How AI and IoT is Used in Inventory Management

Inventory management is a timeless challenge for consumer goods manufacturers and retailers, and the pandemic only made things more difficult. As a result, many companies are identifying it as one of the areas they’re most interested in supercharging through the use of technology. 

In fact, lack of real-time inventory visibility was chosen by 53% of retailers as the top priority of “high importance” that needs to be resolved through technology upgrades or implementations, according to RIS News’ Supply Chain Technology Study, making it a prime use case for AI in the supply chain.   

Both artificial intelligence and the Internet of Things have the ability to transform supply chains and logistics, though in different ways. What they do have in common, however, is that they’re still gaining in widespread use across the consumer goods industry. 

“IoT is still an emerging technology in CGs supply chains,” says Lindsey Peters, retail and consumer goods lead at Celonis. “While it has optimized supply chain track/trace for decades now, the massive leaps forward in miniaturization and precision in this space have resulted in massive increases in the amount of data generated to monitor and track items moving through the supply chain.” 

How is AI used in inventory management?

In short, AI and IoT in the supply chain can be used in inventory management to provide manufacturers and retailers with greater visibility into the location of their goods and the optimal way to manage and move them.  

When it comes to AI in supply chain use cases, C&A Modas is a prime example. The fashion retailer leveraged an AI-infused platform from Palantir to optimize and quicken its inventory process, from planning to shipping to retail stores, to improve inventory management of its best-selling products. The technology processed and generated purchase recommendations, accounting for variables influencing long-term inventory planning, such as sales seasonality, product performance variations, and financial criteria, among other things. 

A digital twin of its logistics chain provided C&A’s planning teams with a wider view of the purchasing process, as well as offered the ability to quickly simulate new rules and scenarios. As a result, the company increased sales of in-stock products and reduced unnecessary overstock, according to Bruno Ferreira, planning and business intelligence director for C&A Brazil

What are the benefits of AI in inventory management?

When looking at how the benefits of AI in supply chain trickle down to inventory management, the technology affords leaders visibility into a number of important factors, including: 

• The types and volume of products they should be manufacturing and selling
• The optimal locations for these products to be stored and shipped
• Robotics to pick and pack orders 
• The number of employees required at any given location and time

Having this information means that companies can make decisions more quickly and accurately, as well as head off challenges more proactively. 

“The use of full artificial intelligence would be valuable in identifying where to apply pattern recognition in the first place, potentially finding and fixing supply chain issues that are less obvious to humans, and identifying true root causes of issues where the human targeting method may be simply looking at another symptom in the chain,” notes Peters. 

 How is IoT used in inventory management?

CPG companies have traditionally used two varieties of IoT to track their inventory, says Steve Statler, chief marketing officer and ESG lead at Wiliot, a provider of IoT technology. The first includes RFID tag inventory sensors, which are stickers that can be read by handheld scanners to provide inventory information. The second is wireless inventory trackers, which leverage sensors to track containers using cellular, GPS, and Bluetooth. 

A newer technology, known as ambient IoT, which Wiliot provides, combines physical tags (similar to RFID) with Bluetooth, Wi-Fi, and 5G, to provide more real-time data to manufacturers and retailers. 

Adheer Bahulkar, global supply chain lead of Accenture’s consumer goods and industry practice, notes that visibility into inventory along the extended value chain is a big challenge. This includes raw materials inventory from a supplier, the transit to the plants, finished goods inventory from plant warehouses to distribution centers, and all the way to customer warehouses and retail stores. 

“Since IoT can be deployed to real-time visibility on inventory at a case, pallet, and container level, it can be a very powerful mechanism to inform the business about the best decisions to make,” he says. “Real-time visibility can help with inventory management, [such as] improve customer fill rates by being able to quickly scan what inventory is available where and making it available to promise. 

IoT in supply chain can also reduce merchandise waste by ensuring the right inventory is being focused on for selling and deployment while the product still has a meaningful shelf-life, he adds. 

How IoT can be used in warehouses

Among the ways that IoT can be used in warehouses include monitoring temperature data in cold settings where food and/or other items must remain below a certain temperature level to stay compliant.