Internet of Things (IoT) integration creates greater visibility into retail operations because enterprises are no longer solely focused on a single stream of data. Bringing in more streams of data through exchange enriches inventory management, asset management, and workflow tools. Additionally, increased data accuracy empowers executives, operators, and frontline employees to make more informed decisions. Partnership is created between technology providers and their customers as providers benefit from shared data and enterprises are relieved from the burden of analysis.
INVENTORY MANAGEMENT
Inventory management systems are put in place to optimize three core variables: quantity, quality, and consumption. At the quantity level, recommendations are delivered to inform purchasing based on the rate of sales and accurately forecasted demand. Computer-assisted ordering provides retailers insight and support for reordering tasks with prescriptions such as “You brought in 100 items of X, you sold 50, and the demand for next week is about 100 with a confidence level of 95%. You will sell between 93 to 110, therefore you need to order 100 more.”
Accuracy issues for exact quantities originate from a myriad of sources. First, the way cashiers scan items at checkout affects inventory data accuracy. For example, it’s quite common for a cashier to scan one item multiple times when the price and product are the same but the flavor is different. A consumer checks out at the grocery store, buying five cartons of yogurt, all different flavors. But the cashier scans the vanilla carton five times, resulting in inventory data inaccuracies.
Theft due to organized retail crime (ORC) and other external or internal fraud is also a contributing obstacle to achieving accurate inventory quantity data. Sophisticated criminal actors have well-developed strategies for coordinated attacks, creating financial losses and increasing risk for physical danger while also leading to inaccurate stock levels.
Finally, there is always some margin of error at the point of receiving. Non-malicious loss due to administrative and operational errors adds to inaccuracy within an inventory system, causing the system to indicate that more items have been received than actually have been. These non-malicious losses are identifiable under the lens of total retail loss, a term coined by Dr. Adrian Beck while developing a systematic way to calculate waste in retail networks caused by sources other than criminal activity.
Connected, IoT-enabled sensing technology is utilized to address these challenges. One option is to employ visual cameras that monitor shelves, analyzing the depth, and positioning of products to estimate the quantity of inventory. Another approach is to implement shelf weight management systems, which keep track of the average weight of items on a shelf and identify discrepancies. Additionally, RFID tags are utilized for expensive items, providing a more accurate picture of the inventory. These solutions, however, are not without their own limitations, such as the need to be in close proximity to the items and the inability to account for the quality of products.
Another critical aspect of on-shelf availability is product quality, which plays a crucial role in consumability. For example, no one would select a brown banana or a deflated basketball from a retail shelf. Therefore, it is necessary to consider factors such as temperature, humidity, positioning, and location to ensure that the inventory is of high quality. When it comes to frozen items like ice cream, improper storage conditions lead to the formation of external frost on the surface, rendering them unappetizing and unsellable. Deli sausages can lose a substantial percentage of their weight by drying out due to improper ambient humidity levels, which eats into margins. Thus, a holistic IoT system helps to monitor and maintain the quality of inventory and preserve already thin margins.
ASSET MANAGEMENT
Keeping track of assets of all kinds—forklifts, carts, refrigeration equipment, shipping pallets, etc.—and ensuring their proper maintenance is essential for all retail enterprises. In some cases, retailers may find themselves losing assets due to miscommunication, sheer volume, or employee theft. Implementing tracking technology allows businesses to locate and monitor the usage of their assets, as well as schedule maintenance tasks to prevent equipment failure.
The impact of asset management on inventory quality is significant. If an asset—such as a grocery store refrigerator—unexpectedly fails, products need to be moved to other assets, which leads to overloading. Overloading inventory within a single asset can impact its temperature settings and compromise the quality of the stored items. Maintaining the health of the asset directly leads to improved product quality.
When retailers consider their options for asset management implementation, they should identify their requirements for what types of telemetry data they will need at each stage of their value chain. Some retailers prioritize asset location, while others set asset condition as their key indicator. If possible, combining location with condition is a powerful way to ensure outcomes where inventory positioning and quality are highest.
WORKFLOW MANAGEMENT
Leaders in the retail space will also streamline operations with IoT integration for workflow management when they implement the following steps:
- Connecting IoT devices to digital workflow management systems
- Automating routine tasks with digital data collection
- Guiding employees with descriptive insights. For instance, optimizing the system to remind employees to clean aisles at specific times or alert them about the real-time status of truck arrivals.
Implementing the above steps not only enhances efficiency but also helps ensure that perishable goods are handled according to proper health and safety standards. For example, if a delivery of meat arrives earlier than expected, the system prompts employees to transfer it to the appropriate walk-in cooler to prevent spoilage, safety risk, and product loss.
Ultimately, the combination of IoT technology with inventory, asset, and workflow management systems leads to increased accuracy, efficiency, and effectiveness. It also allows retailers to maintain inventory quality, preserve margins, and retain happy and loyal customers. By addressing challenges related to accuracy, quality, and efficiency, retailers enhance their operations and ensure customer satisfaction.
Guy Yehiav is President of SmartSense.