8 Ways AI can Improve Inventory Management

Updated on Dec 15th, 2023


Inventory is vital for various business operations. Today, AI, with its smart applications like automated vehicles, drones, and robots, is changing inventory management to streamline it for maximum profit using data intelligence.

With its incredible capacity, AI is enabling supply chains and warehouses with cognitive solutions for inventory management and getting real-time dynamics of inventory levels at fingertips. Not only this, these systems predict situations, recommend solutions, and take actions with human intervention or autonomously.

Let’s dig deeper into the realm, and figure out how AI changes inventory management for better. 

8 Ways AI can Improve Inventory Management

1. AI makes demand forecasting easier.
2. AI-powered insights help boost productivity.
3. AI-enabled chatbots are changing customer support for better.
4. AI can make warehouse management smarter.
5. Predictive analytics helps improve machine uptime.
6. Hyper-Personalized manufacturing can drive inclusive growth
7. Automated Material Procurement.
8. AI helps to make result-oriented and profitable marketing strategies.

1. AI makes demand forecasting easier


Traditional forecasting models such as ARIMA, AutoRegressive Integrated Moving Average, and exponential smoothing methods, where only historical data is considered, are getting outdated because of the increased amount of data generated from businesses. With the implementation of machine learning into businesses’ supply chain management, companies can improve the accuracy of forecast results and optimize their replenishment plans.

Machine learning carries demand forecasting to the next step; it enables enhanced forecasts based on real-time data using internal and external data sources such as demographics, weather, online reviews, and social media. With the help of external data and modern machine learning algorithms, supply chain networks can outperform networks managed more manually by data analysts and adapt to external changes.

According to Mckinsey Digital’s report, AI-powered demand forecasting can reduce errors by 30% to 50% in the supply chain networks. This improved accuracy leads to a 65% reduction in lost sales due to inventory out-of-stock situations and warehousing costs decrease around 10-40%. The estimated impact of AI in the supply chain is between $1.2T and $2T in manufacturing and supply chain planning.

2. AI-powered insights help boost productivity

By the end of 2020, it is anticipated that there will be a high number of machines powered by AI engines. These machines will run machine learning algorithms to optimize the manufacturing process for high efficiency autonomously. Such systems will continuously monitor the quantities used, cycle times, temperatures, lead times, errors, and downtime to optimize production runs.

 3. AI-enabled chatbots are changing customer support for better

Accenture predicts that chatbots can handle 80 percent of all customer engagements. Inventory management is no exception to this. AI-powered chatbots help you stay updated on your inventory and keep track of various orders and updates related to them. For instance, businesses have been implementing cutting-edge chatbots that get information on expected parcels, dispatched parcels, and their contents. 

Chatbots also help you deliver the best customer service. A striking example is DHL parcel that’s expanding its customer service to include a new voice-activated information system.

With this system, DHL customers can query Amazon’s digital smart speaker  Alexa for any information on their parcel’s status. On activating Alexa’s DHL Parcel “skill” via the Alexa app, users can ask Amazon Echo or Echo Dot smart speakers to provide information on their shipment status.

Started as a step to improve the customer experience, the system was aimed at making it easier and quicker for the customers to find an answer to their questions, regardless of the time.

With this, let’s underline some more ways AI-powered chatbots can help supply chain business thrive:

  •       Chatbots can help businesses quickly check on the delivery requests, process the orders, and issue receipts.
  •       They can make it less daunting for the customers to track their parcels, ask related information, or seek answers.
  •        Businesses can easily collect feedback and surveys from customers.

 4. AI can make warehouse management smarter


According to MHI Annual Industry Report 2020, 12% of the respondents are currently using AI technology. However, despite the low number, more than half of the respondents believe that AI is poised to change warehouse management forever, giving businesses a competitive advantage. Here’s how various aspects of warehouse change with AI:

  •       Improving communication within the warehouse
  •       Bettering the warehouse logistics and productivity
  •       Optimizing the cost of operation and resources

5. Predictive analytics helps improve machine uptime

Predictive Analytics

Predictive analytics is helping logistics and supply chain companies meet increasing demands smartly. The industry identifies predictive analytics as to the more influential technology for more than a decade. The trend is being warmly welcomed by most of the decision-makers across the arena. Council of Supply Chain Management released a study that states 93% of the shippers and 98% of the third-party logistics firms admit that data-driven decision making is crucial to supply chain activities.

This cost-effective solution is implemented with predictive AI algorithms,  using which enterprises can detect failure patterns and anomalies, learn from them, and predict future failure of machine components. This prevents downtimes by helping replace the machine components before they even fail, thereby maximizing the uptime.

6. Hyper-Personalized manufacturing can drive inclusive growth

With digitalization entering every walk of life, there is a clear shift from standardization through mass manufacturing, to personalization via automation and smart manufacturing.  In a recent survey, 20% of the consumers admitted that they would be willing to pay a 20% premium for personalized products and services.

Advancements in AI and software intelligence enable companies to take personalization to the next level by tailoring products and services that are highly relevant to individual consumers. Powered by Big data, hyper-personalization combines curation with customizations to create custom user experiences around the specific customer’s demand. Advances in digital technologies, in artificial intelligence (AI) and software intelligence, are enabling companies to take personalization to the next level by making products and services that are highly relevant to individual consumers. This type of consumption facilitates production or part of it in a localized area and allows for inclusive growth.

7. Automated Material Procurement

AI analytics takes into account everything-right from the first stage of quoting to the supply chain. McKinsey predicts machine learning will reduce supply chain forecasting errors by 50% and reduce costs related to transport and warehousing and supply chain administration by 5% to 10% and 25% to 40%, respectively.  While the adoption of AI in business applications like these is still in the initial stages, several examples can be quoted:

  •       Procurement spend classification
  •       Vendor matching
  •       Capturing supplier or market data
  •       Anamoly detection

8. AI helps to make result-oriented and profitable marketing strategies

A considerable benefit of AI-assisted inventory management is in terms of more in-depth insights that help build better marketing strategies. AI and machine learning can particularly highlight the short-lived demands for products and their market. Not just this, with smart inventory tools like ML-based anomaly detection and AI to spot sporadic changes in product interest along with traits of who is more likely to buy them, you can find an enriched set of databases. This knowledge then allows stores to stay on top of consumer trends and react quickly to specific pockets of demand that keep them on top of the consumer’s minds.


Take-home Message

With the integration of inventory management with the latest developments of AI, companies can ensure sustained growth. But with changing patterns in demand, supply, and other data related to inventory, customers, etc., the AI systems tend to learn these changes and repeat the actions. If you are a business facing issues with inventory management or the one that seeks to revolutionize inventory management, contact Matellio for AI development services now!

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