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Inventory management

Inventory management

In an inventory management use case, small language models (SLMs) and large language models (LLMs) are deployed to assist in tracking, organizing, and forecasting inventory needs. Efficient management of inventory impacts both operational costs and customer satisfaction, as it ensures products are available when needed and reduces overstock or stockouts. This comparison will show how SLMs perform faster and more efficiently in this use case compared to LLMs, with a focus on latency, resource usage, and accuracy.


Use Case: Real-Time Inventory Management in a Retail Chain


Scenario

A retail chain uses AI-powered models to manage and optimize inventory levels across multiple locations. The system needs to process real-time data on stock levels, sales patterns, and reorder cycles to make decisions on replenishment, stock allocation, and warehouse management.


Key Metrics for Comparison:

  • Latency: Time taken by the model to process and provide a recommendation for inventory restocking.

  • Memory Usage: The RAM required to analyze stock data and generate recommendations.

  • Throughput: Number of inventory updates processed per second.

  • Forecasting Accuracy: How accurately the model predicts restocking needs, minimizing stockouts and overstocking.

  • Resource Cost: The computational resources required to run the model effectively (CPU/GPU).

  • Energy Efficiency: Power consumed during inventory data processing and recommendation generation.


Metric

  • Latency

  • Memory Usage (RAM)

  • Throughput

  • Forecasting Accuracy

  • Resource Cost

  • Energy Consumption


Small Language Model (SLM)

  • 50 ms

  • 400 MB

  • 1,000 updates/sec

  • 87%

  • Low (CPU-only)

  • Low


Large Language Model (LLM)

  • 800 ms

  • 8 GB

  • 150 updates/sec

  • 94%

  • High (GPU-based)

  • High


Technical Insights

  1. Latency and Throughput:

  • SLM: With a latency of 50 ms, the SLM can rapidly process inventory updates, which is critical in high-volume retail environments where real-time decisions are needed. It supports a high throughput of 1,000 updates per second, meaning it can handle multiple stores’ inventory data simultaneously.

  • LLM: The LLM, on the other hand, has a higher latency of 800 ms and processes only 150 updates per second. This slower performance could result in delayed restocking decisions, impacting the ability to meet demand during peak shopping periods or sales events.

  1. Memory Usage and Resource Cost:

  • The SLM consumes 400 MB of RAM, making it ideal for deployment on edge devices or on-premise servers without requiring extensive hardware. This is especially useful for retailers with many locations, where deploying a lightweight model at each site reduces infrastructure costs.

  • The LLM uses 8 GB of RAM, necessitating cloud-based GPU resources for real-time processing. This is not only expensive but can also introduce network latency, especially in remote locations, further slowing down the response time in inventory management systems.

  1. Forecasting Accuracy:

  • The LLM has a slight edge in forecasting accuracy at 94%, meaning it is slightly better at predicting future inventory needs and avoiding both overstock and stockout scenarios. However, the SLM’s 87% accuracy is still effective for most real-time applications, and its speed and efficiency can make up for the marginal difference in accuracy.

  • Retail chains can use the SLM’s predictions combined with business rules or past data to enhance decision-making without sacrificing too much precision.

  1. Energy Efficiency:

  • The SLM is significantly more energy-efficient, consuming far less power to operate due to its smaller size and lower computational demands. This is an important factor for companies looking to reduce their operational costs and minimize the environmental impact of their AI systems.

  • The LLM, on the other hand, requires GPU acceleration and uses more energy, resulting in higher operating costs, especially when processing large-scale inventory updates across multiple stores or regions.


Business Insights

  1. Cost Efficiency:

  • For a retail chain or small business, deploying an SLM provides a clear cost advantage. With its minimal hardware requirements, an SLM can be run on low-cost edge devices or basic server setups, allowing real-time inventory management without incurring high cloud computing or GPU costs.

  • In contrast, LLMs require substantial investment in cloud infrastructure or high-end computing hardware, increasing the total cost of ownership. For smaller businesses or those with many locations, this might not be a viable option unless precision forecasting is a priority.

  1. Real-Time Performance:

  • Inventory management systems must be responsive, especially for large retailers with dynamic inventory levels and fast-moving products. The SLM’s latency of 50 ms ensures that inventory levels are updated in near real-time, facilitating fast restocking decisions, optimized warehousing, and reduced downtime for products that are out of stock.

  • The LLM’s slower response of 800 ms may not be sufficient in fast-paced retail environments where immediate restocking decisions are critical. This can lead to delays in replenishment and could negatively impact customer satisfaction.

  1. Scalability:

  • The SLM’s lightweight architecture makes it ideal for scaling across multiple locations. Retailers can deploy the SLM to track real-time stock levels at each store without the need for constant internet connectivity or expensive cloud infrastructure. This allows for localized decision-making and faster responses.

  • LLMs, due to their resource-intensive nature, are more challenging to scale effectively across a large retail network. The increased cloud dependency and higher bandwidth usage can slow down the system, especially when handling large data volumes or multiple concurrent updates.

  1. Energy Efficiency and Sustainability:

  • The SLM’s lower energy consumption makes it a sustainable solution for businesses looking to minimize their environmental footprint. Companies can operate energy-efficient AI systems while managing their inventory in real-time, making it an attractive choice for businesses committed to sustainability goals.

  • On the other hand, the LLM’s higher energy demands lead to increased operational costs, especially when deployed across large-scale retail networks. This could be a deciding factor for businesses with a focus on eco-friendly operations.

  1. Accuracy vs. Speed:

  • While the LLM offers higher accuracy at 94%, the SLM’s 87% accuracy is sufficient for most retail environments, particularly when the goal is to minimize stockouts and overstock situations without compromising speed. The SLM’s ability to process more updates per second allows for dynamic inventory management, ensuring that stock levels are always up-to-date.

  • In situations where real-time decision-making is more important than absolute accuracy, the SLM is the better choice. Retailers can use historical data to fine-tune the SLM’s predictions if needed.


Benchmarking Example

A retail chain with 500 stores needs to update inventory levels for 100,000 items every hour across its network. The system must process stock levels, predict demand, and trigger restocking based on real-time data.


  • SLM:

    • Latency: 50 ms per update

    • Total time for 100,000 updates: 5 seconds

    • Memory usage: 400 MB

    • Cost: Low (on-premise, CPU-based)

    • Throughput: 1,000 updates per second


  • LLM:

    • Latency: 800 ms per update

    • Total time for 100,000 updates: 80 seconds

    • Memory usage: 8 GB

    • Cost: High (cloud-based, GPU)

    • Throughput: 150 updates per second


Conclusion

For inventory management, small language models (SLMs) clearly outperform large language models (LLMs) in terms of efficiency, speed, and scalability, making them an ideal choice for businesses seeking real-time inventory optimization without incurring high infrastructure or energy costs.


  • Speed and Efficiency: With a 50 ms response time and the ability to handle 1,000 updates per second, SLMs enable real-time inventory management that supports fast decision-making in dynamic retail environments. This reduces stockouts and overstocking and improves customer satisfaction.

  • Cost Savings: SLMs require fewer computational resources, leading to lower operational costs. This makes them ideal for businesses with multiple locations or small businesses with limited budgets.

  • Scalability: The lightweight nature of SLMs allows them to be easily deployed across a wide range of locations without the need for cloud dependency or expensive hardware.

  • Energy Efficiency: For businesses looking to reduce their carbon footprint and improve sustainability, SLMs offer a low-energy solution while still delivering high performance in inventory management.


In contrast, LLMs, while offering higher accuracy, come with increased latency, higher memory requirements, and significant resource costs, making them better suited for specialized use cases where precision is critical, but less optimal for real-time, large-scale deployment.


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