Posted by Marie Fournier | September 7, 2017
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.
A seasonal index of 1.2 indicates that 120% of average demand was consumed during that month. A seasonal index of .80 indicates that 80% of the average demand was consumed. Because seasons fluctuate, calculating the average seasonal index over a period of three years will provide a more accurate representation of a season’s impact on consumption.
The seasonal index helps buyers provide an uninterrupted flow of inventory without overbuying. Many buyers also temporarily adjust an item’s safety stock level as well to account for variations from one season to another. Sharing this information with suppliers allows them to maintain their service levels as well — nobody wants to be caught short during periods of peak demand.
October 10, 2018
Although no business likes carrying safety stock, experiencing a stockout simply isn’t worth the risk to customer satisfaction. Take an industry-informed look at how to achieve demand planning ‘greatness’ when it comes to optimizing your inventory levels and still meeting customer requirements.
May 2, 2018
In the January-March 2018 issue of APICS magazine, APICS CEO Abe Eshkenazi contends that if supply chain leaders bring business success then that makes them business leaders. Mr. Eshkenazi goes on to state “organizations that consider their supply chains as strategic and competitive assets outperform the market”.
December 19, 2017
I just read a blog post entitled How do you feel when someone mentions predictive analytics? Well, I feel like it’s a good thing. How about you?
Subscribe to our blog and stay up-to-date with the latest supply chain news and resources.
1 Place Alexis Nihon
Montreal, QC H3Z 3B8
Phone: 800 922 8649
2021 © All Rights Reserved.