Liveworx | How AI & IoT Can Help to Cut Costs of Inventory Management

Today’s competitive business environment provides no room for inefficiency.

Supply chain management is constantly evolving and optimizing, and because of market complexities, innovation is key.

Modern technologies have not only streamlined supply chains and business processes, but have also placed supply chain management on a technologically advanced path.

AI, IoT, blockchain, robotics, computerized shipping and tracking, autonomous ships and trucks are transforming supply chains.

Supply chains of the future will be even more complex, but as technology continues to make strides, you can expect them to be more efficient and less costly.

The AI and IoT Supply Chain Intersection

Artificial intelligence (AI) has introduced a whole new world of computing. This technology empowers computers to plan, strategize, calculate probabilities, evaluate different options, and make smart decisions.

IoT is a network of physical devices that communicate with each other and the external environment.

But to achieve all these, AI and IoT have to work in tandem.

IoT and AI improve the supply chain and make it streamlined and efficient as they:

  • Provide real-time actionable data
  • Reduce errors and delays
  • Ensure visibility
  • Enhance communication
  • Promote collaboration
  • Reduce waste
  • Ensure customer satisfaction

You can think of IoT as the enabler that gives AI the ability to act. IoT collects and avails the data that AI needs to make smart decisions.

IoT gathers vast amounts of operational and environmental data that is sorted, analyzed, and converted into actionable insights by AI.

These insights and decisions are then acted upon by IoT and its peripheral devices such as machines, robots, and drones.

How IoT and AI Affect Inventory

Inventory management is the process of ordering, storing, and using inventory. This includes the management of raw materials, work in progress, and finished products.

For most companies, especially those with complex supply chains, ensuring visibility, preventing inventory gluts, shortages and stock-outs can be a challenge without a good system in place.

AI and IoT solve many of these challenges because this specific technology enables companies to: 

  • Determine accurate inventory levels in real-time
  • Avert disconnected workflow processes
  • Reduce employee errors
  • Curb inefficiencies
  • Prevent stock-outs and over-ordering

How IoT Works With Inventory Management

IoT devices used in inventory management are all part of the same network, which allows them to send (and receive) data. Devices that are most commonly used are trackers, sensors, and cameras.

Such devices are often part of cloud-based inventory management systems that can track inventory in real-time. The RFID tags or barcodes enable fully automated scanning and identification in such a scenario.

Every item has a unique identifier. This allows you to locate each inventory item or equipment. This greatly prevents overstocks and stock shortages.

Such advanced inventory systems provide visibility into inventory levels, item location, but also shed light on expiry dates, forecast demand, and much more.

The ability to track and communicate with inventory items will increase as IoT technology continues to develop.

In the near future, trackers and tags will hold much more information about an item, and relay this to the inventory management system.

  • RFID tags share information on traffic, weather, temperature, and even damage to the item, among other information.
  • GPS trackers provide visibility into where every inventory item is.

You will also be able to locate areas with inefficiencies and make the necessary improvements.

How AI Helps Improve Inventory Management

Aside from IoT, AI plays a major role in inventory management.

It’s the reason why IoT has such a huge role in the first place - AI provides the computational part of the equation to the system.

Inefficiencies that would otherwise be hard to spot will become more apparent with a good AI system in place.

Here’s how:

1. Automated Inventory Monitoring

AI completely eliminates the need for employees to manually check inventory.

Real-time tracking of inventory reduces errors and also ensures inventory optimization.

This leads to increased productivity as employees can attend to more important tasks.

2. Data Mining

Data mining enables companies to turn all the raw data they get from IoT devices into useful data.

AI will scour the databases for patterns, which will help businesses develop better business strategies.

This helps them plan and also ensures smooth supply chain operations.

3. Robotics

AI is also instrumental in robot automation.

Robots are used to check, fulfill, and restock inventory by the use of algorithms and sensors. 

The use of robots eliminates the need for manual labor, which decreases the amount of time it would take to complete these tasks manually and improves employee safety.

4. Reduced Forecasting Errors and Improved Customer Satisfaction

Material and product availability are key to supply chains.

AI is instrumental in making forecasts on when a certain item or group of items might be highly demanded, or when the demand usually takes a dip.

This also improves the customer experience as they will always know whether an item they want is available or not, and businesses can prepare for surges in demand without leaving customers hanging.

Combined, AI and IoT Will Play a Key Role in Reducing Inventory Costs

  1. Storage Costs: These are costs associated with renting storage space, paying for utilities such as electricity and climate control. Storage infrastructure such as shelves and bins. These technologies can help you cut on storage rental costs by helping you implement a Just in Time (JIT) system. They can also greatly reduce utilities and storage infrastructure costs by optimizing your stock levels.
  2. Handling: These are costs that pertain to personnel receiving and stocking inventory. Organizing shipments and paperwork. AI and IoT can drive down these costs by use of robotics, automating shipments, and eliminating paperwork.
  3. Insurance and Taxes: Inventory insurance covers shortage, damage, pilferage, and theft. These technologies employ the use of robotics and autonomous vehicles. This reduces human handling and possible damage. IoT employs the use of trackers to monitor inventory. This ensures there is no shortage hence reducing costs associated with losing customers and also prevents theft and pilferage.
  4. Obsolescence: These technologies are constantly collecting and analyzing data on inventory. They also ensure visibility by tracking inventory. This reduces costs by ensuring that you never hold onto a stock that is obsolete.
  5. Labor: AI and IoT greatly drive down labor costs by collecting and analyzing data without the need for human intervention. Robots and autonomous vehicles have also eliminated the need for human labor in some instances.
  6. Overstocking and Understocking: These technologies prevent overstocking and understocking by providing real-time data on stock levels. This ensures that you don’t tie down your cash in excess stock. You also don’t reduce your earning potential by understocking.

In Sum

AI and IoT technologies ensure efficient and cost-effective inventory management systems.

They give you tremendous capabilities to help you view, track, and monitor your inventory.

It promotes visibility, reduces shipping errors, inventory loss, stock-outs, and theft.

Joe Peters is a Baltimore-based freelance writer and an ultimate techie. When he is not working his magic as a marketing consultant, this incurable tech junkie devours the news on the latest gadgets and binge-watches his favorite TV shows. Follow him on @bmorepeters.

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