How can digitalization improve inventory management in enterprises?

Lee & Armstrong (2023) highlight that digitalisation, the process of converting analogue information into digital information, has many benefits such as cost saving and improved data-led decision-making capabilities. In the inventory management space in particular, digitalisation has become a key determinant for success. Turvo (2024) elaborates on how inventory management can be made more responsive, consistent and efficient with the implementation of digital tools. Digitalization in the inventory management space also comes with enhanced accuracy with less reliance on human intervention and much better decision-making through predictive modelling (Turvo, 2024). This better decision-making can be used to improve the supply of popular goods when demand is high to ensure customer satisfaction while allowing businesses to fully capitalise on highly seasonal events. Perez et al. (2021) make use of various predictive algorithm strategies to optimise stock levels and conclude that combining a series of advanced algorithms, such as reinforced learning and deterministic linear programming, can significantly enhance inventory management. This is a strategy that was successfully employed by Villegas-Ch et al. (2024) who utilised machine learning methods to reduce time spent on inventory counting by 45%, improved inventory accuracy with an increase in recognition precision and yielded a significant drop in overcounting and undercounting across multiple product categories. It is also important to note that once inventory management is digitalized, it unlocks other capabilities such as automated AI-enhancements. De Ponteves & Eremenko (2023) run through a use case where they build and train an automated warehouse robot through Q-Learning to automatically pick up goods at priority locations with the AI agent picking the optimal route to enhance efficiency. This level of automation reduces the need for manual human intervention and is a strategy employed by many of Amazon’s robotic fulfilment centres. McLaughlin, K. (2023) emphasises that this reduces the time and costs associated with manual fulfilment processes and speeds up delivery for Amazon by 25%. There are many ways to digitalize inventory management, ranging from cloud-based solutions that provide a centralized view for managing inventory to barcode-based ones (Osa Commerce, 2023).