Inventory management solves a fundamental business need. It answers the questions of how much inventory there is and where it is located. It processes re-orders on a just-in-time-basis so that the replenishment of the inventory of any item occurs right before that inventory item is depleted. It maximizes productivity to have just enough of needed items available to never run out, while at the same time not creating an overstocked situation. Easy to describe. Sounds simple. Why do so many companies do this poorly?
Inventory management has done the old-fashioned way with spreadsheets and physical counts are barbaric. Nevertheless, a 2017 survey conducted by Wasp Barcode Technologies noted that most small businesses did not track inventory using the current best practices.
The survey revealed the following:
- 11% do not track inventory at all.
- 12% use a pen and paper along with physical inventory counting.
- 22% use accounting software that only tracks purchase orders and sales figures.
- 32% use spreadsheets.
- 7% had no idea what inventory tracking they used if any.
- Only 16% used an automated inventory-tracking system.
In total, 84% of the survey respondents were not yet applying the best practices. With the explosive growth of the IoT, this is likely to change because the ease and the cost of doing this will come way down.
IoT in Inventory Management
The capabilities of using the IoT to improve inventory management now create the possibility for businesses of all sizes to monitor inventory in real-time. Data transmission will improve significantly over the next years with the deployment of 5G network technology.
Here are the nine ways that IoT improves inventory management:
1. Real-Time Communication
One of the fundamental benefits of deploying an inventory management system using IoT is that communication is improved. Everything, which is a reasonably-sized unit of value in the inventory management chain, is enabled with communication capabilities.
2. Precise, Detailed, Itemized, Location Monitoring
Knowing, in real-time, exactly where every item of inventory is located, is the new standard. Delivery services already do this very well with packages. A package that is being sent, is scanned into the system, tracked while in transit, and then the delivery is recorded.
With the expanding IoT capabilities, combined with 5G wireless data transmission, this will enable micro-tracking. Inventory management systems will be able to increase in granularity to not only track a package but to also be able to track the individual items inside.
Itemized inventory tracking continues through the warehousing and processing until the item is used in manufacturing, sold, or written off as a loss for various reasons.
Micro-tracking is limited to items that can contain a physical RFID chip or have a barcode stamped on them or their packaging. To be cost-effective, the items must have an individual value that is sufficiently high enough to be worth using inventory tracking methods to account for them. However, with IoT, the number of specific inventory items that will be tracked will increase by the trillions.
3. Touchless Data Collection
The best practices for an inventory management system using IoT are to have as little human intervention as possible. Data collection of the inventory items should be highly-automated so that when each item passes through a scanner, its presence in inventory is tracked and recorded. When the item is used or sold, physically moving it out of the warehouse through another scanner (or at another checkpoint in the supply chain) reduces the inventory count for that item.
4. Warehouse Management
Using technology that is enabled by the IoT along with the coming improvements offered by 5G wireless technology improves the logistics of warehouse management. Warehouse management is about efficient use of the space and the activity that occurs in that space. Space in a warehouse is better allocated after considering the usage pattern. More frequently used items can be stored more closely to the access points to improve warehouse efficiency.
IoT in inventory management includes the use of smart shelves and storage bins that can communicate how long things have been held in those places and how full they are.
5. Artificial Intelligence Algorithms
Algorithms developed using computer-learning AI systems may be able to track and manage inventory better than a human counterpart. By scanning IoT data, the AI system may identify patterns that a human being may not find. This process may improve inventory management decisions.
AI may be used on its own to improve system functions such as replacement inventory ordering, or it may be combined with human supervision and human decision-making about note-worthy data patterns discovered through the AI algorithms.
6. Cloud Computing Enhances AI and IoT Systems
Using AI with cloud computing has tremendous benefits. Cloud computing offers significant computational processing needed to create the benefits of using AI and IoT systems for inventory management. This cloud-computing processing power enables data mining of large sets of data by applying sophisticated analytics, in order to make accurate predictions.
7. Equipment/Fleet Inventory Management
If an organization’s inventory includes equipment and vehicle fleets, then the IoT is very useful. Tracking mechanisms use GPS locations to collect data about where the equipment or fleet vehicles are always. This data helps manage the utilization of the tracked items and helps prevent loss or unauthorized use.
8. Better Management of Lead Times
Tracking of inventory using IoT systems helps determine the lead times needed to assemble all the parts necessary for manufacturing. Excessive lead times are identified in order to avoid bottlenecks caused by a critical part(s) being missing that stops the production processes.
9. Integration with Robotics
Inventory management using IoT systems allows the easier integration with robotics that is used in conjunction with inventory processes. For example, many online retailers have a significant amount of work needed to do in picking items to fill a customer order. Robotics can do this work more efficiently in conjunction with IoT-connected inventory items and systems.
Embracing IoT for inventory management is, in general, a wise decision for most organizations. However, there are concerns about IoT implementation that need to be considered as well. They are the investment cost, standards that help devices communicate with each other, security, and scalability. Certainly, all those issues must be addressed to create a successful inventory management system using IoT.
Despite these concerns, the cost of the IoT technology continues to decrease and the deployment of IoT for inventory management continues to advance. For many organizations, this is rapidly becoming a cost-effective and efficient solution for inventory management.