How Retailers Are Grappling with Supply Chain Disruption
Few economic issues have persisted throughout the pandemic with the intensity of supply chain disruption. But how is the issue affecting retailers as we head into the third full year of the pandemic, which first disrupted global business in spring 2020?
I checked in with Troy Prothero, senior vice president, product management, supply chain solutions, at Symphony RetailAI to understand how retailers are grappling with supply chain disruption and how AI can help.
You surveyed retailers about the state of supply chain operations. How are retailers feeling about their readiness to deal with supply chain disruption?
The survey, “Role of AI/ML in Supply Chain and Demand Forecasting,” asked retail executives to evaluate their supply chain performance over the past two years and indicate areas where they intend to focus improvement efforts. As new threats loom and other economic factors create supply chain unpredictability, retailers need to be able to handle unexpected disruptions — and they’re finding they can no longer cope using historical, human-constrained supply chain capabilities.
We also found that many retailers are not well prepared to deal with this level of continual change and disruption, as 87% of retail executives think their company’s supply chain performance either lags the competition (22%) or is only on par (65%).
New economic factors and other global obstacles underscore the importance of AI in the supply chain, as current top-of-mind supply chain issues include many that can only be meaningfully mitigated with the application of data science. The survey found that nearly nine out of 10 retailers (88%) say they have a significant opportunity to improve in demand forecasting, and the same percentage want to do better contingency supply source planning.
What are the factors driving supply chain management difficulty?
Retailers understand AI’s potential within the supply chain but have not defined a clear path to move forward. The large majority (87%) of retail executives surveyed say they have not yet taken meaningful steps to embrace AI, and 39% indicated they are unsure how to apply AI to real-world scenarios.
We also found that 92% of retailers feel that their inability to integrate data from multiple sources prevents them from successfully pursuing AI solutions. Other roadblocks include poor data quality (79%) and a lack of confidence in AI to make good recommendations (31%).
However, even with these perceived roadblocks, retail executives are aware of the risks of not using AI technologies. Nearly a quarter (22%) of respondents are concerned about falling behind the competition due to a lack of an AI-based strategy.
How is AI helping retailers manage the supply chain?
The most successful supply chains are those that have achieved full visibility through significant transformation, either because of redefined processes, new supply chain roles, or specific technologies. If full visibility is not achieved, retailers will be unable to recover from unforgiving shoppers and aggressive competition, leading to lost profits and market share.
Even before the pandemic, complexities in the supply chain, changes in consumer behavior, and shifting market dynamics made relying solely on historical data ineffective. AI-driven models for demand forecasting factor in future data, including calendar events and promotional plans. This results in timely, actionable projections that enable retailers to effectively meet shopper demand and quickly make any necessary changes.
What’s more, full supply chain visibility can only be attained once silos are eliminated. As mentioned, many retailers face challenges seeing where their inventory is at every step of the supply chain. Omnichannel has only added to this complexity. A single hiccup in the supply chain can cause a ripple effect, and retailers must be able to anticipate, understand, and mitigate these dynamics. Therefore, it’s critical to have inventory visibility with real-time updates, along with the agility to respond to and bounce back from challenges.
What are the business benefits of a better managed supply chain?
AI-based technology and master data management enable retailers to access inventory availability across the supply chain. In turn, this allows retailers to confidently predict changes in demand and respond rapidly, no matter how seemingly unexpected the change is.
Specifically, our AI-based technology has led retailers to achieve up to a 35% reduction in inventory, 40% improvement in productivity, and 80% reduction in out-of-stock items. The capabilities help retailers not only better serve their customers but also improve profitability by having the right items in the right place at the right time.