The following article is attributed to Roshan Singh Bisht, Co-Founder & CEO, Asort.com
Managing inventory effectively is crucial for success in the fast-growing e-commerce sector. The global e-commerce market size was estimated at USD 25.93 trillion in 2023 and is projected to grow at a CAGR of 18.9% from 2024 to 2030, according to Grand View Research. With this rapid growth, optimizing supply chains to meet demand is more important than ever. Poor inventory management can lead to costly inefficiencies that retailers cannot afford in such a competitive industry.
According to IHL Services, global retailers are expected to experience $1.77 trillion in losses in 2023 due to inventory distortion, which includes lost sales from out-of-stock items and the discounts needed to move overstocked products. This highlights the critical need for businesses to balance supply and demand more efficiently to avoid such financial losses.
Impact of Technology on Inventory Management
Businesses are increasingly adopting technology to improve their inventory management processes. The global inventory management software market, valued at USD 2.13 billion in 2023, is projected to reach USD 4.84 billion by 2032, growing at a CAGR of 9.7%, according to Fortune Business Insights. This growth reflects the increasing adoption of automation, sensors, and analytics to streamline inventory operations. Myos reports that 72% of retailers plan to transform their supply chain operations with real-time visibility through these technologies.
Integrating IoT into inventory management is another key trend. Businesses using IoT technology have seen a 25% increase in inventory turnover and a 30% reduction in excess inventory levels, according to a recent study. These advancements allow companies to improve operational efficiency while responding more quickly to changes in consumer demand.
Cost Reductions Through Smarter Supply Chains
Addressing overstocking and understocking is not only about improving inventory efficiency but also about reducing operational costs. According to Myos, resolving these issues can lead to a 10% reduction in inventory costs. Additionally, digital transformation initiatives are expected to reduce 10% to 12% of emissions from logistics activities by 2025, making inventory management more sustainable.
Myos also highlights that 73% of warehouses plan to implement mobile inventory management solutions, providing businesses with the ability to track stock levels and make data-driven decisions from mobile devices. These real-time insights help reduce waste and improve accuracy.
Role of AI and Advanced Analytics
Artificial intelligence (AI) is playing a significant role in improving inventory management. McKinsey reports that AI-driven forecasting can reduce errors by 20% to 50%, translating into a reduction in lost sales and product unavailability of up to 65%. Additionally, warehousing costs can be lowered by 5% to 10%, and administrative costs by 25% to 40%. These technologies offer businesses a more precise way to manage inventory levels and avoid costly mistakes.
Businesses with high-performing supply chains are 79% more likely to achieve above-average revenue growth, according to Myos. Implementing AI and other advanced inventory solutions helps e-commerce companies strike the right balance between supply and demand, driving profitability.
As the e-commerce market continues to grow, so does the need for effective inventory management. Companies must embrace digital tools to stay competitive. The warehouse management system (WMS) market is expected to reach around $10.5 billion by 2030, according to Myos, driven by the demand for smart inventory solutions.
Effective inventory management is no longer just about avoiding stockouts or overstocking. It’s about using technology to enhance supply chain performance and achieve long-term growth. With the right tools in place, businesses can create a more efficient and responsive system that meets the increasing demands of e-commerce.
