Study: AI adoption is on the rise across the supply chain
Retailers are increasingly investing in artificial intelligence (AI) to automate operations and improve supply chain efficiency.
One in three companies claim to have incorporated AI capabilities into their supply chain management processes, and one in four is working toward that goal, according to “Strengthening the Supply Chain,” a study from Symphony RetailAI.
AI is poised to enhance every link in the supply chain, delivering faster, more reliable demand insights, unparalleled quality management capabilities, and real-time updates along the way. Retailers said AI’s greatest potential to improve supply chain management relates to quality and speed of planning insights, while nearly half of all respondents identified “demand management” as one of the top three areas for AI in the next five years.
AI could also help companies automate supply chain operations. This would be an improvement since nearly two-thirds of retail supply chain professionals struggle with disconnects between systems. The majority of surveyed retailers have confidence in their allocation and inventory planning software, but 48% rate their forecasting technology as average to very poor. While they would prefer that each supply chain component work together to enable harmonized demand flow across the organization, few retailers have established a unified process.
The lack of connected systems causes other roadblocks, as well. For example, 36% of respondents indicated that they have separate demand planning, replenishment, allocation and order management systems for store and e-commerce orders. Combined with the fact that 28% don’t manage each of their modules on the same platform, it becomes clear that disparate demand replenishment systems are a significant burden to efficiency.
Retailers feel pressure to push past barriers, and forecast more accurately. However, the pace of innovation is a significant issue, with 43% of retail supply chain professionals saying their technology can’t keep up with business demands. Meanwhile, 42% describe less-than-optimal synchronization between their inventory and channels, and nearly as many worry about fulfillment complexities, stocking inefficiencies and high product lead time.
When they do invest in needed technology, organizations are most inclined to spend on systems that increase stock availability and decrease stock holding. Meanwhile, 44% of supply chain professionals invest in new technology because their existing systems are unable to sustain new growth.
While retailers strive to keep reasonable service levels, 43% of respondents said they’re challenged by a lack of real-time visibility of all supply chain inventory. However, six in 10 supply chain professionals said their organization is actively taking steps to address this hurdle and increase inventory visibility.
The good news is a new generation of AI solutions can help over-come these challenges.
“Supply chain efficiency is more critical than ever. There’s also a constant backdrop of rising cost of goods, which cannot simply be passed on to the customer,” said Patrick Buellet, chief strategy officer, Symphony RetailAI.
“Even though retailers are challenged by the pace of innovation, winners are investing in new technologies, particularly artificial intelligence and machine learning,” he added. “These can boost productivity, and greatly improve the accuracy of information for better decisions throughout the supply chain.”
Transportation Capacity Crunch Challenges Retailers in Run-up to Holidays
Retailers are gearing up for the busiest time of the year – the holiday season – but despite efforts to move inventory quickly and get it into the hands of consumers, the current transportation capacity crunch is taking a toll.
Over the last quarter, we’ve seen many big players – from grocers and home improvement retailers to department stores – report higher transportation costs which are severely eating into profit, in some cases cleaving full percentage points off already pressured margins.
With U.S. retailers increasing inventory from Asia to cater to growing consumer demand and to avoid any potential tariff impact, larger volumes of goods are pushing up freight costs. Furthermore, the challenges in the U.S. trucking market – due to the ongoing talent shortage and the introduction of the ELD regulation – means that transportation costs are being pushed up too. Some retailers are paying up to ten times more than the regular rate on some of their routes.
With truck manufacturers struggling to keep pace with demand, and talent and regulations constraining the supply, retailers continue to face challenges in securing capacity even at a premium directly impacting both their top and bottom line. It’s forcing them to find alternative modes of transportation or face the reality of paying higher prices to move inventory from port to stores (or the burden of passing on costs to consumers).
Many retailers that once ordered stock for the holiday season three to four months in advance began planning much earlier in the year. The risk of doing so is that inventory is sitting around for longer in distribution centers and warehouses – an expensive luxury.
Furthermore, some retailers will find themselves in a position where they do not have the “right product” that’s going to fly off the shelves during the busy period due to early ordering, leaving customers disappointed and retailers with an abundance of stock that will need to be heavily discounted to get shifted.
The lack of agility caused by the crunch is also likely to impact the delivery of goods to consumers. With shoppers increasingly buying goods online, particularly around the holidays, many retailers will be unable to deliver on their shipping promises or record on-time performance risking customer experience and trust.
Retailers are rethinking their operational strategies to overcome the challenging market conditions and improve competitiveness by taking more ownership of the process where they can:
1. Continue optimizing shipments: Coordinating transportation routing with merchants and distribution center processing schedules to optimize shipment prioritization. Transporting products based on business needs relies on creating visibility into distribution center requirements and merchant product mix.
2. Bring more freight operations in-house: Building some internal capacity reduces the risk of outsourced services. This is difficult for many smaller retailers, so we expect to see new collaboration in this space to help drive efficiency.
3. Leveraging new modes of transportation: More retailers are turning towards intermodal shipments as an alternative, which has an impact on the product sourcing calendar and can challenge flexibility.
As the market conditions look to evolve, savvy retailers will find new ways to cut the ties that bind their operational agility and in turn regain their competitiveness.
Jill Standish, is senior managing director and global retail lead, Accenture. Frank Layo, is managing director, Kurt Salmon, part of Accenture Strategy.
Gap joins seasonal-hiring retailers
Gap Inc. is upping its workforce for the holidays.
The retailer plans to hire 65,000 seasonal associates for its Gap, Banana Republic, Old Navy and Athleta stores, as well as call centers and distribution centers for the 2018 holiday season. Gap will host a hiring event on Oct. 6 in the U.S. and on Oct. 13 in Canada.
Last week, Target announced it will up its holiday hiring over last year by 20%, with plans to hire some 120,000 seasonal workers. Challenger, Grey & Christmas described Target’s plan as the “largest holiday plan by a traditional retailer” since it began tracking these type of announcements in 2012.
Challenger has tracked over 330,000 holiday hiring announcements so far this year.