Iraqi Journal for Computer Science and Mathematics

Journal Homepage: http://journal.esj.edu.iq/index.php/IJCM

e-ISSN: 2788-7421 p-ISSN: 2958-0544

Implementing an Automated Inventory Management System

for Small and Medium-sized Enterprises
Hayder Sabah Salih1 , Mohanad Ghazi 2,*, , Mohammad Aljanabi2
1
head of the Scientific Affairs section in the Department of Private Education in the Iraqi Ministry of Higher education
and Scientific Research, Baghdad, 10024, Iraq.
2
Department of Computer, College of Education, Aliraqia University, Baghdad, Iraq

DOI: https://doi.org/10.52866/ijcsm.2023.02.02.021
Received March 2023; Accepted April 2023; Available online May 2023

ABSTRACT: Alfa Company is a medium-sized Iraqi distributor of laboratory equipment and supplies; in this
study, we analyze their experience with implementing an automated inventory management system. This research
explains the potential benefits and implementation challenges of such a system for small and medium-sized
businesses. Improved inventory tracking, less storage fees, and happier consumers resulted from adopting this
system. However, implementation was complex and time-consuming, requiring the expertise of outside IT
consultants as well as the training of internal staff. This case study shows how beneficial it can be for small and
medium-sized enterprises to work with external IT consultants and vendors to help them evaluate the costs and
benefits of installing an automated inventory management system. In sum, the case study is instructive for other
SMEs thinking about investing in automated inventory management systems to boost efficiency and cut costs.

Keywords: Inventory management system, automated inventory management, AI-powered inventory

management, Supply chain management, Inventory control

1. INTRODUCTION

The success of any company, no matter its size or industry, depends on its ability to effectively manage its inventory.
Having enough stock on hand to fulfill client orders while keeping inventory expenditures to a minimum is the goal of
good inventory management. However, inventory management may be a difficult and time-consuming endeavor,
especially for small and medium-sized businesses (SMEs) with fewer personnel and fewer resources. Stockouts, excess
inventory, and higher holding costs are all consequences of sloppy inventory management that can hurt a business'
bottom line [1].
An automated system that makes use of AI technology to manage stockpiles could be one answer to the problem of
inefficient stockpiling. Inventory management solutions driven by AI can help SMEs get their stock levels right, save
money on storage, and streamline their supply chains. These systems utilize sophisticated algorithms and machine
learning to monitor sales and demand in real time and adapt stock levels accordingly [2].
The purpose of this article is to give a case study of AlfaCompany's experience in implementing an automated
inventory management system using AI technology. The study's overarching goal is to shed light on the critical aspects
that influence the effectiveness of such a system's adoption in a small or medium-sized enterprise (SME).
This paper follows the following structure: In Section 2, we'll look at what's already been written about the intersection
of AI with supply chain management. In Section 3, we see how the AlfaCompany's inventory management changed
both before and after the introduction of the AI-driven system. In Section 4, we'll look at the implementation's end
outcomes and conduct a thorough cost-benefit analysis for the business. The conclusion and suggestions for small and
medium-sized enterprises (SMEs) looking to implement an AI-powered inventory management system [4] are
presented in Section 5.

In conclusion, SMEs may benefit from better inventory management if they use an automated system that makes use of
AI technology. This paper examines the AlfaCompany's implementation of such a system in order to provide light on
the pros and cons of adopting such technology. This research provides valuable information for small and medium-
sized enterprises (SMEs) thinking about implementing an AI-powered inventory management system to boost supply
chain efficiency and profits.

*Corresponding author: [email protected]

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Hayder Sabah Salihet al., Iraqi Journal for Computer Science and Mathematics Vol. 4 No. 2 (2023) p. 238-244

2. Literature Review:

Effective inventory management is an integral part of running a business and can have a substantial impact on a
company's bottom line. Particularly for small and medium-sized businesses (SMEs) with limited resources, the manual
processes often used for inventory management can be time-consuming, error-prone, and inefficient. However,
automated inventory management systems can improve efficiency and accuracy of inventory management procedures
[5].
Time-consuming inventory counts, trouble keeping track of inventory levels, a higher risk of errors, and higher costs
due to overstocking or stockouts are just a few of the problems that can arise from using a manual approach to
inventory management. fewer productivity, fewer profits, and worse customer satisfaction [6] are all possible outcomes
of these difficulties.
An Overview of AIS Artificial intelligence (AI), machine learning (ML), and the internet of things (IoT) are just some
of the cutting-edge technologies used in automated inventory management systems, which allow for constant
monitoring and administration of stock. These programs can keep tabs on stock, make purchases, and plan restocking in
the most efficient manner possible. Better inventory management decisions can be made with the help of demand
forecasting and predictive analytics, which are provided by some systems [7-10].
Automated inventory management systems have both positive and negative aspects.
Increased accuracy and efficiency, decreased expenses associated with overstocking and stock outs, enhanced inventory
control, and improved decision-making via data analytics are just some of the benefits of deploying automated
inventory management systems. High implementation costs, technological complexity, and the requirement for staff
training are also possible downsides [11-14].
Evidence suggests that small and medium-sized enterprises (SMEs) gain the most from using automated inventory
management systems. One of the scholars found that small and medium-sized enterprises (SMEs) with an automated
inventory management system had better inventory control, lower inventory holding costs, and higher profits. authors
did a case study of a manufacturing SME and found that after implementing an automated inventory management
system, lead times were cut, inventory accuracy was increased, and customer satisfaction was boosted [15, 16].

According to the available research, automated inventory management systems can have considerable positive effects
on SMEs. However, businesses must weigh the costs and benefits of installing such systems to guarantee they are
appropriate for their needs and will help them achieve their objectives. The technical complexity and training
requirements of employees should also be taken into account by businesses before using automated inventory
management systems.
3. Methodology
The case study method was used to evaluate the pros and cons of introducing an AI-powered inventory management
system to AlfaCompany. The purpose of this case study is to analyze the system's deployment and assess its effects on
inventory management procedures such as stock levels, holding costs, and supply chain productivity. Interviews with
key people, observations of inventory management procedures, and statistical analyses of sales and stock levels were
all used to compile the study's results.

Data Collection Methods

Inventory managers, supply chain managers, and purchasing managers were interviewed using semi-structured
questions to better understand their roles in the inventory management processes. Information about the company's
inventory management procedures both before and after the introduction of the AI-powered system was gathered
through these interviews. Issues with inventory management, the company's decision to use an automated system, the
rollout process, and the technology's benefits and drawbacks were all topics of discussion throughout the interviews.
The day-to-day operations of the company's inventory management were also observed to collect further data. This
entailed keeping an eye on the storage, tracking, and handling of items from the moment of purchase until the moment
of delivery.
Finally, sales and inventory data were collected and evaluated to measure the effectiveness of the AI-driven inventory
management system in reducing stock outs, lowering holding costs, and improving the company's supply chain
efficiency. This information was gathered for a total of 12 months, six months before and after the system became live.
Statistical methods were then used to the data in order to spot any noteworthy shifts in stock and associated costs.

Data Analysis Techniques

Interviews, field notes, and sales and stock records were examined using both qualitative and quantitative methods. To
better understand the company's struggles, the reasoning behind the choice to deploy an automated system, and the pros

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and cons of that decision, content analysis was applied to the qualitative data gathered through interviews and
observations.

Statistical methods, such as t-tests and ANOVA, were applied to the numerical data gleaned from sales and inventory
records in order to determine whether or not there had been any appreciable shifts in stock levels or holding costs
before and after the system went live. The efficiency and precision of the system's proposed changes to the stockpile
were also assessed.

Limitations and Challenges

A number of restrictions and difficulties were experienced throughout the course of the case study. It was impossible to
adequately analyze the system's influence on supply chain efficiency due, in part, to the lack of available historical
sales and inventory data. Employees' resistance to change and skepticism of the system's benefits posed another
obstacle. Addressing these constraints and difficulties required further in-depth interviews with key persons, additional
training and support for staff, and follow-up evaluations to gauge the system's long-term effectiveness.
Using a case study approach, we were able to thoroughly weigh the pros and cons of introducing an AI-powered
inventory management system to AlfaCompany. Using a variety of data collection and analysis tools, we were able to
gain insight into the rollout process and the system's effect on inventory management at the organization.

4. Case Study: Alfa Company

The Baghdad, Iraq-based Alfa Company is a small business that caters to the needs of colleges all throughout the
country by distributing laboratory equipment and supplies. The business has flourished over the past few years and has
been around for a decade. Manual inventory management systems were a burden for the organization because they
were slow and prone to mistakes. The company decided to implement an automated inventory management system to
standardize and improve inventory counts.

The company did extensive research before settling on a cloud-based solution that employs artificial intelligence and
machine learning as their automated inventory management system of choice. The software was designed to help the
business with its inventory management processes, such as checking stock levels, placing restocking orders, and
monitoring their progress. Data migration was used to transfer the company's historical stock data to the new system so
that it could be preserved and made accessible. The company trained its staff thoroughly on the new inventory
management system's functionality, such as data entry, data retrieval, report generation, and analysis.
.

Benefits and Drawbacks

Several benefits accrued to Alfa Company after they adopted an AI-powered inventory management system:

1. Enhanced Inventory Tracking: The introduction of the system enabled real-time monitoring and tracking of
stock levels. This allowed the company to have better visibility and control over their inventory, reducing the
risk of stock outs or excess inventory.

2. Reduced Capital Investment and Holding Costs: By optimizing inventory levels using the AI system, Alfa
Company was able to minimize the amount of capital tied up in inventory and associated holding costs. This
optimization led to cost savings and improved financial performance.

3. Improved Inventory Management: The AI system's data analytics and demand forecasting capabilities
provided Alfa Company with valuable insights for effective inventory management. It helped them make
informed decisions about stock replenishment, ensuring that they had the right amount of inventory to meet
customer demand, thus improving operational efficiency.
Although Alfa Company benefited greatly from installing the AI-powered inventory management system, it did
confront a few challenges along the way:
1. Technological Complexity: The implementation process involved dealing with the technical complexities of
the AI system. This required expertise in system configuration and setup, which posed challenges for the
organization, particularly in terms of resource allocation and technical knowledge.

2. Training and Adaptation: Transitioning to a new inventory management system required training employees
on how to use the system effectively. This training process consumed time and temporarily impacted
productivity as employees adapted to the new system.

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The implementation of the AI-powered inventory management system presented certain difficulties, but the benefits for
AlfaCompany much surpassed the negatives.

5. Results and Discussion:

Numerous benefits accrued to AlfaCompany with the introduction of the automated inventory management system. The
technology enabled constant monitoring of stock levels, which helped management stay on top of inventories and head
off any potential shortages or surpluses. The approach also assisted the business in minimizing the sum of money held
in inventory and maximizing profits. The system's data analytics and demand forecasting capabilities allow for the
possibility of better inventory management choices being made. Table 1 summarizes the main points learned from
talking to Alfa Company's inventory managers, supply chain managers, and buying managers. The purpose of these
interviews was to gain a better understanding of the inventory management issues faced by the organization, the
motivations behind deploying the automated inventory management system, and the overall effects of implementing the
system. The interviewees' experiences with inventory management difficulties, the pros and cons of the new automated
system, and the overall effect on the business are all summarized in the following table. It features key findings that
explain why the method is so helpful and how it may be implemented to boost inventory accuracy, save holding costs,
and provide better customer service. The information gleaned from interviews with key stakeholders in Alfa Company's
inventory management was really helpful. These results add to our knowledge of the benefits and drawbacks of using
artificial intelligence in inventory management for small businesses. The results of the interviews are consistent with
the literature research, which indicates that automated inventory management systems can improve the control of
inventory, the reduction of costs, and the efficiency of the supply chain for SMEs. Small and medium-sized enterprises
(SMEs) must give serious thought to the technical complexity and training needs of such systems before implementing
them. The key results table is a helpful resource since it summarizes the most important information gleaned from the
interviews and provides evidence for the pros and cons of switching to an automated inventory management system..
These findings inform the overall discussion and recommendations for SMEs considering similar technology
implementations.

Table 1: summary of the data extracted from interviews

Key Findings Description

Benefits of Automated Inventory - Constant monitoring of stock levels
Management System - Lower capital investment in inventory and associated holding costs
- Improved inventory management through data analytics and demand
forecasting
- Enhanced customer service and satisfaction.
- Increased market share and customer base.
Drawbacks of Automated Inventory - Technical complexity of implementation
Management System - Higher implementation costs, including the need for external IT
consultants
- Time-consuming staff training and temporary impact on productivity.
Recommendations for SMEs - Evaluate the costs and benefits of implementing an automated
inventory management system
- Seek support from external IT consultants and vendors
- Consider the technical complexity and training requirements
- Analyze the potential return on investment.

The technological intricacy of the implementation process presented difficulties for the organization, and the procedure
required technical competence. The implementation costs were more than expected because the organization had to hire
outside IT consultants to help with configuration and setup. Training employees was another source of stress for the
business, as it consumed a lot of time and temporarily stunted output. The company overcame these obstacles and
gained greatly from the system's adoption. The solution increased the company's inventory accuracy and decreased its
holding costs, which positively impacted the company's bottom line. Better inventory management decisions were
made thanks to the system, which also boosted customer service and satisfaction. The computerized inventory
management system has also contributed to AlfaCompany's rise to the top of Iraq's laboratory equipment and supplies
distribution market. The technology has increased the company's productivity, which in turn has allowed for more
competitive pricing and shipping alternatives for clients. The company's market share and customer base have grown as
a result.

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Overall, AlfaCompany is pleased with the results of using the automated inventory management system. The solution
has allowed the business to streamline its inventory management procedures, cut expenses, and boost its levels of
customer service. Those small and medium-sized businesses (SMBs) looking into automated inventory management
systems can learn a lot from the company's example. However, before implementing such systems, SMEs should weigh
the pros and downsides, as well as the technological complexity and training needs of their employees.

6. Conclusion:

Benefits and drawbacks of installing an automated inventory management system for SMEs are explored in depth in the
case study of AlfaCompany. The company was able to streamline its inventory management procedures, cut expenses,
and boost customer service after using the new technology. The process of implementation, however, was intricate and
time-consuming, calling both the services of external IT consultants and the education of internal personnel. The case
study shows how crucial it is for small and medium-sized enterprises to weigh the pros and cons of using an automated
inventory management system. Before beginning such initiatives, SMEs should evaluate the technical difficulty of the
implementation process, the need to train people, and the potential return on investment. Small and medium-sized
businesses should hire outside IT experts and vendors for support throughout the deployment phase. The case study
also demonstrates the potential benefits of an automated inventory management system for small and medium-sized
businesses. The system can help SMEs increase productivity, decrease costs, and improve service to their clientele. The
method can aid SMEs in becoming market leaders by facilitating easier payment and delivery options for their
customers.

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Appendix

Interview questions
• What are the main challenges you face in
managing inventory?
• Can you describe any specific instances
where inventory management has been
difficult or time-consuming?
Inventory Management Challenges
• How do you currently track and maintain
inventory levels?
• Have there been any instances of stockouts
or excess inventory? If so, what were the
consequences?

• What prompted the decision to implement an

automated inventory management system?
Reasons for Implementing Automated System: • What were the specific goals or objectives
you hoped to achieve with the new system?
• What were the limitations or challenges of
the manual inventory management processes
that you aimed to address?

• Can you describe the process of selecting the

automated inventory management system?
Implementation Process: • How was the data from the previous system
migrated to the new system?
• What steps were taken to train employees on
the new system and ensure a smooth
transition?
• How has the automated system improved
inventory tracking and monitoring?
Benefits of Automated System:
• In what ways has the system optimized
inventory levels and reduced holding costs?
• How has the system improved inventory
management decision-making?
• What were the technical complexities
encountered during the implementation
process?
• Can you discuss any challenges or
Drawbacks of Automated System:
difficulties faced in terms of implementation
costs or external IT consultants?
• How did the staff training process impact
productivity temporarily?

• How has the automated system contributed

to improved inventory accuracy and lower
Overall Impact on Alfa Company holding costs?
• In what ways has customer service and
satisfaction been enhanced by the new

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system?
• Have you observed any changes in market
share or customer base since implementing
the automated system?
•

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