What are the best methods to manage inventory levels during a promotional campaign?

Inventory management is a crucial aspect of retail operations, especially during a promotional campaign. A successful promotion can boost sales, attract new customers, and clear out excess stock. However, it can also pose some challenges for inventory planning, such as forecasting demand, balancing stock levels, and avoiding stockouts or overstocks. In this article, we will discuss some of the best methods to manage inventory levels during a promotional campaign, based on the following factors:

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1 Promotion type

The type of promotion you run can have a significant impact on your inventory levels. For example, a buy-one-get-one-free offer can deplete your stock faster than a percentage discount. A limited-time offer can create a sense of urgency and increase sales volume, but also require more accurate forecasting and replenishment. A loyalty program can encourage repeat purchases and customer retention, but also increase the complexity of inventory tracking. Therefore, you should choose a promotion type that matches your inventory goals, such as clearing out seasonal or slow-moving items, increasing turnover rate, or maximizing profit margin.

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2 Demand forecasting

Demand forecasting is the process of estimating how much inventory you will need to meet customer demand during a promotional campaign. It involves analyzing historical sales data, market trends, customer behavior, and other factors that influence demand. Demand forecasting can help you optimize your inventory levels, avoid stockouts or overstocks, and reduce inventory costs. However, demand forecasting can also be challenging, especially during a promotional campaign, as demand can fluctuate unpredictably. Therefore, you should use a combination of quantitative and qualitative methods, such as sales projections, customer feedback, and expert opinions, to forecast demand as accurately as possible.

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Mohamed Sadek, CPIM

Demand Planning Manager MENA @ adidas | CPIM
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Demand forecasting is a guess work based on some quantitative (intrinsic or extrinsic) data and qualitative ( market and personal insights ) Demand forecasting has to consider all sources of independent demand only as dependent demand is calculated as per dependent demand through MRP. Demand forecasting always has an estimate of error so accuracy has to be measured to improve it. More accurate forecast means more optimized inventory and higher inventory turnover. Choosing the demand forecasting method is very important but to do this we must first understand the demand pattern ( seasonal, trend, random variation ) sometimes it could be trend and seasonal and in this case we decompose the patterns first

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Felipe Torres

Director de operaciones, Comercial, Retail (Consultor)
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En mi experiencia este punto es donde más fallan las empresas durante una campaña promocional: Se quedan justos de inventarios y se desaprovecha la oportunidad. O se exceden y se queda un sobreinventario de mercancía. La clave es involucrar a los líderes/gerentes de venta, tener claro el comportamiento del mercado y la competencia, y una vez se lanza la campaña comunicar a todo el equipo de ventas, y hacer un merchandising agresivo.

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3 Inventory optimization

Inventory optimization is the process of finding the optimal balance between inventory costs and service levels during a promotional campaign. It involves determining how much inventory to order, when to order it, and where to store it. Inventory optimization can help you improve your cash flow, customer satisfaction, and operational efficiency. However, inventory optimization can also be complex, as it depends on various factors, such as lead time, reorder point, safety stock, and inventory turnover. Therefore, you should use a systematic and data-driven approach, such as the economic order quantity (EOQ) model, the ABC analysis, or the inventory management software, to optimize your inventory levels.

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4 Inventory control

Inventory control is the process of monitoring and managing your inventory levels during a promotional campaign. It involves tracking your inventory movements, verifying your inventory accuracy, and adjusting your inventory quantities. Inventory control can help you prevent inventory shrinkage, detect inventory errors, and maintain inventory visibility. However, inventory control can also be time-consuming and labor-intensive, especially during a promotional campaign, as inventory transactions can increase rapidly. Therefore, you should use a reliable and efficient method, such as the perpetual inventory system, the barcode scanning, or the radio-frequency identification (RFID), to control your inventory levels.

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Artemios Tziomakas

Inventory control manager
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You have to create a top 10 SKU list to maintain stock levels correctly and occasionally check the other promoted stock. You had already done the stock check on the other product so you have the luxury to focus on the fast movers first and make sure to put them in visible locations to avoid discrepancies.

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5 Inventory evaluation

Inventory evaluation is the process of measuring and analyzing your inventory performance during a promotional campaign. It involves calculating your inventory metrics, such as inventory turnover ratio, gross margin return on investment (GMROI), and sell-through rate. Inventory evaluation can help you evaluate your inventory profitability, productivity, and efficiency. However, inventory evaluation can also be challenging, as it requires consistent and accurate data collection and analysis. Therefore, you should use a clear and relevant method, such as the first-in, first-out (FIFO) method, the weighted average cost method, or the retail method, to evaluate your inventory levels.

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Stephen Quander

Retail District Director at Nike | Realtor | Author of Lessons in Leadership Vol1
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Inventory evaluation during promotions is key. It ensures that we have the right products available to meet customer demand without overstocking. Using methods like FIFO and GMROI, we maintain balance, optimize turnover, and maximize profits—a critical driver of business growth and customer satisfaction.

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6 Inventory feedback

Inventory feedback is the process of collecting and applying feedback from your customers, employees, and suppliers during a promotional campaign. It involves soliciting feedback, such as customer reviews, employee suggestions, and supplier ratings, and using it to improve your inventory management. Inventory feedback can help you identify your inventory strengths, weaknesses, opportunities, and threats. However, inventory feedback can also be subjective and biased, especially during a promotional campaign, as feedback can vary depending on the promotion type, duration, and outcome. Therefore, you should use a balanced and objective method, such as the net promoter score (NPS), the customer satisfaction score (CSAT), or the supplier performance score (SPS), to gather and use inventory feedback.

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7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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What are the best methods to manage inventory levels during a promotional campaign?

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1 Promotion type

2 Demand forecasting

3 Inventory optimization

4 Inventory control

5 Inventory evaluation

6 Inventory feedback

7 Here’s what else to consider

Retail Operations

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