Advancements in AI and data science are enabling industry innovators to mitigate the bullwhip effect inherent in supply chain operations. While there are several cutting-edge product focused vendors, the integration challenge requires a combination of in-house and external (domain) expertise.
Two critical areas where artificial intelligence (AI) is making a big impact include demand sensing and retail operations. The Internet-of-Things (IoT), specifically RFID, is a key enabler in optimizing retail operations and providing a critical feedback loop to upstream supply chain activities.
Predicting consumer demand accurately has been an ongoing challenge for the best of brands and retailers. We live in an environment where a single TikTok video can create a viral trend within 48 hours, color trends can be influenced quickly by street artists, and a new carbon-plated running shoe can capture the fancy of the marathon runner community after a single event. Consumers make and change their purchase behavior at the speed of the internet, so it’s critical for brands and retailers to be able to assess demand at the aggregate business unit, category, and individual SKU level.
The challenge of sensing demand for design, merchandising, development, sourcing and supply chain teams is being overcome by various AI technologies. Machine learning (ML) and computer vision-based platforms, for instance, deploy real-time big data capabilities to detect subtle shifts in consumer intent and integrate these signals with demand and supply planning systems. Industry leaders are increasing revenue by 5%–10% annually, while improving gross margins by 1%–2% and reducing inventory carrying costs by 5%–7% during the first 2–3 years of deploying this sensing capability.
RFID technology has also shifted the playing field by dramatically increasing the efficiency of retail staff, reducing in-store inventory by increasing store revenues by 2%–3%, expanding gross margins by up to 50 bps, and reducing overall idle inventory. Wholesale operations are seeing chargeback reductions of 10%–20%, and upstream benefits include DC efficiencies, logistics network cost reductions and lower manufacturing costs through better QA on the factory floor.
These capabilities require an ongoing focus on data quality, taxonomy, ontology and data stewardship. The combination of legacy and cloud databases, mixture of data types, and ingestion of streaming and batch data creates a challenge for infrastructure and deployment teams. Efforts around product 360, customer 360, vendor 360 and other foundational data elements typically lag meeting the needs of deployment teams. Having an external partner steeped in data management to co-lead this effort can accelerate progress greatly.
Another critical driving factor for success is humanizing the entire AI journey to accelerate user adoption of AI. The ability of AI platforms to provide a confidence score, along with the output, and describe the impact of feature engineering to enable users to align to the reasoning criteria, can significantly help improve decision-making. But the journey of AI adoption involves rapid learning cycles, an amalgamation of disruptive and evolutionary thinking, talent with deep and broad expertise, and leadership teams who commit to building a high trust level with their teams. In this scenario, an external partner who has expertise across data & digital engineering, cloud analytics, and application of AI technologies in retail/supply chain contexts can go a long way in improving ROI and speed of deployment.
Jasmeet Sraw, Senior Growth Partner, Course5 Intelligence
Jasmeet Sraw is a seasoned executive with vast experience working with Fortune 1000 enterprises in Retail & Consumer Goods. He has spent more than a decade helping clients leverage Analytics, Technology, and Consulting to accelerate digital transformation. He has worked with IBM as part of their Retail Center of Competence and other boutique, analytics consulting firms.
Sanjay Mehra, Industry Advisor – Retail, Course5 Intelligence
Sanjay Mehra is an advisor at Course5 Intelligence and a global strategy, business development and operations leader with extensive experience heading growth and transformation-oriented businesses. He has held leadership roles at Nike, Gap, Wolverine Worldwide, Reliance and Weight Watchers. Sanjay’s focus for the last 10 years has been on all aspects of digital transformation including visioning, strategy, tech development, advanced analytics, product management, transition management and portfolio management.
