How Artificial Intelligence Is Transforming the Retail Supply Chain

Artificial intelligence is making a huge difference for retail supply chain optimization, as there’s a greater need for fast delivery to shops and end customers, and an increasing focus on tight inventory control. AI helps retailers understand exactly how their supply chain is operating, make improvements throughout and eliminate waste and overhead. In this article, we’ll explore some of the trends in AI for the retail supply chain.

AI Delivers Significant Benefits for Retail Businesses

Artificial intelligence can deliver improvements to large parts of the international supply chain. For retail businesses worldwide, Statista¹ reports that:

• 49 percent of respondents expected supply chain AI to reduce costs.
• 44 percent believed AI would drive increased productivity.
• 43 percent stated AI will increase revenue.
• 40 percent saw more improved retail decision-making as a key benefit.

This will translate into a tangible impact on the bottom line. A report by Capgemini estimates that retailers could save as much as $340 billion by taking AI to scale across the value chain.⁵ AI can optimize inventory control as well. One AI provider reports that AI inventory management implementation resulted in a 32 percent reduction in costs across the operation.⁶

AI has numerous use cases and applications across the retail supply chain.² AI and machine learning delivers autonomy, modeling, forecasting and optimizations that can reduce supply chain delays, optimize demand and capacity planning and significantly reduce costs.

AI Forecasting and Intelligence

Artificial intelligence and machine learning provide powerful tools for retailers to predict and analyze trends and datasets:

• Forecasting and modelling trends across multiple retail products and locations using predictive and prescriptive analytics
• Extracting information and business intelligence from large supply chain datasets to support more informed retail decision-making
• Linking with other systems to balance potential demand, supply and capacity changes for products and inventory
• Optimizing the throughput of orders, suppliers and manufacturing to meet demand

AI Automation and Routing

Route optimization, automation and tracking makes transporting retail goods through the supply chain faster and easier:

• Automation of cars, trucks, ships, delivery robots and more to allow for effective, self-guided, robotic operations
• Linking with GPS tracking to understand progress through the supply chain and optimize routing for maximum speed and efficiency
• Planning operations and movement throughout the supply chain

AI Supply Chain Networks

Integrating artificial intelligence across the supply chain network delivers benefits for all parties:

• Estimating internal and external costs and expenses at every stage of the supply chain
• Reducing freight costs for third-party logistics businesses and their clients
• Improving the speed, accuracy and quality of supplier deliveries
• Providing better upstream and downstream planning for raw material producers, manufacturers, logistics companies and other supply chain stakeholders
• Managing and minimizing the risk for suppliers through understanding environmental factors and other variables
• Taking corrective action during unexpected and disruptive events

What Are Retailers Doing to Realize These Benefits?

Spending on AI in Retail Supply Chains Is Increasing Dramatically

According to MarketsandMarkets, spending on AI in the retail supply chain is likely to increase to $10 billion a year by 2025, an annual growth rate of over 45 percent.³ More than half of retailers are getting budget approval for major projects implementing AI and machine learning across their operations and supply chains.

Pressure From Competitors Is Fueling Supply Chain AI Investment

Although retailers will see significant internal improvements and optimizations from introducing AI, much of the investment in machine learning is driven by external pressures. RSR reports that almost six in ten retailers cite faster delivery times from competitors as a major business challenge.⁴ With so much competition and choice, the speed of delivery is a major differentiating factor for winning business, and that’s an area where AI can excel.

Around four in ten retailers currently offer delivery the same day that an order is placed. More than two-thirds of retailers are expected to offer same-day delivery within the next three years.

How to Best Leverage AI for the Retail Supply Chain

Here’s how supply chain managers and the retail sector can make the most of this rapidly developing technology.

AI Helps You Exceed Retail Customer Expectations

As customers demand faster delivery and high-quality products, AI can help you optimize speed and accuracy throughout the supply chain. When you’re competing with big retailers, AI can help you streamline your logistics and fulfillment options, so they’re truly focused on the customer.

Successfully Implementing AI Relies on Engaged People Using Accurate Data

Introducing AI into the supply chain can be tough. If you want to meet the challenge, you need high-quality supply chain datasets and properly trained people across all supply chain organizations. We believe the extended retail supply chain still needs a little work for complete AI optimization and recommend focusing on data collection, together with training and incentivizing all stakeholders to use AI as intended.

Get the Most Benefit From AI Improvements for Automation and Planning

Retailers can get the most benefits from AI by focusing improvements in two areas:

• Automation of manual, lower-value tasks like responding to queries, automating invoices, order management and tracking, GPS location and similar administrative functionality
• Planning across many key areas, including demand, supply and capacity management, route optimization, extracting business intelligence from data, continual supply chain optimization and similar tasks

AI is the future for effectively managing the retail supply chain, and can drive lower costs, faster deliveries and enhanced customer satisfaction.

Learn More

The Blume Digital Platform is the industry-leading, real-time network that connects and uplifts the entire supply chain ecosystem. Beyond bringing efficiencies and automating repetitive tasks, Blume Digital Platform uses AI and machine learning to streamline and optimize supply chain networks. Our software combines AI with data from multiple sources to drive predictive capabilities in demand, real-time visibility into inventory, collaboration or co-innovation across trading partners, precision around availability or real-time status of orders, smart contracts and managing by exception—executed and enabled through our solutions to drive growth and value for customers.

References:

1. Statista - Benefits of artificial intelligence (AI) for retail business worldwide in 2018 - https://www.statista.com/statistics/805303/world-ai-benefits-for-retailers/
2. Forbes - 5 Examples Of How AI Can Be Used Across The Supply Chain - https://www.forbes.com/sites/blakemorgan/2018/09/17/5-examples-of-how-ai-can-be-used-across-the-supply-chain
3. MarketsAndMarkets - Artificial Intelligence in Supply Chain Market worth 10,110.2 million USD by 2025 - https://www.marketsandmarkets.com/PressReleases/ai-in-supply-chain.asp
4. RSR - Supply Chain Management 2018: In Service Of The Customer - https://www.rsrresearch.com/research/supply-chain-management-2018-in-service-of-the-customer
5. Capgemini - Building the retail superstar - How unleashing AI across functions offers a multi-billion dollar opportunity - https://www.capgemini.com/gb-en/research/building-the-retail-superstar-how-unleashing-ai-across-functions-offers-a-multi-billion-dollar-opportunity/
6. Artificial Intelligence for Inventory Management - https://medium.com/@RemiStudios/artificial-intelligence-for-inventory-management-c8a9c0c2a694