Table of contents
Appropriate inventory management is a task that has a major impact on increasing a company’s sales and reducing costs. However, when inventory information and physical inventory management are performed manually, errors and losses inevitably occur.
Introducing AI for inventory management offers a variety of benefits, so an increasing number of companies are using it. In this article, we will explain the challenges when managing inventory manually and the advantages and disadvantages of using AI. We will also introduce a practical method of using AI for inventory management, so please refer to it.
AI can automate inventory management
In recent years, we have begun to see cases where AI is being introduced to inventory management. AI is good at accumulating large amounts of data, learning patterns, and performing analysis. Therefore, it has great advantages in inventory management.
The biggest advantage of inventory management using AI is automation and efficiency. Not only can inventory management operations be automated, but highly accurate demand forecasts can be made based on data, making business management more efficient.
Issues when managing inventory manually
If inventory management is done manually, it takes a lot of effort, increases labor costs, and causes human errors. Let’s take a look at four challenges when managing inventory manually.
1. Difficult to predict supply and demand
If inventory management is done manually, it is difficult to predict supply and demand, and inventory management may become inefficient. There are four reasons for this:
・Many types of products are subject to demand forecasting: Generally, inventory management is performed for many types of products, so there is a difference in forecast accuracy between products for which demand forecasting is done vigorously and products for which demand forecasting is not. coming out.
・Changes in demand vary due to external factors: It is difficult to accurately predict the effects of external factors such as social conditions, weather, and the media.
・It is difficult to notice a product that is no longer selling: If sales suddenly decrease, it can be recognized, but if sales are gradually decreasing, it may be difficult to notice the trend.
– Difficult to predict demand for new products: It is difficult to predict demand for new products for which there is no experience or data accumulated.
Unable to optimize inventory
Optimizing inventory is an important issue that affects sales, customer satisfaction, costs, etc. For example, if a product is out of stock, the product cannot be sold even if the customer orders it, leading to lost opportunities and lower customer satisfaction. As a result, you may lose the trust of your customers, and in the worst case scenario, there is a risk that you will not be able to do business with them again.
However, on the other hand, if you carry excess inventory, you may be able to fulfill customer orders, but storage costs will increase. Additionally, disposing of these excess inventories will incur additional costs.
Business becomes a black box
If inventory management is done manually, the work will depend on the intuition and experience of the individual in charge, and there is a risk that the process will become a black box. In this case, inventory management know-how cannot be shared, inventory management work itself becomes individualized, and managers are unable to discover issues.
If inventory management rules are not visible, management errors are more likely to occur, communication and cooperation between employees cannot be carried out smoothly, and operations become inefficient.
Inventory management takes a lot of time and cost
Inventory management requires a lot of effort and cost for the following operations.
・Receiving and placing orders by phone, fax, and email: It takes time to receive and place orders for each customer or product. Errors are likely to occur during the process of inputting and managing order details.
– Inventory quantity input, slip processing: If inventory management itself is done manually, such as paper-based or computer management, manual input is required, which is not only time-consuming but also prone to input errors.
When time is taken up by these tasks, time is taken away from more important tasks.
Advantages of using AI for inventory management
Utilizing AI for inventory management can help resolve issues that would otherwise arise when managing inventory manually. We will introduce four specific benefits: “increased accuracy of demand forecasts,” “easier to prevent excess inventory and stockouts,” “reduced human errors,” and “increased operational efficiency.”
Increased accuracy of demand forecasts
Inventory management using AI analyzes past data such as sales, customer attributes, demand changes, and external factors to predict demand. You can now make more accurate predictions than when you relied on limited data, intuition, and experience.
Additionally, when a new product becomes available, decisions can be made based on more accurate demand forecasts, allowing for appropriate inventory management.
Easily prevent excess inventory and stockouts
If you can make accurate demand forecasts based on data, you will be able to maintain enough inventory to prevent stockouts and avoid excess inventory.
As a result, we can expect to be able to meet customer demands and lead to cost reductions.
Human error can be suppressed
Inventory management is prone to human error. When counting the actual inventory items manually or visually, there is a risk of omissions or duplicate counts, as well as manual input errors.
By using AI and systemizing inventory management, inventory counting will become a task of reading barcodes, and count input will also be automated, preventing human errors from occurring.
Increases work efficiency
By using AI for inventory management, you can centrally manage inventory information, outbound information, inventory shortage information, etc. in a system. As a result, many tasks related to inventory management can be automated and efficiency can be improved.
By entrusting work in areas that can be left to AI to AI, you will be able to focus on important work that only humans can do.
Disadvantages of using AI for inventory management
There are many advantages to using AI for inventory management, but you should also be aware that there are also disadvantages. We will explain two disadvantages of using AI for inventory management: it requires a certain cost to introduce and operate, and it requires skills to operate.
Certain costs are required for introduction and operation.
It costs money to introduce and operate an AI system for inventory management. Initial costs are required when introducing the system, and there are also running costs. Additionally, it may take some time to fully utilize the system, and until then, you may not be able to say that you have made your operations more efficient. However, if we can successfully utilize AI systems, we can expect the benefits to outweigh the costs.
Requires skill to operate
Even if an AI system is introduced for inventory management, it may not be possible to fully utilize it if the operating skills are lacking. As a result, operations end up being more costly without being made more efficient.
In order to make the most of the system, it is necessary to educate field personnel about the meaning of the system and how to operate it. In addition to providing education, it is also important to choose an AI system that has an inquiry service.
Two ways to AI inventory management
How can I use AI for inventory management? Here we will explain when introducing a new inventory management system that supports AI and when implementing AI into an existing inventory management system.
1.Introduce a new inventory management system compatible with AI
If you are currently managing inventory manually, we recommend implementing an inventory management system that supports AI. Functions and prices vary depending on the service, but it is important to choose a system with functions suitable for each industry.
2. Implement AI into your existing inventory management system
If your company already has an inventory management system in place, there is also a way to introduce AI into the existing system. In some cases, it is possible to implement AI into the inventory management system without making changes to the existing system. By implementing AI into your existing inventory management system, you can automate processes that were previously performed manually.
summary
The biggest advantage of inventory management using AI is automation and efficiency. It improves the accuracy of demand forecasts, prevents excess inventory and stockouts, and reduces human errors, increasing operational efficiency.
