Inventory Management for Small Businesses and the IOT

Inventory management is defined as “the planning and controlling of inventories to meet the competitive priorities of the business.” While inventory management is often thought of being beneficial for only large retail and manufacturing companies such as Costco and Kevlar, it is important to realize that smaller companies can benefit greatly from inventory management.

One aspect of inventory management that is particularly useful is forecasting demand. Although not always exact, forecasting demand is necessary to cut costs, meet demand, and eliminate waste. Many large companies have the assets to use sophisticated technology and software to forecast demand and manage their inventory. However, most small businesses have to do it the “old fashioned way” using various methods such as moving averages and exponential smoothing. These methods help to even out demand to allow for seasonality forecasts in the results.

My mother’s company is a full-service hotel design firm. Although hotels open year-round, many owners are in a rush to open during late spring/early summer as well as mid fall due to the high influx of travelers during those peak times. Therefore, it is important for her company to anticipate and forecast the seasonal demand in order to have enough staff on-hand and for her vendors to have enough supplies readily available to ship to the right destination. These methods allow them to not have too many staff or too much inventory as waste and reduces their costs, as well as ensure they have enough product and supplies to meet the hotel owner’s needs.

Are inventory management and demand forecasting more important in a made to order (MTO) service company, like the design business, than in a non-MTO firm?


Again, large companies do not have to go through this process and, instead, are able to use sophisticated technology and software to manage inventory and processes and forecast demand. One software large companies use is the Watson Internet of Things (IOT). The Watson IOT helps manufactures by harnessing the influx of data that is coming from the factory floor and uses condition-based modeling to help record inventory management and asset management. In the video below (1:05-1:30s) you can see the ways the Watson IOT utilizes data. Although it is mostly about asset management and predicting breakdown of machines, I encourage you to watch the full video because the same data and software could be used to manage inventory and store past demand to predict future demand.

How does this relate to JIT and lean processes? Is it viable in the current environment for smaller companies to harness the power of big data and sophisticated software to manage inventory and forecast demand more accurately?

7 thoughts on “Inventory Management for Small Businesses and the IOT

  • March 22, 2018 at 7:05 am


    I am so excited you brought up this topic! My past five summers I have worked at a local boutique in my hometown, which is just about as small business as small business gets. Across those years I definitely became more in tune with the business aspect of the store aside from my job as a clerk.
    The store is open from April-December, but the only real peak months are June-August (when all the tourists arrive for summer). This leaves us with about a 3-month season, which yes, is about as stressful as it sounds. The 2 owners do a great job with inventory selection and inventory management and are constantly trying to win this losing battle of having too much “stuff”.
    I will say, it is fun to sit down in April and May and look through vendor catalogs and go to shows and make rash decisions about things that are ‘cute’ and ‘pretty’. At the end of the day, however, this is not an option for my boutique. With a 3-month season, we need to know exactly what the customer wants and exactly how much to order. If a white dress sells out in early July it is VERY risky to re-order it as it won’t arrive until late July, and people stop buying white in early-to-mid August. In that sense, we must be very tactful in the ordering process to find the best way to maximize our sales while also minimizing the leftover inventory that ends up selling below a margin during the winter season.
    I think another main learning point from working at this store is how expensive having extra inventory can be. Being such a small business, this inventory is literally an investment in the sense that if the owners don’t see returns from this inventory, they won’t be able to pay for the inventory, hypothetically. They buy it on credit with the hope that they will turn a profit and pay off their bills. When I realized this, I was absolutely fascinated and was able to appreciate the job of buying product much more. I started to be very aware of popular items and unpopular items, and was not surprised one summer when we carried less ‘home goods’ items and more ‘clothing’ items as that was what our consumer base had trended towards the season before.
    Thanks for bringing up this topic!

  • March 21, 2018 at 10:06 pm


    I thought your post was really interesting, especially your description of your mother’s hotel design company. The video was also very intriguing and really made me curious about how technology has already changed, and is continuing to change the supply chain models of different types of organizations.

    I had only really talked about the internet of things in relation to marketing and consumer behavior, so it was interesting to learn more about how it relate to different types of business. The IoT has the ability to change the supply chains of businesses on an operational revenue as well as lead to different revenue opportunities.

    The IoT can provide companies with asset tracking tools to give them tighter quality control, more efficient deliveries, and product forecasting. Additionally, it can add a layer between the company and its suppliers. By understanding how each vendor is handling product, supplies, etc. a company will have a better understanding of the value and quality of their products. It is clear that the IoT can provide more accurate inventory counts and forecasts than humans. This data can be used to find trends and to make manufacturing schedules more efficient.

    I read an article on Forbes (linked below) that the IoT has the ability to enhance brand reputation as well as recognition. Brands can create a transparent supply chain – when customer access technology that could show data of where their product came from and how it traveled through the supply chain.

  • March 21, 2018 at 9:54 pm


    It was incredibly interesting to think about inventory management from the perspective of small businesses. The summer after my freshman year I interned for a local accounting firm in Rhode Island and worked with many small businesses. The things that seem easy and straightforward for large businesses are often much harder for small businesses because they are not integrated into core operations. It is interesting to watch the video you linked and think about the Watson Internet of Things that allows for larger companies to use predictive analytics.

    I was thinking about what resources small businesses can utilize and I thought about the Oracle software platform NetSuite which I utilized while working for a company called Virgin Pulse. NetSuite is a provider of cloud-based financials, enterprise resource planning and omnichannel commerce software suites. The Company offers a suite of applications, including financial management, customer relationship management, e-commerce and retail management, commerce marketing automation, professional services automation and human capital management that enable companies to manage business operations in an integrated suite.

    Specifically, for inventory management, NetSuite offers small businesses features to improve efficiency such as barcode scanning, customer history, receipts printing, and delivery setup. For e-commerce supervision, the software offers the features of auto inventory update on website, gift registry, online shipping, and product catalog management. The software offers inventory management features of automated orders, customer orders, inventory transfers, and serial number assignment. It also features a variety of useful CRM and employee management capabilities. NetSuite could ultimately help small businesses keep track of their inventory and allow them to plan ahead using analysis tools.

  • March 21, 2018 at 9:17 pm

    Your post about how companies go about managing their inventories was very interesting. The video certainly shed light on the available technologies that can be used to help businesses run more efficiently than ever before. But you brought up a good point about how the companies are able to use this powerful technology. Large corporations will be able to take advantage of this information through these technologies while smaller sized companies will have a tough time supporting the costs. In a Forbes article I found, Eric Savtiz writes on the cost of “big data.” He talks about Hadoop, a platform created by web innovators such as Yahoo, Facebook, and Google, which allows for enterprises to have access to big data. Most companies cannot store all the raw data they record, and to compensate they keep only the last 4 quarters. The previously recorded data gets offloaded to an offline tape, which makes it hard to access when they company needs it. Savtiz gives the example of “when Christmas falls on a Saturday, and they need to analyze data from seven years back to understand specific patterns.” To reinstate older and large data back into active storage is both costly and very challenging. For companies to combat this problem, they can invest in the technology needed for Hadoop, which will cost them roughly $1 million as an initial investment and then another $1 million annually for maintenance. This brings me back to the third question you asked. In my opinion, small companies will struggle to be able to obtain this data and even if they are capable of doing so, will likely struggle in maintaining it. To make the jump to big data these companies would be taking on huge risk, hoping that their investment will expand their companies in the coming years. There will be some small companies that bring in enough revenue to run the technology involved with Hadoop. However for the most part, smaller companies will not have access to this platform, and will have to find another way to work with big data.

    Reference Site:

    • March 22, 2018 at 7:25 am


      Your insight on the data-keeping aspect of small businesses is also relevant to the boutique I work at in my hometown, as I wrote about below. We use a platform called Springboard Retail, which is a POS Software that larger brands such as Lily Pulitzer use in their stores. This is a flexible software in the sense that you pay for each additional “cash drawer” that you open – meaning, each additional store. This allows this software to be accessible to smaller and larger companies. We converted over to this system about 2 and a half years ago, which before that we were using an Excel-based data-keeping service. I remember when we were still using the Excel program, every night when I closed the store I would print out a report of our sales and margins that day and place it in a binder. Not the most effective record-keeping technique, just from experience. This new system was truly a change of pace in the sense that it is able to compile so much data for us at the touch of a finger. It tells us what our sales and margins were last year on each day, our top-selling items and vendors, our busiest hours on each day, our top customers, and so much more. I truly believe this system advanced our company to a place that we could not have been without it, and has allowed us to provide better inventory, awareness, and service to our customers.

  • March 21, 2018 at 5:25 pm


    The video you included in your post was fascinating and relates a lot to what we have been talking about. In my mind, using IoT is just another way to save the company time, money, and resources. The benefits of this technology will add up extremely quickly.

    As for the second question you posed, I believe it will be tougher for smaller companies to harness the power of big data due to the lack of resources. That being said, it is necessary for the smaller companies to begin to invest in sophisticated software that can grow with the business. Not only will this help the company grow and be more successful, the historical data will be very valuable in the future.

    I found a very interesting article from Forbes that I will link at the end that discusses the importance of big data. The writer, Bernard Marr, has a very strong opinion on the impact of big data. He writes, “I firmly believe that big data and its implications will affect every single business — from Fortune 500 enterprises to mom and pop companies— and change how we do business, inside and out.” As he points out in his article, every single business collects data and being able to analyze the data in a way that is helpful to the company will provide instant positive feedback. As the video in your post argued, companies need to view maintenance as an investment. In addition, they should focus on viewing big data and data analytics as a growing investment moving forward.

    Referenced article:

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