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Seasonal variations in consumption occur for many reasons; summer, back to school, various holidays. In fact, most industries experience annually recurring spikes in demand — even healthcare as they prepare for the dreaded flu season. Furthermore, the duration of a season differs depending on geography and demographics.

Having recognized the existence of a seasonal pattern, one must anticipate its future effect on inventories. To understand seasonal differences in consumption, forecasters look at an item’s seasonal index. The calculation of an item’s seasonal index is quite simple. The first step is to calculate the average monthly demand for a given year. The second step is to divide the actual demand by the average demand. The result is the seasonal index.

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