7 ways to reduce stock using AI optimization
Optimizing stock thought AI
The future is here. Cutting-edge technology has become an essential part of daily business operations.
Companies with strong artificial intelligence (AI) initiatives have reaped twice the benefits of those without them.
AI has led to a 54% reduction in costs and inefficiencies, a staggering amount that represents half of the expenses that can be allocated to growth initiatives.
Introducing AI into your operations can greatly contribute to the success of growing and expanding businesses. It works in a variety of areas, but the best place to start is where you spend the most money: your inventory.
AI inventory optimization can help you overcome a number of operational issues. You can improve your processes, eliminate inefficiencies and save costs. In this article, you will see where you can use it in your trading and how it works.
Top Areas Where AI Inventory Optimization Can Help
Intelligent systems are a valuable asset in any retail environment. These are the key operations where you can efficiently use machine learning for inventory optimization.
Inventory monitoring. Knowing your inventory level 24 hours a day allows you to make smarter purchasing decisions. 26% of companies use AI to achieve real-time inventory management. With real-time tracking and accurate forecasts, they can prepare replenishments or reduce stock without overspending or falling short.
Warehouse optimization. Inventory optimization using AI, such as digital maps and tracking systems, can optimize warehouse spaces. A study claimed that these tools facilitate the movement of goods from one point to another at the right time and place. This way, your team is less likely to make costly logistics mistakes, such as mismatches in batch processing and order picking.
Supply chain visibility. Forecasting, warehouse automation, supplier relationship management (SRM), and other tools provide visibility into the supply chain. 42% of companies consider this crucial as it allows them to improve sourcing and take timely action when supply and demand shocks occur.
Risk management. Companies face internal and external risks (for example, biased judgments, lack of control, and economic downturns). AI inventory optimization can mitigate these risks with data and analytics. During a recession, for example, AI tools can help you decide on the optimal investment in inventory with the lowest risk of loss. Less guesswork, less trading risks.
If your goal is to reduce costs and risks, investing in machine learning for inventory optimization is a good start.
7 Ways AI Inventory Optimization Reduces Costs and Risks
AI is not a rocket; it just puts fuel into your inventory management. Look at your operations and identify where it can best help you. Here are 7 ways machine learning for inventory optimization can help reduce operating costs.
Maximize inventory investment
Eliminate manual work
Minimize human errors
Reduce labor costs
Maximize warehouse efficiency
Streamlines cash flow
Improve order fulfillment
Maximize inventory investment
Investing heavily in inventory doesn't always give you the income you expect. Without proper guidance, it can result in excess stock that you cannot sell. You'll have to lower prices or bundle your products just to break even.
Buying too little, on the other hand, puts you at risk of running out of stock, affecting profitability and customer satisfaction.
Finding a good balance is a common concern among retailers. You should keep your shelves well stocked, but not overstocked.
AI inventory optimization can identify the optimal inventory investment between these extremes. Because it is sophisticated enough to detect errors and inconsistencies, it can understand data sets faster than humans and traditional recording methods.
For example, Augment's forecasting tool collects your past sales data to predict future demand. Then take into account any promotions or seasonal sales that may disrupt purchasing habits. With AI inventory optimization, you will only stock in-demand and profitable products without going overboard.
By analyzing historical data, tracking balances in real time, and forecasting future demand, you'll have a better chance of forecasting how much inventory you'll need for a specific period.
There are many ways you can use machine learning for inventory optimization to improve your bottom line. But as a business that sells merchandise, you are most effective when you reduce inventory and maximize it.
Eliminate manual work
AI inventory optimization eliminates repetitive and time-consuming tasks. These tasks can undermine your team's productivity, resulting in poor performance and operational delays.
They can even eat into your budget in the long run. Disengaged employees cost the global economy $7.8 trillion.
Unless your employees are excited about entering purchase orders, entering sales, and auditing stock balances in Excel or paper on a daily basis, your company contributes to this statistic. You can avoid such losses by upgrading to advanced inventory systems.
In this case study, AI redirects employees to more vital areas by freeing them from repetitive tasks. It also improves your performance by reducing manual errors and providing accurate and up-to-date data. It also prevents bottlenecks (e.g. sudden stock shortages) before they occur.
One aspect of AI inventory optimization that you should focus on is automated replenishment. Based on our observations, you can save up to 20 hours of administrative tasks per week.
Placing orders to suppliers as needed is something you should do frequently. But you don't have to do it manually. Platforms like Augment handle all the manual and technical work, so you don't have to waste hours writing purchase orders from scratch. It also includes suggested order lists that you can export and send to suppliers.
Mundane, recurring tasks can negatively impact your business. Implementing machine learning for inventory optimization in your operations can direct your time, money, and human capital toward growing your business.
Minimize human errors
Humans make mistakes, but a well-trained AI does not. While some oversights are minor and tolerable, others can bleed your funds. An intelligent system prevents and corrects such errors.
Inventory errors can arise at any stage of the operation. The most common examples are miscoding, shipping the wrong items, forgetting expiration dates, and errors in Excel or manual forecasts. Their common culprit: manual logging and tracking.
AI inventory optimization not only takes care of manual work, but also reduces forecast errors by 20% to 50%.
It doesn't matter if it's as simple as scanning barcodes or as intricate as Augment's forecasting automation. Machine learning for inventory optimization can manage your processes and reports to help you stay on top of your inventory. The less human intervention there is, the lower the chance of error.
As the technological age advances, automation plays a more critical role in success. Leave no room for error or limit such instances with reliable AI solutions.
Reduce labor costs
The more your business grows, the more experts you need to help run it. You can start with a few sellers. However, if you plan to expand your product line and source suppliers, you will need to hire procurement experts.
Paychecks and salaries add up quickly. But not so fast if you have artificial intelligence on your team.
AI replaces your supposed new employees, but it does much more than that. Automating repetitive tasks increases workforce efficiency. As an added benefit, 39% of companies use it to mitigate labor and skills shortages.
Let's say you want to identify your best-selling products and strategize your portfolio. An AI inventory optimization tool with product segmentation features is a great substitute for market planning experts.
For example, our tool analyzes the movement of each product and categorizes them as Winners, Followers and Losers based on their sales performance. You won't have to wait days or weeks for reports. You will know your products better, but faster and without bias.
Low staff availability can increase labor costs by more than 5.5% in one year. AI inventory optimization is cheaper; averages $100 or less per month (Augment offers tiered pricing starting at $49/month). And a long-term contract is not required. Most providers allow you to cancel at any time.
AI solutions are built with labor-intensive tasks in mind. So by keeping labor costs low, you also ensure that performance and production are of the highest quality.
Maximize warehouse efficiency
AI helps your warehouse staff work more efficiently and accurately. 73% of companies believe that warehouse automation works best when AI and humans collaborate. AI doesn't do all the work, but it allows your team to perform at their best.
You know how many products you have and where they are, and you understand the flow of items in and out.
This knowledge will help you maximize your warehouse space and design. For example, you can place best-selling products near the shipping area to save time picking orders.
You can integrate an inventory optimization tool with mobile devices, scanners, sensors, and asset location technology. Keeping all workers up to date prevents delays and task omissions.
Streamlines cash flow
With optimized replenishments and accurate forecasts, AI inventory optimization can help reduce cash outlays.
Investing in productive inventory allows you to maximize your profits. You can reduce, if not completely eliminate, your stock of slow-moving products.
The less inventory you have on hand, the lower your storage and maintenance costs will be. That means more money in your pocket.
Being smart and prudent with your inventory investments can prevent you from running out of cash. You can pay your purchases and obligations on time. This way, you avoid costly interest and fees from your suppliers and other third-party providers.
Cash flow forecasting can free up up to 20% of cash from your inventory. With our tool's self-learning algorithms, it's easy to identify optimal balances, identify slow-moving stock, as well as budget, plan and forecast disbursements.
Businesses run on cash. You can keep yours running for the long term with machine learning for inventory optimization.
Improve order fulfillment
Humans can only detect, but not quantify, change. Artificial intelligence is capable of both.
Inventory optimization using AI is incredibly useful in terms of responding to changing customer demands.
AI tools can send real-time alerts about low stock levels, delivery delays, and emergencies. You will know which products are in stock, out of stock, in transit and of good quality. Therefore, you can avoid selling products that do not meet your customers' requirements.
This would avoid complaints and product returns that increase your costs. On average, returns represent 16.6% of total retail sales. Common causes are what AI attempts to solve: late deliveries, limited product selections, and unmet quality expectations.
Machine learning inventory optimization software, like Augment's, allows you to stock up on the items your shoppers love most. Product segmentation identifies best sellers and gives you clues on how to expand your product offering. These AI-powered strategies can help reduce returns.
Product returns and unhappy customers increase costs and reduce profits. So, use your AI initiatives to eliminate out-of-stocks, low-quality products, and delayed shipping from your operations.