The Need for AI in the Retail Supply Chain
Efficient supply chains have become essential to meeting consumers’ high expectations with e-commerce giants such as Amazon raising the bar for delivery speeds and consumer experience. Retail has always been a key player in the move toward a more modern supply chain process. Even before the current COVID-19 pandemic, retailers were looking for ways to separate themselves from competitors, and AI-based planning software offers accurate, insightful, and cost-effective solutions to ensure organizations stay ahead of the curve.
Black swan events, like COVID-19, bring unprecedented events with severe consequences that require agile business reactions. COVID-19 has accelerated the need for retailers to both streamline costs and operations while fulfilling consumer demands. The unprecedented swings in the market from the pandemic has left many retailers vulnerable while highlighting the importance of having an agile supply chain. AI enables retailers to calculate and interpret major risks and plan for the unexpected.
Repercussions of the COVID-19 pandemic encourage consumers to shop online and allow for e-commerce organizations to make a stand in the industry while some giants are struggling to keep up. A more focused organization allows smooth logistical operations with timely deliveries that help gain and maintain customer loyalty.
Well managed warehouse space, delivery expectations, and consumer behavior are three major challenges facing the retail industry–all challenges that AI can help to mitigate.
Demand Planning & Forecasting for Retail
The disruption caused by the COVID-19 pandemic has significantly impacted retailers that did not have a large e-commerce presence. The closing of major brick-and-mortar stores and inability to sell products has resulted in stock piling up, causing an increase in cost to storing merchandise.
While many warehouses experienced a widespread disruption in the flow of goods, AI adoption has enabled retailers to react quickly to redistribute and balance inventories across warehouses, this is called Inventory Optimization. If stores were seeing reduced operations due to temporary closures, AI-enabled solutions can advise re-routing options to ship stock to other locations. Using AI, retailers can adapt the route of their goods without creating bottlenecks in the supply chain. They can intelligently re-distribute stock across open warehouses, based on known and predicted demand.
When governments began rolling out nationwide lockdowns, consumers moved towards online shopping, bringing the challenge to maintain timely deliveries. As supply chains became choked; limited routes, increased safety requirements, along with an increased amount of online orders resulted in retailers working harder than ever before to deliver direct to consumers on time. Even the mighty Amazon saw delays and disruptions in their delivery schedules.
Since the start of the pandemic, many organizations have been transparent and have been advising consumer to expect delays in deliveries. Although, even before the spike due to COVID-19, online shoppers valued speed as a top shopping priority, commonly abandoning shopping carts if the estimated delivery time was too long.
AI enables retailer to spot potential bottlenecks in their supply chain, calculate the fastest alternative routes, and avoid exploitative surcharges in time of disruption. By combining full oversight of inventory and predicted demand, stock can be optimally distributed across warehouses and stores. This enables retailers the flexibility to efficiently fulfill orders, and allow consumers to receive goods quickly.
Before the COVID-19 outbreak, consumers would have happily browsed aisles, picking up and examining or trying on items in person, but these types of behaviors have been replaced with one-way aisles and the assumptions that most items you touch must be bought. This has further pushed shopping trends towards e-commerce.
AI can identify changing behaviors in these fluctuating environments, using demand planning software and predictive tools, such as Vanguard Predictive Planning™. These advanced technologies analyze large and complicated data sets. Utilizing AI generated recommendations, retailers can extract valuable information out of large sets of data faster and more intelligently than humans. They can anticipate increases and decreases in demand, and adjust stock levels, resourcing and logistics providers accordingly.
The COVID-19 pandemic’s upheaval of industry norms has highlighted the need for risk planning. With the accelerated move towards e-commerce, along with increasingly high consumer expectations, it’s time for retailers to invest in technologies that will allow agile responses and provide a competitive edge.
Vanguard Predictive Planning™ leverages AI across multiple features including forecast method selection, demand predictions and pattern detection, and automation of tasks.
To learn more about our AI-enabled planning solutions, request a demo.