to slow down. For this reason, seasonal inventory can pose a challenge to your inventory control plan, making it difficult to prepare adequately for the changes in demand.