What is Anticipation Inventory? Uses, Advantages & Disadvantages

While some of the events that lead to supply chain disruptions and throw businesses for a loop are unpredictable, others follow clear patterns—and savvy companies know how to plan for them. (Hint: anticipation inventory plays a big part.)

Instead of taking a stab in the dark, businesses can leverage historical sales data and market signals to forecast fluctuating demand—and thus how much they need to order—with a high degree of accuracy. By stocking up ahead of predicted demand spikes or price increases, businesses can ensure they’re prepared for seasonal trends, promotional events and expected supply chain disruptions. 

This proactive approach helps retailers and manufacturers avoid costly stockouts, keep customers happy and maintain smooth operations—but it’s not without risk. In this blog, we’ll explore what anticipation inventory is, how businesses use it effectively and the pros and cons of incorporating it into your operations. Let’s dive in. 

• What is anticipation inventory?
• Uses of anticipation inventory
• Advantages of anticipation inventory
• Disadvantages of anticipation inventory

What is anticipation inventory? 

Anticipation inventory, also referred to as seasonal stock or speculative inventory, is extra inventory that is purchased to meet an expected jump in demand. For example, stocking up on chocolate bunnies before Easter, or school supplies before the late summer rush. 

Because while certain disruptive issues can be hard to predict—such as natural disasters or a sudden surge of demand fueled by some celebrity or TikTok influencer—consumer demand for certain products at certain times can be surprisingly predictable. 

Anticipation inventory may also be purchased to hedge against expected cost increases or shortages of materials or components. For example, stockpiling inventory to lock it in at a lower price ahead of incoming tariffs.

Sounds familiar, doesn’t it? It sounds a lot like safety stock. 

However, while anticipation inventory and safety stock are both inventory management techniques that aim to ensure businesses always have the necessary inventory on hand to meet customer demand, there are some nuances between the two. 

Here’s the difference between anticipation industry and safety stock:

• Anticipation inventory is purchased to meet a predicted spike in demand or price.
• Safety stock is a buffer of inventory purchased to protect against supply chain disruptions—e.g. unexpected shipping delays—or sudden, unforeseeable spikes in consumer demand.

So, those shamrock-shaped sunglasses and  “Kiss me I’m Irish” t-shirts ahead of St Patrick’s Day? Or that extra leather you ordered at the first rumblings of an H5N1 outbreak among dairy cows? Anticipation inventory.

But those 10 extra pairs of Christian Louboutin 4-inch heels “just in case”? Safety stock.

Uses of anticipation inventory 

Anticipation inventory is used in a variety of ways in the retail and manufacturing industries. Let’s talk about the most common:

Seasonal demand 

Anticipation inventory is most commonly used for seasonal products. Ahead of holidays and special events, for example, retailers can reasonably assume that demand for certain products will surge.

For example, string lights, turkeys, Christmas stockings and tree ornaments will be in far higher demand in December than at other times of the year. (Imagine strolling past giant inflatable reindeer in your local Walmart in July—you’d think the store manager had lost their mind.)

Sales and promotional events

Sales, product launches or events like Black Friday & Cyber Monday (BFCM) can lead to temporary but predictable spikes in demand. 

Cyber Monday 2024 sales set the record for highest US online sales for any day historically, with $15.8 million processed in online transactions every minute from 8 to 10:00 PM. US consumers spent a record $41.1 billion online during the 2024 Cyber 5—the five consecutive days of intense shopping that start on Thanksgiving and run through Cyber Monday.

Of course, competition on these days is fierce, with everyone from online giants to mom-and-pops vying for a piece of the pie. To make the most of BFCM, retailers need to prepare in advance, not just to ensure they have enough stock to meet demand, but also to get their brand in front of motivated buyers with marketing campaigns that stand out. 

Supply chain disruptions

Supply chain disruptions can cause global upheaval, as we saw during the COVID pandemic. Weather events can also disrupt the flow of goods as they move from point A to point B. While it can be difficult to forecast supply chain disruptions, getting ahead of potential disruptions like this—as much as one can get ahead of hypothetical situations—will benefit your business. 

An example of using anticipation inventory to protect against supply chain disruptions—versus safety stock, which is a buffer of extra inventory to protect against the unforeseen—would be ordering extra inventory ahead of a predicted tropical storm.

Price fluctuations 

Anticipation inventory is also used to help businesses get ahead of rising costs. By purchasing goods or raw materials before expected price hikes, companies can lock in lower rates and protect their profit margins. For example, when the cost of linen increased by almost 20% in 2022 (compared to 2021), many US apparel retailers moved quickly to secure their inventory early to maintain their margins and avoid passing higher costs to customers. Strategic planning like this helps businesses stay competitive in volatile markets. 

Advantages of anticipation inventory 

Anticipation inventory offers a lot of benefits to retailers and manufacturers alike—otherwise they wouldn’t bother with it, right? Let’s talk about a few of the core benefits.

Ensures demand is met 

Anticipation inventory helps retailers make sure that products are available when customers need them, particularly during peak seasons or events like BFCM. By anticipating and preparing for high demand periods, businesses can minimize stockouts, lost revenue, frustrated customers and the risk of losing said customers to competitors. 

Prevents production delays

Anticipation inventory allows for more efficient production planning and steady production schedules, so retailers and manufacturers can better optimize resources and labor. Rather than finding yourself suddenly short on raw materials, and facing longer than expected lead times, planning ahead to have enough raw materials on hand significantly reduces the risk of downtime, stoppages and the inevitable rush—and probably overtime pay—to make up for lost time once materials arrive. 

Cost savings 

If you know that a supplier’s prices will be going up in a couple months, ordering extra units in advance at the lower price can help you protect your margins and keep your prices competitive. Keeping your eye on the market, and your ear to the ground, can also tip you off about potential shortages or disruptions that could affect your business in the near future—so you can plan ahead to minimize its impact.

In general, knowing what products you need, when you need them and how much, will help you secure better prices, whether that’s grabbing a bulk discount or negotiating favorable terms while you still have leverage. 

Customer satisfaction 

Product availability is one of the top factors that influence customer satisfaction, and stockouts are a course of significant frustration for customers. And that’s fair, right? If you go out of your way to buy in-store from your favorite shop, but the shelves are empty, you may not make the trip the next time. 

In today’s hyper-competitive environment, where shoppers have more choice than ever before, customer retention is key. 

You may have heard that acquiring a new customer can cost five times more than retaining an existing one, and that increasing retention by just 5% can increase profits by 25-95%. (95%!) But did you know:

• 31% of consumers will buy the item from another store when a product is out of stock;
• 9% of customers won’t substitute or buy the item at all if it’s out of stock the first time;
• 24% of Amazon’s North America retail revenue comes from customers who found the item out-of-stock at their local store. (Source)

And not to belabor it, but it’s estimated that retailers are leaving nearly $1 trillion in sales on the table because of stockouts. For all these reasons and more, an efficient anticipation industry strategy is a boon for businesses. 

Disadvantages of anticipation inventory

While anticipation inventory offers many benefits, it’s not without cost. For businesses considering this strategy, it’s important to weigh the potential downsides carefully. Here are the key disadvantages of anticipation inventory.

Increased holding costs

Stocking up in advance means you’ll need extra storage space, and it ain’t free. Because in addition to the inventory costs themselves, you also have to pay for the space to house it, equipment to move it and workers and software to manage it. 

Holding costs, also known as carrying costs, can account for 20-30% of total inventory costs, depending on the industry and business size. That’s not insignificant, and may even exceed the financial benefits of holding anticipation inventory. 

Overstocking

Demand forecasting isn’t an exact science, and errors can be expensive. Overestimating how much you’ll need leads to overstock, which you may not be able to sell (at least not at full price). You may be forced to sell overstock at a steep discount, at a loss, or you may not be able to unload it at all. According to a study by IHL Group, overstock costs US retailers ~$123.4 billion annually.

Risk of obsolescence 

The longer inventory sits on shelves, the greater the risk it may become obsolete. Trends change, and customer preferences shift rapidly. Fashion and tech retailers, in particular, face a constant race against the clock—what’s in demand this season could be unsellable the next. The longer the inventory is held, the greater the risk it will become obsolete. 

Tied-up capital 

Holding anticipation inventory ties up capital that could be used elsewhere in your business. Instead of investing in marketing, product development, staff development or sophisticated tech to streamline your operations, your money is tied up in inventory. Tying up capital in inventory can lead to cash flow issues, especially for smaller businesses, which is a leading cause of failure for small businesses. 

Key takeaways

Anticipation inventory is a valuable strategy that helps businesses meet seasonal demand, prepare for promotional events and hedge against rising costs or supply chain disruptions. It helps ensure customer satisfaction, supports efficient operations and protects profit margins.

However, it’s not without potential risks. Increased storage costs, overstocking and less cash flow flexibility, to name a few. Businesses need to decide when and how to use anticipation inventory as part of their broader inventory management strategy. 

Balancing the benefits of carrying anticipation inventory with its potential risks helps businesses stay agile and competitive, even in unpredictable markets. Your tech stack can help you do it. 

Want to learn more about how technology can help you manage your inventory? Talk to a POS expert today. 

FAQs

What are the benefits of anticipation inventory? 

Anticipation inventory ensures businesses can meet demand, prevent stockouts, avoid production delays and lock in cost savings during price fluctuations.

How is anticipation inventory different from safety stock? 

Anticipation inventory helps businesses prepare for predictable demand spikes, while safety stock acts as a buffer against unexpected disruptions.

How do businesses decide how much anticipation inventory to carry?

To calculate how much anticipation inventory to carry, businesses analyze demand forecasts, historical sales data and market trends, while also factoring in storage capacity and any financial constraints.