If you haven’t started inventory planning for Q4, here’s how to catch up

For an eCommerce founder these days, just getting an inventory order filled by the manufacturer and shipped to your customers takes monumental levels of patience and planning. My own eCommerce company placed an order with our factory in China back in December. Those goods finally arrived at a U.K. port in May — five months later — and well beyond our anticipated two-month timeline for order fulfillment.

We’d already anticipated the year to be filled with inventory management challenges for eCommerce brands, and unfortunately, those predictions have all come true. As we hurtle towards peak season in Q4, we’re helping founders come up with a game plan to navigate these increasingly complex logistics. There’s a great opportunity to capitalise on customer demand — but you have to be ready to do so.

Don’t wait any longer to catch up on inventory planning for Q4 and the holiday season. Start forecasting sales now and place your inventory orders by June so you can get ahead of any supply chain snags.

Understand the supply chain issues beyond your control

There are loads of risk factors outside your control that can and will slow down your order fulfillment for the busiest time of year. You might usually be able to comfortably wait until the first week of October to place orders for holiday inventory. But if you do so this year, you’ll be at major risk of freight delays and losing production slots at your factory.

Here’s an overview of the main supply chain challenges that are already impacting Q4 inventory planning:

• Shipping delays still haven’t cleared up: According to Supply Chain Dive, the outlook for the global shipping industry isn’t expected to improve this year. In fact, industry stakeholders expect backlogs to continue into 2023. ‍
• Russia’s war with Ukraine is also disrupting freight: In Europe, rail freight seemed like it could be a workable alternative to shipping. In fact, according to Bloomberg, rail shipments to Europe from one port in China grew 70% in the first two months of the year. But then came Russia’s war with Ukraine. Now, one of Europe’s largest freight forwarders isn’t accepting rail cargo from China to Europe. Even if your eCommerce business was never considering rail freight, you might still be impacted. As freight forwarders instead switch from rail to sea routes, it will only add to the shipping logjams.‍
• Factory shutdowns are always a concern: Due to a recent rise in COVID cases, the Chinese government is enforcing more lockdowns, most notably throughout the Shanghai region. Every time there’s a surge in COVID cases, there’s a risk that localised lockdowns affect the region where your factory is based. You’ll face production delays and potentially lose your production slot.

As these factors compound, what should be comfortable timelines for getting inventory ordered and out to customers are instead stretching into four- or five-month ordeals. Those delays are way too long for you to meet peak demand at the end of the year, and your sales will suffer if you don’t have stock on hand ahead of time.

eCommerce companies that have a footprint with retailers risk more than just fewer sales opportunities. When a retailer tries to place a re-order, they want that stock right away so they can stock shelves and cash in on their end. They won’t be willing to wait several months for you to fulfill their orders. You risk harming those relationships if you don’t keep enough stock on hand, especially as we get closer to the end of the year and retailers feel more optimistic about foot traffic in their stores.

But while you can’t do anything about the ongoing supply chain challenges, you can take steps to make your business more resilient. Properly plan for a successful Q4 so that you have enough stock on hand for your own customers and your retail partners.

Forecast sales to accurately predict year-end demand

Before you can order your Q4 inventory, you need to know how much inventory is enough. Take measures to forecast your demand for the rest of the year so you can place the inventory orders to match.

If direct-to-consumer (DTC) is your primary channel, look back at data from previous holiday seasons to uncover repeating trends and order volumes. You can also look over your sales data and trends throughout the year to anticipate what your demand will be and identify how much growth you might have year-over-year.

Factor in your marketing attribution as well, accounting for metrics like customer acquisition cost and return on ad spend. You might see an increase in sales by uplifting your spend on channels like paid search or Facebook ads. If you know you’re going to be spending more on advertising as the holiday season approaches, make sure you’re accounting for that potential uplift in your forecasting.

If you know you’re going to be spending more on advertising as the holiday season approaches, make sure you’re accounting for that potential uplift in your forecasting.

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And finally, don’t leave out other channels you might sell through, like Amazon, retailers, and even B2B partners. Companies who order in bulk from you for their corporate gifting needs might typically wait until Q4 to place those orders. You can’t wait for them to place those orders this year, as it will be too late for them to be filled. Instead, reach out to your partners across these channels by the end of Q2 and let them know you’ll be finalising inventory orders for the end of the year. Start those conversations now and ask how much stock they anticipate ordering from you for the holidays.