The holiday season is here, and supply chain leaders find themselves in a tough spot. Finance expects lean inventory to protect working capital. The merchant organization demands product availability to capture every possible sale. Both are right, and both are watching the same compressed window between now and year-end with very different priorities.
FRED data shows that retailers are carrying less inventory relative to sales than at almost any point in the last 30 years, with the inventory-to-sales ratio at 1.28, down from the 1.4-1.5 range that held steady for most of the past decade. Some of this reflects better supply chain execution. A lot of it reflects financial pressure to reduce working capital. Either way, the margin for error has shrunk considerably.
For most retailers, the period between Labor Day and New Year’s can make or break their financial targets for the year. By late October, the big decisions are already locked in. Purchase orders were placed months ago, seasonal merchandise is staged across the network, and store sets are rolling out on predetermined schedules. At this point, the work shifts from strategic planning to tactical damage control.
The problem is structural. Retailers operate with siloed systems serving siloed departments. Import management systems track containers using one set of identifiers. Warehouse management systems organize inventory by different keys. Transportation systems reference shipments by yet another dimension. Each team owns visibility into their specific handoff, but most lack a single system that connects the full journey from factory to shelf.
This fragmentation gets exposed during peak season. Seasonal flow into stores begins early because distribution centers, trucking lanes, and store backrooms cannot absorb the peak in a single burst. Inventory has to be layered in weeks ahead, consuming working capital while stores gradually build displays and backstock.
The pressure points emerge when reality diverges from the plan. A delayed vessel arrival means a lumpy spike hits the DC later than expected, compressing the outbound schedule. Labor assumptions get stressed when receiving volume suddenly doubles. Stores that expected gradual replenishment get overwhelmed by concentrated deliveries they weren’t staffed to handle.
Once you’re behind schedule this close to selling events, recovery options narrow and get expensive. The closer you get to the must-have date on shelf, the fewer degrees of freedom you have to fix the problem. When you don’t have true end-to-end insight into inventory positions against time objectives, you miss sales or push markdowns.
Real-time supply chain visibility combined with live insight into inventory position by node lets you intercede before problems occur. You need a continuously reconciled picture of on-hand and in-transit inventory by location, mapped against the merchant plan and time-phased demand.
The operational value shows up in earlier detection. If a port delay is going to cause holiday adjacencies to miss their store-set deadline, you need to know while there’s still time to source from an alternate DC, expedite selected shipments, or adjust allocation to prioritize the highest-volume doors. Waiting until the shipment is already late removes those options.
Coordination improves when teams can see before and after their handoff. Distribution centers benefit from knowing inbound volume surges are coming. Outbound transportation teams can pre-position capacity when they see compressed loading schedules forming. Store operations can plan receiving labor around anticipated delivery spikes. The problems don’t disappear, but the organization has time to staff and sequence the response.
For the next 60 days, tighten exception windows around time-at-risk inventory already en route. Focus on merchandise tied to selling occasions where timing determines success. If holiday trim needs to be on shelf by the second week of November, track those SKUs with urgency and escalate early when delays surface.
Cross-functional coordination should be keyed to time objectives, not just quantities. If port ETA slips for a critical shipment, trigger immediate action so DC labor can absorb compressed inbound, outbound transportation can scale capacity, and stores have advance notice to adjust receiving plans.
Prioritize correlated assortments for occasions. Trees, lights, ornaments, wrapping paper, and tape sell together. Turkey, stuffing, cranberry sauce, and pie ingredients travel together in the customer’s basket. Missing one complement doesn’t just lose that SKU’s sales — it erodes the trip’s total value. When inventory is constrained, protect the bundles that drive occasion-based shopping trips.
Tag inventory with seasonality and occasion markers so age in the DC gets evaluated against event timing, not just absolute days on hand. Product that’s been sitting for three weeks but is still six weeks ahead of its target selling window is in a different risk category than product that’s two weeks from its must-move date.
Looking ahead, the operating model that will make next year’s peak season go smoothly requires three layers.
First, a data backbone that harmonizes identifiers and time references so purchase orders, containers, loads, SKUs, and locations reconcile into one inventory narrative per item family.
Second, an intelligence layer identifies re-sourcing, re-routing, expediting, and allocation adjustment needs with clear economic thresholds. When product is X days behind schedule and Y dollars of revenue is at risk, what actions are needed to execute?
Third, agentic AI that resolves the core tension between lean inventory and stock availability. When you’re operating with a 1.28 inventory-to-sales ratio, there’s no room for manual coordination delays. AI agents can monitor inbound shipments, trigger carrier follow-ups on delays, automatically adjust DC appointments, and alert store operations before a human would even see the problem in their queue. The difference between detecting a delay on Tuesday morning versus Thursday afternoon can determine whether you expedite at a reasonable cost or miss the selling window entirely.
The ROI case is compelling — working capital efficiency improves from tighter turns and fewer aged seasonal units. Revenue risk declines when product reliably reaches stores on time. Markdown exposure drops when you’re not liquidating merchandise that missed its moment.
The tightrope between lean inventory and in-stock reliability doesn’t get easier in the final weeks of the year. With inventory-to-sales ratios at historic lows, there’s less buffer in the system to absorb disruptions. For this season, the work is controlled damage and faster exception resolution. Next season, the goal should be making continuous visibility and real-time orchestration the operating norm so your organization can see problems forming and act while there’s still time to intervene.
Want to learn more about the ways an inventory twin can help your operation? Nucleus Research breaks down how inventory twins solve year-round supply chain disruptions. Read the full report.
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