Sporadic Items with Seasonal Demand

For many organizations, 50% or more of their stocked inventory items have sporadic usage – that is, they are not sold or used on a regular basis. In previous articles, we have discussed how typical demand forecast techniques that predict the quantity of the product that will be sold or used in an upcoming month or week don’t work well for these products. In this article, I will discuss the proper maintenance of stock sporadic items with seasonal demand.

Consider an item with the following usage history:

A demand forecast based on an average of past monthly usage would probably equal somewhere between two and four pieces. But it appears that when customers order this item they want 12 pieces. The problem is you don’t know which day or month they will ask for the product. For this reason, replenishment parameters for product with sporadic usage should be based on a multiple of the normal quantity sold in one transaction.  After all, you don’t know when a customer will ask for the product, but when he or she does request it you want to be able to completely fulfill their order. In this case we would want to keep 12, 24, or even 36 pieces in stock as an “order up to” quantity based on the number of requests we want to be able to handle out of stock inventory.

Our clients have been very successful with this technique for stocking these items, but one of them called last week with an interesting question. He said that many of their products with sporadic usage have seasonal demand, and are sold only during certain times of year. The client wants to be sure the products are in stock at the beginning of the popular season, but the client does not want to replenish stock as the popular season ends or in the off season.

Properly maintaining sporadic items with seasonal demand in stock requires a simple enhancement to our replenishment logic.  When the net available quantity of a seasonal sporadic items drops below its “order up to” quantity, we will not replenish stock unless there was usage recorded in the upcoming several weeks or months, last year.  For example, if an item is sold only in the summer months, we won’t replenish stock in the fall or winter because there was no usage recorded last year during this time period. However, when we review stock levels towards the end of spring and see usage recorded in the upcoming weeks last year, then the inventory of the item will be replenished. For example, if the lead time for an item is 21 days, we will compare the available quantity of the product to the minimum stock level we want to maintain 21 days before the start of the popular season to see if the product needs to be reordered.

This simple solution will allow your system to automatically handle the replenishment of these items. As with any good replenishment tool, it will relieve you of performing a lot of mundane replenishment tasks and allow you to focus on those situations that really need your attention and expertise.