5 Ways AI-Powered Retail Analytics Is Improving Inventory Management
Updated: Dec 26, 2023
Hyper-competitive. Fast-paced. Customer driven. While the retail industry is all of these, being inventory led is – arguably – the sector’s primary defining characteristic. Unsurprisingly, retail organisations (like yourself) today count technology-led inventory management as a critical factor for success.
Inventory Management and Artificial Intelligence
Effective inventory management poses a considerable challenge, akin to navigating the proverbial "between the Devil and the deep sea" scenarios faced by retailers regarding inventory volumes. Maintaining an optimal stock balance is crucial, as excessive stock leads to increased storage expenses and potential wastage, while insufficient inventory results in missed sales opportunities and dissatisfied customers. If you're in the retail business, these challenges are undoubtedly familiar.
You've likely firsthand encountered the limitations of traditional inventory management systems, which fall significantly short in ensuring agile inventory optimization, meeting the evolving demands of modern consumers, and navigating the complexities of the market.
As we put these thoughts into words, sweeping transformations are unfolding in the retail landscape, driven by Artificial Intelligence (AI)-led inventory management software. On that note, have you heard about the global market for AI in inventory management, currently valued at approximately $1.7 billion projected to soar to a staggering $34.54 billion by 2030?
How is AI-driven Analytics Upgrading Inventory Management?
Integrating AI models into inventory management systems is catalysing stock optimization at both warehouse and store levels, helping decrease inventory, transport and handling costs as well as meet customer expectations at every touchpoint. Let’s explore the five key ways AI-powered retail analytics solutions (like the ones from Syvylyze Analytics) are making all of the above possible, introducing a paradigm shift in inventory management –
1. Improved demand forecasting –
One significant aspect of AI in retail is its ability to predict consumer demand accurately. Leveraging time series models, AI algorithms analyse historical sales data, incorporating factors like seasonality, promotions, and external events. This enables the generation of near-precise demand forecasts, maintaining a balance between supply and demand. The result is minimised losses, streamlined sales planning, and improved customer satisfaction through real-time insights, empowering informed decision-making and enhancing overall supply chain efficiency.
2. Optimised assortment planning – Offering the right mix of products that caters to diverse customer preferences is a common, and well known, challenge for retail players. AI-powered solutions analyse customer data, purchasing behaviour, and market trends to plan this mix, or assortment, correctly.
An understanding of customer preferences and emerging trends will allow you to tailor your product assortments and meet evolving market demands. Such a data driven approach helps –
o Lower the risk of excess inventory on slow-moving or outdated items
o Craft well-planned purchasing strategies that define when, and how much, inventory to order from suppliers
o Customization based on consumer preferences enhances the customer shopping experience
To summarise, algorithms allow for cost optimised inventory procurement, ensuring you stock the most relevant and profitable products in the correct quantities.
3. Enhanced stock visibility and loss prevention – AI-powered solutions provide real-time visibility into stock levels across the supply chain, minimising the risk of stockouts or theft. Computer vision and RFID technologies enhance stock visibility in both stores and warehouses. AI algorithms simulate inventory trade-offs, finding ideal balanced inventory levels, and detect patterns indicative of fraudulent activities or discrepancies in inventory records. Proactive addressing of these issues minimises losses, ensuring accurate alignment between available stock figures and recorded inventory levels.
4. Automated replenishment strategies – AI-powered retail analytics automate the stock replenishment process, reducing human errors and streamlining operations. Continuous monitoring and reordering, based on demand, improves efficiency and meets customer demand promptly. AI-based automation optimises replenishment strategies by considering constraints such as lead time, supplier performance, and transportation logistics. This results in a more responsive and agile supply chain, accurately identifying inventory reorder levels, decreasing carrying costs, and improving overall inventory turnover.
5. Reduce transportation cost – Retail analytics, powered by AI, optimise transportation costs through sophisticated pathway models. Retailers can map out efficient routes for inventory flow, minimising transportation expenses by identifying the most cost-effective routes. This data-driven approach ensures the right amount of inventory reaches the right locations at the right times, reducing overheads, and enhancing overall operational efficiency within the retail supply chain.
AI-powered retail analytics, exemplified by solutions like those from Syvylyze Analytics, are transformative for inventory management in the retail sector. From forecasting demand to automating replenishment and optimising transportation, AI empowers retailers to make data-driven decisions that improve efficiency, reduce costs, and elevate the overall customer experience. In the evolving retail landscape, embracing AI technologies is not merely an option but a strategic imperative for those aiming to stay competitive in the dynamic world of retail.