The Power of AI for Inventory Management
The novelist Edna Ferber once said, “Perhaps too much of everything is as bad as too little.” While she didn’t probably intend it, her quote perfectly illustrates the central conundrum of inventory management. Businesses need enough stock on hand to satisfy demand but not so much that they tie up too much cash in inventory that just sits there. Finding the middle ground is a crucial if difficult task, especially in a world where demand is far from constant. Businesses often rely on little more than an educated guess to determine their inventory, which can lead to inefficiency, cash flow problems, and unhappy customers. With the power of AI-predictive inventory, however, knowing how much inventory is just right doesn’t have to be a shot in the dark.
As the name suggests, AI-predictive inventory harnesses the power of artificial intelligence in order to give businesses a better sense of how much stock they should have on hand. It allows your accounting data to work for you in order to provide a clearer picture going forward. A business owner knows their company better than anyone else, but they don’t have the time to pour over granular data in search of the little optimizations that save money and increase profits. AI allows this process to happen automatically, providing all of the insights without any of the hassle. Here are some of the ways that AI-predictive inventory can benefit business owners.
Prepare for seasonal surges
All businesses, even those that don’t sell pool toys or Halloween costumes, deal with a certain amount of seasonality. Certain goods sell better at certain times of the year than they do at others. Understanding these patterns in detail allows businesses to be more agile, keeping more products on hand at the times when they are likely to sell and freeing up capital for other resources during down months. While some of this can be gleaned intuitively, AI allows for much greater detail and specificity. For example, it’s easy to say that shorts sell more in June than December, but AI can tell you which pairs of shorts sold during which weeks in June, predicting how many a clothes retailer should have on hand on a weekly and monthly basis.
Increase and improve product mix
Understand what customers demand and when they want it also gives businesses an opportunity to identify additional needs and go about meeting them. If a business has been severely understocking an item, they may not even know the demand exists for it. Analyzing demand predictions, therefore, gives leadership a chance to interrogate their product mix and ask how they can better serve their customers. Maybe a retailer didn’t realize that one of their products was selling out before being restocked. Using this information, they may add auxiliary items that meet similar demands.
Identify dead stock before it dies
Dead stock, or the products a company has bought but is unable to sell, can put a stranglehold on a business’s livelihood. Sometimes, dead stock amasses because a retailer continually orders a product when the demand for it has been outstripped. AI can tell you that the demand for a product is falling, altering you to order less or stop ordering altogether. Rather than compounding a problem, you work toward solving it. Without the insights provided by AI, you may never even have known the problem existed.
AI-based predictions are just one of countless inventory management tools business owners and accounting professionals need to use in order to provide actionable insights that propel business growth. AccountingSuite™ offers a wide range of inventory management tools to make sure that a company’s inventory is an asset and not a liability. Head here to find out more.