From Investment to Payoff: Exploring the CostImplications of AI Adoption in InventoryManagement Across the Different Phases

Abstract: Background and problem discussion: In recent years, there has been increasing recognition ofArtificial intelligence (AI) and its benefits in various sectors, including inventory management,which is a significant component of company expenses. However, adopting AI in inventorymanagement also comes with challenges and expenses before businesses can fully reap itsbenefits. Although extensive research has been carried out in the field of inventory managementin areas like the benefits of AI adoption, the road map on AI implementation, and the generalizedchallenges of AI, a research gap is identified. No single study has addressed the financial costassociated with different phases of AI adoption that companies need to evaluate before adoptingAI and the potential benefits associated with adopting AI within their inventory management.Hence, this thesis addressed this research gap. Research Purpose: The purpose of this study is to explore how the adoption of artificialintelligence (AI) can affect organizational costs associated with inventory management at eachphase of adoption, offering insights into both the cost implications and the benefits thatcompanies will realize. This will equip businesses with the necessary knowledge to makeinformed decisions, allowing them to strategically implement AI to maximize efficiency, cost-effectiveness, and the overall benefits of their inventory management processes Method; These thesis philosophical assumptions are guided by a relativist ontology and socialconstructionist epistemology. The abductive approach was used where Qualitative data wascollected through semi-structured interviews where we studied the perceptions of managers whowere a part of AI adoption in inventory management. Conclusion: it becomes evident from our study that organizations face significant costs in thepre-adoption phase, these costs are associated with readiness for AI adoption, which involvesevaluating needs, commitment, and hiring experts. As they transition into the adoption phase,companies also face costs associated with enhancing the workforce skills to effectively utilizeAI. Also, there are costs associated with Hardware equipment and training AI models. In thePost-adoption phase, companies start to experience cost-related benefits, these benefits includeautomation of repetitive tasks and complex data handling, improved forecasting, reduction inhuman error, and potentially reduced employee costs, leading to overall cost savings andenhanced business operations.