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How to Improve Inventory Management with Video AI-based Technology

Published:

May 29, 2024

How to Improve Inventory Management with Video AI-based Technology

Improving inventory management is a long-established method for maximizing a company’s budget, especially in retail. But in the past, the question of how to improve inventory management has been a difficult one, with traditional methods bringing significant risk along with benefits — and with expensive technology-based solutions too often out of reach.

Today, though, technology has advanced to the point that previously premium inventory management solutions are now available to virtually every business. Even better, it’s powerful enough to get the job done at a level that would have been unimaginable just a decade ago. 

Here’s a closer look at how to improve inventory management by applying affordable, AI-based technologies like computer vision and video analytics to existing infrastructure, why it’s worth doing so, and how to align today’s tech with the traditional models that so many businesses already use.

> Need inventory management solutions now? Check out the Dragonfruit AI inventory management app

The Benefits of Efficient & Effective Inventory Management

Inventory management may seem basic, but don’t be fooled: Just as with almost every aspect of running a successful business, it pays to give close attention to shelf and inventory management. Doing so can help keep your expenses low and your customers happy.

How else can effective inventory management benefit your business?

  • Prevent lost sales by ensuring that customers can always find what they want, when they want it
  • Maximize revenue and ensure smooth operations by accurately forecasting demand
  • Improve supply chain management and avoid logistical shortages
  • Reduce holding and handling costs (or, for some retailers, spoilage) that come with overstocking
  • Maximize the customer experience and avoid losing business to your competitors
  • Avoid intervention from regulatory agencies, which may come from changing methods too frequently

How to Improve Inventory Management: 3 Types of Solutions

Of course, none of this is exactly a secret. Part of running a successful retail business has always been finding the right balance between having what customers want, when they want it, and avoiding the costs of storing that merchandise any longer than necessary. 

The trouble is, until recently, getting inventory management exactly right rarely seemed possible. A huge variety of theories, best practices, and academic-level analyses have been offered over the past few decades. And, while each of these traditional methods does offer tangible benefits — at least, to certain types of businesses — each also comes with its drawbacks.

Solution #1: Traditional Inventory Management Models

With just-in-time (JIT) inventory management, for instance, businesses order a select number of products at a set time on a regular basis, so they’re available only when needed. While this can help avoid overstocking, it also comes with a high-risk of stockouts which means disappointed customers.

The economic order quantity (EOQ) model calculates factors like projected demand and cost of holding to determine the right amount of inventory to have available at any given time. While it can help reduce overstocking, it’s also prone to issues with shifts in demand, which can lead to stockouts and lost customers.

In the materials requirement planning (MRP) model, businesses use sales data to predict inventory needs. Though it takes a more informed view toward predicting demand, like EOQ, it can be disastrous when its calculations are wrong.

The days sales of inventory (DSI) model calculates the number of days an order of inventory will last. Businesses can then assess the specific costs and value of having excess inventory, and plan accordingly. Again, this model can be susceptible to failing to accommodate spikes in customer demand or unanticipated successes/failures with new product releases.

The minimum order quantity (MOQ) model calculates the absolute minimum necessary for each order to a supplier to meet customer demand. Often imposed by the supplier, some businesses use MOQ as a basis for their own inventory management calculations.

The ABC inventory analysis and management system ranks needed supplies by importance, helping limit shortages to products of the least value or demand. By its nature, though, it accepts that stockouts will happen, although it does help minimize their impact.

There are many other methods, too, which often involve coordinating shipping with sales. Bulk shipping ensures supply but can lead to high holding expenses, for example. Dropshipping, where the supplier ships directly to your consumers, and cross-docking, where you immediately ship customer orders without stocking inventory, can be effective for certain businesses. But they also carry their own risks and expenses.

For fast-paced businesses like retail, optimization by location adds an additional wrinkle as inventory managers must look not only at overall levels of supply and demand but also contend with geographic differences in tastes and preferences, and thus buying patterns.

Solution #2: Computerized PoS Systems

As technology has developed over the past few decades, more advanced types of inventory management options have become available to businesses. For instance, — have enabled a far more accurate and continuous level of tracking of sales and inventory. And this data can help inform and improve the effectiveness of traditional models like MRP and DSI.

Technology has even enabled some retailers to adopt a perpetual inventory management system, which requires a highly detailed, up-to-date outlook of inventory to function. With technology, these details are easily provided, and without the need for staff to manually check shelves or the warehouse.

While highly effective, though, this model has often come with the high price tag of installing computerized systems, and doesn't necessarily solve all of the problems with which fast-paced retailers must contend. For instance, many consumers have gone to a store — where the digital information has confirmed their desired product should be — only to be disappointed (or worse) to find that what they're looking for is no longer on the shelf.

Solution #3: Software, Apps & AI

Technology has also enabled the introduction of specialized software that is by far the most accurate and cost-effective way to improve inventory and shelf management. Integrating with their POS system as well as every aspect of their shipping and storage operations, today’s software can deliver the most up-to-date picture of inventory at any given time, quickly and usually inexpensively.

Some software providers are also working to integrate cutting-edge AI functionality into their services in a way that doesn’t require significant investment from retailers and the other businesses wondering how to improve inventory management.

For instance, the Dragonfruit AI inventory management app uses the cameras you already have to track current stock levels down to the SKU, anywhere throughout an individual retail space or across a vast network of stores, warehouses, or wherever you have cameras. It then applies video-based AI analytics to forecast demand and trigger re-orders​, even sending messages directly to suppliers who may do their own restocking. By using vision AI, Dragonfruit enables inventory managers, merchants and store operators to easily manage inventory across end caps, front of store displays, on the shelf and even in the backroom as long as there is camera coverage.

Using new solutions like Dragonfruit AI, businesses can get closer to adopting a perpetual inventory management model — or simply improve the results they get from one of the traditional models we explored above. With easy-to-use, affordable, app-based tech, the question of how to improve inventory management may finally have a satisfying answer.

Improve Your Inventory Management with Dragonfruit AI

Dragonfruit AI inventory management software directly integrates with your existing systems for seamless operation and ease of use. And it’s all part of a larger suite of retail AI apps that provide an easy and affordable way to monitor customer behavior while better managing queues, staffing, self-checkout theft prevention, and more. Contact us today to learn more. 

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Disclosure: The apps promoted on this page are offered by Dragonfruit AI, a provider of app-based video AI business solutions. Read more about Dragonfruit AI here.

Image Credit: Featured image licensed under iStockPhoto account 16223288.

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