Artificial intelligence technology will be crucial to enable retailers to optimise their supply chains, minimising their costs and ensuring they have the right levels of stock, by analysing vast quantities of data to automate thousands of product replenishment decisions. Uwe Weiss, CEO at Blue Yonder, looks at how intelligent analysis and automated replenishment processes can help reduce costs and maximise profit.
According to the latest research from Kantar Worldpanel, low cost supermarket chains Lidl and Aldi have both increased their market shares to an all-time high, growing their sales by 18.9% and 17.2% respectively. To remain competitive and fend off these new entrants into the market, the traditional ‘big four’ British supermarkets must reduce their costs and improve the customer experience; optimising the supply chain will play a critical role in achieving this.
The UK retail market is facing a period of almost unprecedented pressure. In addition to the rising popularity of discount retailers such as Lidl and Aldi cutting into the traditional incumbents’ profit margins, Brexit, interest rate rises, and the resulting depreciation of the pound has put immense strain on retailers’ supply chains. All these factors mean that it is more important than ever that retailers optimise their supply chains, to reduce product wastage and ensure that they always have the right stock on the shelves, ultimately improving the customer experience.
The rise of Aldi and Lidl has proved to be one of the most disruptive forces in British retail. This year’s research from Kantar Worldpanel confirms how the market has changed, with Aldi overtaking The Co-operative and Lidl supplanting Waitrose. Innovative technology and the optimisation of the supply chain will be critical to ensuring that the UK’s big, traditional retailers remain profitable and arrest the decline in their market share.
One of the most significant costs on a retailer’s balance sheet is wasted stock, and products that they cannot sell. Every item of food that is wasted is a potential sale lost. Alternatively, if supermarkets cannot guarantee that they will always have the right products on the shelves, they may lose customers to their rivals. Either way, retailers cannot afford to have a less than optimal supply chain, and it is here that where artificial intelligence (AI) and automation can help retailers gain a competitive edge.
“Retailers generate vast quantities of data from across their business, through their online channels and in-store points of sale. On the one hand we can combine this with existing data such as past sales patterns, customer footfall and product pricing, and external information, such as public holidays, to help a retailer to make informed replenishment decisions. But on the other hand, when this data is integrated with advanced AI technology, stock replenishment is much more accurate and is optimised to customer demand. Forecasting and replenishment solutions can automate stock level decisions, across thousands of product categories and hundreds of stores. Based on the business strategy, retailers can manage their stock with greater agility and reduce their costs, helping them to maintain their position in the market and grow their sales.”
By Uwe Weiss