To automate inventory management in Google Sheets, users can set up a workflow using Zapier that integrates with their existing spreadsheet and Google Forms account. The process involves creating a new form to update inventory, setting up a trigger to send responses from the form to the spreadsheet, and then configuring an action to update the spreadsheet row with the correct stock quantity. This automation allows for efficient management of inventory levels without requiring manual updates, making it easier to track and manage products in real-time.