Anticipation Inventory

The sources of demand for the anticipation inventory are the following:

1. High seasonality of a product
2. Global, National and Regional festivals such as Ramadan, Diwali, Halloween, Christmas etc.
3. Events like school reopening, election, movies etc.
4. Launch of innovative products!
5. A new trend like usage of masks after COVID 19. 

Anticipation inventory is very much suitable for products with high contribution margin. The limit of building the anticipation inventory both in terms of quantity and duration is a function of carrying cost and contribution margin. No company would build anticipation inventory where the carrying cost is exceeding the contribution margin per unit.

Pros 

1. Anticipation inventory helps a company to plan and build the inventory well in advance, so that it does not disappoint its loyal customers.
2. Helps to capitalize the seasonal sales and boost revenue.
3. Holds the loyal customers and prevents them to migrate to competitor products.

Cons

1. A poorly planned anticipation inventory quantity may force a company into rough terrains to the extent of bankruptcy.
2. Cost of warehousing, additional labour, insurance etc. add to the cost.

Anticipation inventory is the store of materials, parts, or products kept on hand by an organization or firm to fulfill demand during a period of time before demand arises or to fill the gap caused by sporadic production. It is also known as build up stock, seasonal stock, or simply inventory. In industrial situations where the supply chain is long and the stocks are regularly replenished, the inventories generally have longer life than those used in supply chain scenarios with shorter supply lines. If you are a manufacturer who must regularly evaluate your inventory, an anticipation inventory system can help you greatly.

In anticipation inventory systems keep a large reserve of your products so that when your supply line is closed for the day due to a weather event, the inventory is there to fulfill demand. When stockouts occur because of unanticipated bad weather or supply shortfalls, it is possible that you will experience lost sales, which will directly affect the profit and losses. The lost sales can seriously impact your bottom line and cause you to lose money.

A well-planned inventory cycle provides excellent management of your inventory, including its cycle stock requirements and lagging sales. If you have warehouses that are routinely stocked, you don't have to wait for days, weeks or even months to let customers know you have something in stock. Instead, you can contact them immediately with an updated inventory status, letting them know right away that your inventory is running low. Because you are using anticipation stock as an additional source of demand to boost sales, you will avoid the stockouts, which in turn, will save you money in storage costs, labor and materials costs, and profit.

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