skip to Main Content

Quarter End

Supply Chain Planning  

It is September 30, 2009.  It is the end of the Quarter.  Funny things happen to the Supply Chain at the end of the Quarter.

In all industries, companies are trying post sales and make budget numbers.   For publically traded companies, the reporting of sales and profits at the end of each quarter is incredibly important.  Wall Street will judge the company based on how they perform to objectives, or guidance, that has been communicated with the investment community.  This judgment is manifested in the stock price almost immediately.  So, it is critically important for companies to make the sales and profit numbers.

In many industrial sectors, if sales are lagging, management and sales will begin offering incentives to customers to buy.  These financial incentives to generate large orders result in a surge of sales in the last week of the Quarter.    The effect of this is at least 4-fold.

  1. The financial incentives have to be enough to make customers want to take on more inventory than they may need.  These incentives reduce the margin and hence profits in order to achieve the sales number.  The bottom line is compromised in order to make the top line.
  2. A Quarter End surge in sales, all but guarantees an anemic first few week or even two months of the next quarter.
  3. This sets up the need to have to have a very strong third month of the next quarter.  This means more incentives.  The pattern of the previous quarter will be repeated again.
  4. Companies actually train the customers to rely on this buying pattern i.e. to wait until incentives are of sufficient size at the end of the quarter.  It is a self-perpetuating vicious cycle.


This sales cycle puts a lot of stress on everyone and especially the Supply Chain.  The later in the Quarter the sales surge comes, the greater the stress.  In order for the sales to be counted in the Quarter, the goods must be invoiced and shipped before the end of the month.  With Sarbanes – Oxley, the rules are quite clear and definitive.   Thus, the later the surge is in the Quarter, the tighter the timeline is to get everything done:  processed, picked, packed, and shipped.

There is finite capacity in the Supply Chain.  There is a fixed manufacturing and assembly capacity.  If the sale surge is greater than this capacity, inventory must be built in anticipation.  Ask around, there are many examples where 40% of the Quarter Sales are shipped in the last two weeks of the Quarter.  Building inventory in anticipation means companies rely more heavily on forecasting for this build-up and risk getting the mix of products wrong and thus affecting customer service.

With a large surge at the end of the quarter, distribution and transportation is also stressed.  Distribution Centers have a finite capacity.  Overtime and temporary workers are required to make the Quarter end deliveries.  The same applies to containers and trailer availability at the end of the Quarter.   In an effort to secure transportation and expedite shipments, premiums have to be paid.

Every Supply Chain executive wants to level load the factories and distribution centers.  This allows for a steady and reliable transportation requirements.  The reality often is very different.  The vicious cycle of Quarter End peaking and sales surges is easy to get into and extremely difficult to break out of.  It is the primary cause for inventory, service issues, and manpower issues at the end of one Quarter and the beginning of the next.

Related Articles

Supply Chain Planning in the Face of Rapid Change

There’s little that could properly prepare the world for the magnitude of global events such as the COVID-19 global pandemic. These situations not only impact us as individuals, but often highlight critical vulnerabilities in our business processes. Supply chain planning [...]

Demand and Supply Planning in Unpredictable Times

With everyone’s health a top priority due to Covid-19, we’re facing unprecedented times, and in many cases flying by the seat of our pants to maintain as much normalcy for ourselves and our families as possible. Now enter the workforce, [...]

How you can implement automation without going totally digital

Going completely digital is a big step that not every business is ready for. That’s alright! There are still smaller steps that can move you in that direction. said, “Starting small with workflow automation allows organizations to streamline simple [...]

Your business growth could be hiding in supply chain

78% of the businesses studied were missing significant opportunities in their supply chain. Accenture said, “The remaining 22% of companies, referred to as “Leaders,” are making smart moves in three areas — digital investments, customer-centricity and ecosystems. This is enabling [...]

One number forecasting or number one attitude?

Are you focused on one number forecasting? Some companies swear by it while others take a different approach. The Institute of Business Forecasting & Planning said, “The idea is that a one number forecast creates alignment and that the whole [...]

Seven Advantages of Integrated Demand and Supply Planning

A championship football team reaches such heights because of teamwork, practice, and a clear strategy.  Both offensively and defensively, team members are drilled over and over to work together and know the plan so that on game day, everyone is [...]

Differences between correlation and causation

Just because you see patterns doesn’t mean you should make your business decisions around them. It’s easy to find connections and mix up the two, there are even some articles that confuse correlation and causation. Do your research and don’t [...]

6 Reasons to Avoid Using Spreadsheets for Supply Chain Planning

First introduced to the business world in the late 1970’s as a computerized representation of bookkeeping worksheets, spreadsheet software has become a staple in almost every office. Used in a wide variety of industries from manufacturing to retailing to professional [...]

Demand Planning vs. Supply Planning: Balance is the Key to Success

Organizations that manage a supply chain have a number of priorities that need to be continually balanced: meeting financial goals, completing customer orders on time and in full, and keeping facilities at optimal productivity levels, to name just a few. [...]

What is CPFR in supply chain?

CPFR stands for collaborative planning, forecasting, and replenishment. The Institute of Business Forecasting and Planning said, “CPFR strategies allow aligning of multiple S&OP processes and jointly plan supply chain activities to ensure that the joint business plans between organizations are [...]
Subscribe to our Blog
Back To Top