What do you think about when you hear ‘Halloween?’ Candy? Costumes? Scary Movies? Unsurprisingly, inventory management professionals are thinking about the same things from a different perspective. They are thinking about the logistics of the holiday. How much candy to order, what costumes to stock – and how scary business will be if their forecast is off.
On average, Americans spend $7 billion on Halloween items. That includes items ranging from candy to costumes to decorations. The peak time for consumers making Halloween-related purchases is the beginning of October. However, virtually all purchases are made within the six weeks leading up to October 31st. You can imagine how much planning had to go into selling such a large volume of items in such a short period of time.
Many candy producers start preparing for this holiday almost a year in advance. Designing themed packaging, forecasting numbers, and starting production all require adequate lead time to be successful. The rush leading up to the spooky night is often talked about and well planned for, but what about after?
November 1st. The unofficial holiday for buying large amounts of candy at heavily discounted prices. You must be thinking, “that sounds great!” But for many supply chain professionals this is the real Halloween nightmare. It is when they will see if their forecasting paid off, or if they will fall victim of the post-Halloween price cuts.
The day after Halloween the demand for “fun sized” chocolate bars and candy corn drops dramatically. For many retail locations this means dramatic price slashing. While this might be great for the sweet tooth in your life, it is not great for the retailers.
So now the question is, if we can’t guarantee our forecasting will be 100% accurate, what can inventory planners do to mitigate the loss?
For manufacturers the answer is simple: only produce what retailers order. For retailers this means their inventory planners need to order their Halloween stock months in advance. However, having to plan so early leaves more room for error, and since manufacturers only produce for order, last minute deliveries may not be an option.
Inventory planners are put in a situation where there are two options. They can order under demand and potentially miss out on sales, or order over demand and have to sell at a discount. When faced with this decision, many planners choose to error on the side of caution and order an amount they know they can sell. This might mean ordering less than they would if they had the option to order closer to Halloween. As a result, this may also mean lost profit for candy manufacturers.
This is just another example of how each area of the supply chain connects. In order to maximize profits and minimize loss, retailers and manufacturers need to work together. This is especially important around any holiday when demand is so dynamic and unpredictable.