Kristjan Vilosius is the CEO of Katana Cloud Inventory.
Small businesses today have a unique opportunity to close the gap with large companies. Artificial intelligence (AI) and machine learning (ML), once tools reserved for big players, are now accessible to small businesses. These technologies help SMEs grow and stay competitive in a rapidly changing market.
According to the American Chamber of CommerceAlmost all small businesses use at least one type of technology platform, and 81% plan to continue expanding their use of technology. Indeed, small businesses are actually in a great position to make the most of AI. Without legacy systems that often slow down large businesses, they can adapt more quickly.
So, if you’re a small business owner considering using AI, a smart way to start is to identify small, specific challenges, such as reducing response times to customer inquiries or improving forecasting inventory, and testing solutions that target these areas first. A focused approach like this keeps things manageable while still showing the most immediate value.
How is AI changing manufacturing for small businesses?
More and more manufacturers are increasing their AI budgets, seeing first-hand how it improves efficiency. A report of Microsoft and MIT Technology Review shows that 64% of manufacturers are currently exploring AI, and 35% of them are already finding use cases in their operations.
For small manufacturers, even something as simple as adding Internet of Things (IoT) devices to monitor equipment can result in measurable savings by reducing downtime. If you’re just starting out, try an inexpensive sensor that detects wear patterns; this small step could help avoid costly outages.
Instead of following planned maintenance schedules, AI allows you to detect issues before they become real problems. An IoT device on a manufacturing line, for example, can detect subtle changes like slight vibrations or temperature changes that signal potential wear and tear on the equipment, prompting action only when necessary. The return on investment here is clear: even a slight improvement in maintenance planning can reduce machine breakdowns by 10-20%, saving significantly on repairs and lost productivity.
AI in Retail: Driving Customer Engagement and Managing Inventory
Retail is another industry where AI is having a big impact. It helps retailers track orders, track inventory, and communicate better with customers. The Chamber of Commerce report showed that nearly 40% of small businesses are using generative AI, almost double from last year. Getting started with an AI-powered chatbot for customer service can be a great first step. Automatically processing routine requests can significantly reduce response times for simple requests, allowing your staff to focus on more complex customer needs.
AI tools also offer insights into customer behavior, allowing you to provide better recommendations and refine your marketing.
Consider using AI to personalize promotions. By analyzing customer behavior data, you can segment audiences based on actions like frequent purchases or high cart abandonment rates, then target them with personalized offers. McKinsey Research shows that this personalized approach can increase conversion rates by 10-15%, a significant benefit for small retailers.
Make inventory and data management simpler
Managing data, especially unstructured data, has always been a challenge for small businesses. With inventory, customer information, and supply chain data to keep track of, it’s easy to feel overwhelmed. AI can help make things simpler by predicting inventory needs based on past sales, meaning you’re less likely to run out of stock or end up with a surplus. If space is limited, this can be a game changer. Using AI tools connected to point-of-sale systems to automatically adjust stock levels could reduce overstocks by around 20% on average.
The Chamber of Commerce report shows that 77% of small businesses are considering adopting AI for these types of tasks. It’s not about cutting costs; it’s about freeing up time and resources to facilitate growth. Streamlining replenishments with an AI-based system that alerts you when stock is low can help ensure faster replenishments without the need for manual checks, keeping operations smoother and more efficient.
Using AI for strategic decisions
While AI can make everyday tasks easier, the real value lies in using it for overall strategy. AI offers insights that can guide smarter choices about products, prices and markets. For small businesses, starting by forecasting demand is often a good thing. A recent Statistical report found that retailers using artificial intelligence and machine learning technologies performed better than their competitors, demonstrating that these tools can drive better results in a competitive market.
Data-driven planning helps stabilize cash flow and maximize inventory turnover.
AI can also help predict demand for seasonal products, guide investment decisions and make growth more sustainable. Additionally, monitoring competitor prices and tracking market trends in real time allows you to adjust prices in response to demand without having to constantly monitor the competition.
Collaborate with the right AI solutions
Finding the right technology partners is essential. Not all AI solutions are suitable for every business. It is therefore essential to choose tools that evolve according to your needs. 2023 data from McKinsey shows that AI adoption in retail is growing 25% annually, a clear indication that businesses want tools that are adaptable and scalable.
For small businesses, using AI-powered SaaS tools with flexible, low-cost subscriptions can be a great way to get started. I would suggest aligning with technology partners who have a strong track record in AI. You may want Shopify and HubSpot to integrate AI into your products so you can reap the benefits without the need for heavy customization. When it comes to choosing partners, finding one with clear, scalable pricing models can help you avoid unexpected costs as your use of AI increases. But it’s a complex decision unique to each small business.
If you’re new to AI, start with tools that provide immediate feedback, like customer service automation or inventory management, and then move to more complex applications, like analyzing sales trends. By making smart technology choices today, you can prepare your business for sustainable growth.
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