Demand Planning

Seasonal Demand Forecasting: Planning for Peaks and Valleys

Planster Team

December sales are four times July sales. If you plan the same inventory for both months, you're guaranteed to either stock out in December or drown in excess in July.

Seasonal patterns are predictable. The challenge is quantifying them accurately and translating that knowledge into inventory plans that work.

Identifying Seasonal Patterns

Not every product is seasonal, and not every seasonal product follows the same pattern.

Common Seasonal Patterns

Holiday-driven: Peaks in November-December for gift products, entertaining items, baking supplies.

Weather-driven: Summer peaks for outdoor products, sunscreen, cold beverages. Winter peaks for cold-weather gear, soup, hot drinks.

Event-driven: Back-to-school in August-September, New Year's resolutions in January, tax season in April.

No clear seasonality: Stable demand year-round for everyday essentials, staples, evergreen products.

How to Spot Seasonality in Your Data

Pull at least two years of sales history (three is better) and look for patterns:

  1. Calculate monthly averages across all years
  2. Normalize each month as a percentage of annual average
  3. Look for consistent patterns across years

If December is consistently 150% of average and July is consistently 60% of average, you have seasonality.

Red flag: If the pattern varies wildly year to year, you may be seeing noise rather than true seasonality. Don't over-model irregular patterns.

Calculating Seasonal Indices

A seasonal index quantifies how much each period deviates from average.

Step 1: Calculate Baseline Average

Total annual demand / 12 months (or 52 weeks) = baseline monthly (or weekly) average

Example: 12,000 units per year / 12 months = 1,000 units/month baseline

Step 2: Calculate Period Averages

For each month, average the actual sales across all years in your data.

Example:

  • December average (across 3 years): 1,800 units
  • July average (across 3 years): 550 units
  • April average (across 3 years): 1,050 units

Step 3: Compute Indices

Divide each period average by the baseline average.

Example:

  • December index: 1,800 / 1,000 = 1.80
  • July index: 550 / 1,000 = 0.55
  • April index: 1,050 / 1,000 = 1.05

Step 4: Validate

Your indices should average close to 1.0 across all periods. If they don't, something's off in your calculation.

Applying Seasonal Indices to Forecasts

With indices calculated, applying them is straightforward:

Forecast = Baseline × Seasonal Index

Example: Your baseline forecast is 1,200 units/month (based on recent trend)

  • December forecast: 1,200 × 1.80 = 2,160 units
  • July forecast: 1,200 × 0.55 = 660 units
  • April forecast: 1,200 × 1.05 = 1,260 units

When to Apply Indices

Apply seasonal indices to:

  • Demand forecasts
  • Safety stock calculations (more buffer during high-variability periods)
  • Reorder point calculations
  • Production or purchase planning

Building Your Seasonal Inventory Plan

Forecasting is one thing. Turning forecasts into inventory that's actually there when you need it is another.

Work Backward from Peak

If December is your peak:

  • When do you need inventory in warehouse? (Early November)
  • What's your lead time? (Let's say 8 weeks)
  • When do you need to place the order? (Early September)

Peak season planning starts months before the peak.

Account for Supplier Constraints

You're not the only one ramping up for the holidays. Your supplier is too—along with all their other customers.

  • Confirm supplier capacity for your peak needs early
  • Place purchase orders earlier than usual
  • Consider building inventory gradually rather than one large order

Plan for the Ramp-Down

What goes up must come down. After December, January demand might be 40% of peak. Plan for:

  • Reducing incoming orders as you exit the peak
  • Selling through seasonal inventory before it becomes excess
  • Not getting stuck with post-season dead stock

Handling Promotional Events Within Seasons

Seasonality and promotions interact. A Black Friday promotion during an already-high November amplifies the spike.

Model Promotions Separately

Don't let promotional lifts get baked into your seasonal indices. They're different phenomena:

  • Seasonality = recurring pattern from external factors
  • Promotions = demand response to your specific actions

Layer Promotional Lift on Top of Seasonality

Forecast = Baseline × Seasonal Index × (1 + Promotional Lift)

Example: November baseline 1,200 × November index 1.40 × Black Friday lift 1.50 = 2,520 units

If you don't separate them, your seasonal index will be overstated for promotional periods and your forecast will be wrong in years when promotional plans change.

Adjusting for Unusual Years

What if last year had a one-time event that skewed the data?

Identify Anomalies

Look for periods where sales deviated significantly from the typical seasonal pattern. Common causes:

  • Major stockouts that suppressed sales
  • Unusually large orders from one customer
  • Viral moments or press coverage
  • Competitor stockouts that drove traffic to you
  • Supply chain disruptions

Exclude or Adjust Anomalies

Two options:

  1. Exclude the anomaly from your seasonal index calculation
  2. Estimate "normal" demand for that period and use the estimate

Either way, document your adjustment so future planners understand why the data looks different.

Seasonality by Channel

Different channels may have different seasonal patterns:

D2C

Often tracks consumer seasonality closely—holiday gifting, seasonal usage.

Amazon

Similar to D2C, but Prime Day creates an artificial "season" in July that doesn't exist elsewhere.

Retail

Follows retailer promotional calendars, which may not align with consumer seasonality. Holiday sets arrive early; seasonal resets create artificial timing.

Wholesale

May have smoothed seasonality if distributors buy to maintain their own inventory levels rather than responding to consumer demand.

Calculate seasonal indices by channel if patterns differ meaningfully.

New Product Seasonality

New products don't have history, but they may still be seasonal.

Borrow from Analogous Products

A new pumpkin-flavored product will likely follow seasonal patterns of existing seasonal flavors. Use those indices.

Use Category Patterns

If you don't have an analogous product, use category-level seasonality. The new product probably isn't that different from the category average.

Adjust After First Year

After one full year of data, calculate actual indices and update your forecasts. First-year patterns may be distorted by launch timing, initial distribution, and learning effects.

Key Takeaways

  • Seasonal patterns are predictable if you look at multiple years of history
  • Calculate seasonal indices by dividing period averages by baseline averages
  • Apply indices to forecasts, safety stock, and reorder points
  • Plan backward from peaks—lead times mean you order months in advance
  • Separate promotional effects from true seasonality
  • Adjust for anomalous periods that don't reflect normal patterns
  • Different channels may have different seasonal patterns

Frequently Asked Questions

Q: How many years of data do I need to calculate seasonal indices?

At least two years, preferably three. One year isn't enough—you can't distinguish true seasonality from one-time events.

Q: What if my product is new and has no history?

Borrow seasonality from similar products in your line or your category. Update indices after your first full year of sales data.

Q: Should I calculate weekly or monthly seasonality?

Monthly is sufficient for most planning. Weekly is useful if you have sharp peaks (like the week of Thanksgiving) that monthly aggregation would smooth over.

Q: How do I handle a year where I had major stockouts?

Either exclude that period from your index calculation or estimate what sales would have been without the stockout. Stockout periods don't reflect true demand.

Q: What if seasonality is changing over time?

Weight recent years more heavily, or use only the last 2-3 years. Seasonal patterns can shift as your customer base and product mix evolve.

Planster Team

The Planster team shares insights on demand planning, inventory management, and supply chain operations for growing CPG brands.

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