How can digitalization enable better inventory management in enterprises?

Traditional or manual inventory management techniques that rely on manual data collection, are marred by wastage, escalated costs and often lead to poor customer satisfaction (Niaz, 2022). These were based on broad planning methods based on historical demand and trends, for example, if in the last 3 seasons you needed X parts to produce Y product, the operations managers would assume that even in this season they would need the same number of parts based on previous experience. If market demand suddenly rises or diminishes, then you are stuck with additional unwanted and unused inventory, which attracts massive costs, or you are not able to meet customer demand, which leads to customer attrition. Issues of overstocking, understocking and inability to accurately measure inventory on hand are also quite common where manual inventory management practices are in place (Chan et al, 2017). Inventory management also has a direct relationship with supply chain management. The inability to manage stock adequately may result in understocking and when making back orders to meet the customer demand, there may be a delay in the delivery of the raw materials to enable product development, further leading to lost sales and customer attrition. Ali et al (2024), also argue that stock management is an issue across many industries, with businesses struggling to keep the right amount of inventory, or getting their inventory timeously when needed. Digitalizing the manufacturing value chain provides enterprises with valuable data that can help them better understand customer demand, behaviour and product lifecycles and improves demand forecasting with then allows them to better do inventory management. This translates into appropriate inventory levels, minimizes the risks of understocking or overstocking which can result in the inability to deliver goods on demand, or high inventory costs respectively. (Niaz, 2022). Digitization therefore allows entities to quickly adapt to changing external events, such as a drop in demand or an unexpected increase in demand. Because there are automated tools that use data to monitor these events on a near real time basis, it means that the business can be more nimble and adapt to change quickly, therefore giving it competitive advantage as it is able to react to the market quickly (Ali et al, 2024). Balon et al (2022), also argue that technologies such as Blockchain can enhance the allocation of Human resources in order to perform production tasks. This further illustrates the importance of digitalization in enhancing operations.