Seasonality of demand can bring a number of challenges for a business. It is difficult to balance your labour requirements and manage your cash flow effectively when you have to face an irregular demand pattern that cycle throughout the year. This is however a reality that many businesses face.
If your demand is predictable, your cash flow allows for it and your product’s shelf life can accommodate it, it may be worth your while to produce some inventory in advance.
Related: Business Plans: A Remedy for Failure
In this way your manufacturing volumes can be levelled out and remain more stable throughout the year. It is however important to consider this option very carefully, as there could be a significant risk that you might end up with potentially obsolete stock if market conditions result in lower future demand for your product.
Even if you are not in a position to manufacture your entire end product in advance, there may be some level of preparation work and pre-forming that you can take care of in advance – like printing product labels and folding packaging boxes.
This is not ideal, but in some cases it might be the lesser of two evils when considering losing productive time as an alternative. Do not attempt this unless you have solid controls in place to avoid any quality issues.
If you are unable to level out your manufacturing volumes (if you are in a services business for example) you may need to plan in advance for reducing your expenditure during the quiet months.
Where possible, make sure that the rental contracts for your office equipment are only for the months of the year that you need it, instead of all year round.
Diversify your product or service portfolio with something that has a complimentary seasonal demand. For example instead of just selling ice cream in summer, also sell soup during the winter. When doing this it is important to select a service or product that you are familiar with, so that you have a high probability of delivering it successfully.
Failing to deliver consistent quality on the new product or service when compared to your original product or service might harm your reputation and damage your business.
Offer your spare capacity to businesses that serve a complimentary demand. For example renting out part of your facility to a business that only needs the space during the times of the year that you do not need it.
Utilise the quiet time wisely. Have your employees take their annual leave and schedule all your ad hoc activities during this time. Examples include training, strategic planning, team building, stock take, maintenance, annual contract negotiations with suppliers and supplier quality assessments.
This is also the ideal time to send your employees for tours of your supplier and customer manufacturing facilities and host workshops focused on process optimisation.
Conversely also remember that dealing with times of exceptional high demand can be very stressful on your employees, so during these months make extra sure that you reward and recognise your staff for their hard work and try to make life as easy as possible for them. Consider serving meals at work and offering a laundry service for your staff.
The roller coaster of seasonal demand will always pose challenges, but learning how to effectively mitigate the impact will increase your chances of surviving the rocky ride.