One of the most difficult challenges HVAC wholesale buyers face is managing the tens of thousands of low-selling SKUs that may also exhibit seasonal tendencies. Although any given part may not have high sales at a given location, not having critical parts in stock regularly at the right location at the right time can lose large sales and clients.

For example, take a look at the following three-year SKU demand history of one part at a branch:

• Is this seasonal or just unpredictable demand? 
• Should it even be stocked? Is there a demand increase or decrease year over year?
• If it is seasonal, do you stock it year-round, or do you try to time it to quit buying at the end of one season and at the start of another? (Which must also take into consideration SKU lead time and vendor availability.)
• Will the SKU even exist by the next selling season? Will it be replaced or affected by the refrigerant changeovers or new model equipment?

Traditional ERP systems struggle with both unpredictable demand and seasonality – especially both at the same time. Their forecasts tend to lag – buying too late at the on-set of the season and continuing to buy when the season is over – and offer virtually zero guidance as to whether the SKU should even be brought in next season.

But what do most buyers do when there are tens of thousands of these SKUs spread across the company? Usually, they just keep on reordering like they always have and keep stocking the SKU without adjusting the Min/Maxes. 

There simply aren’t enough hours in the day to dig in and make that determination for every SKU for every location, nor can forecast-based systems properly account for items that are only selling 2-3 times per year. Because of that, it leads to overstock and eventually to costly dead stock.

Is it even worth trying to manage these SKUs? The accumulation of dead stock may be costing you significantly more than you ever imagined. Thrive analyzed more than 100 wholesale distributors across North America, and we discovered that more than 85% of stocked SKUs sell 10 times or less per year.

It’s these items that make up your dead stock – and these items especially impact HVAC distributors due to seasonality.

The key to lowering those numbers is to identify and stop buying dead stock before it’s ever purchased, which is obviously easier said than done. 

What’s the solution? You won’t find it in an ERP system, Excel, or even in traditional advanced buying systems. It's no fault of their own. They simply don’t have the horsepower to do the required heavy lifting given the forecast-based nature of them.

What you can turn to is AI solutions that work directly within your ERP system, not only preventing dead stock and lost sales, but also preventing the need for a new, costly software implementation for your buyers to learn.

These solutions, such as Thrive AI’s Thermostock® and Tiltmeter®, leverage massive amounts of very granular sales and customer data facilitated by today’s awesome cloud-based computing power and AI. They recalibrate and optimize existing buying parameters outside of the system and then integrate the results back into your ERP buying system. 

For these seasonal and low-selling SKUs, we leverage up to three years of filtered and weighted demand data to detect both seasonality and trend at the SKU location level. Is it seasonal? Is it trending up or down? Is there a breadth and depth of different customers driving the demand (70% of SKUs sell to just one or two customers each year)? Should it even be stocked going into the next season based on year-over-year declining sales?

From these calculations, the system makes stock/non-stock and seasonally adjusted Min/Max recommendations as well as targeted buy-in and sell-out dates based on SKU lead-time. 

The results? 

Fewer out-of-stocks and a significant decrease in the accumulation of dead stock.

And all without the need for a lengthy, disruptive software implementation.