What a roller coaster these last several years have been! COVID, historic inflation, supply chain issues and fast-changing customer preferences brought on by these major shifts have fundamentally changed how we work, live, play … and shop.
We see three major factors with considerable impact for the retail industry in the coming 18 months, including:
• Geo-political instability. The ongoing war in Ukraine and rising tensions across Iran and China are having global impact. It’s disrupted the availability and cost of consumer products from raw materials to perishable products that are basic ingredients of core consumer packaged goods.
• COVID “hangover.” COVID has made the stakes higher in the race to be more efficient. The effects of labor shortages for jobs critical to the production, distribution and merchandising of core consumer products is contributing to overall cost increases and driving the need for automation and efficiencies.
• Unprecedented inflation. The last time we saw this kind of inflation was in the late ’70s and early ’80s, and it led to a nearly half-decade long decline in corporate profits. Today, some believe we will return to lower inflation soon, but with political skepticism impeding the ability to develop cohesive, long-term government policy to combat inflation, it is likely to remain for some time.
Because of these major shifts and unknowns, how we buy food has evolved and will continue to do so as retailers strive to delight the shopper. As a result, innovation in technology and other ways to make shopping more of an experience, whether in-person or digital, will have a lasting impact on the future of grocery.
AI Will Be Indispensable for Retailers to Thrive
Retailers are facing an increasingly challenging fiscal model. The success of the traditional retail model is based on high sales volumes that offset incredibly tight margins. Because of this and additional pressing factors, retailers must leverage AI technologies to successfully address supply and labor shortages and costs, as sales volumes are threatened by the rise in digital shopping options, supply and labor shortages, and elevated product and labor costs.
In the coming years, AI will be the cornerstone of the future of retail planning and execution and customer experience delivery.
IDC analysts predict that by 2025, 20% of the top 100 global retailers will drive holistic business results using distributed AI systems with integrated data across retail planning, decisions, operations and optimization. By 2026, IDC researchers expect retailers to solve the challenge of matching inventory plans to omnichannel orders, resulting in a 15% reduction in split shipments, 7% reduction in packaging and a 20% increase in customer experience.
What’s more, the proliferation of Internet of Things (IoT) devices will significantly reduce the need for human intervention in capturing signals that relate to availability, production and distribution of consumer goods and ingredients. Brands, as a result, need to leverage AI to become more efficient and personalized.
Even with newer software applications, retailers today are forced to use a disconnected combination of software tools and Excel to plan and analyze their businesses. An integrated solution is long overdue. Unlike current, disparate point solutions, integrated solutions harness common data elements into a single platform with a single unified forecast to drive a holistic, process-enhanced approach to:
• Integrate processes, reduce complexity and automate workflows.
• Remove constraints to provide greater visibility, agility and ROI across departments.
• Significantly reduce overhead costs and manual labor requirements.
Put Technology to Work in Every Part of the Value Chain
Retailers have an opportunity to overcome the difficulties of the post-COVID, inflationary times with the emergence of IoT devices, alternative information sources, and AI/ML technologies that can harness the abundance of available information into smart data-driven outcomes.
The most successful retailers have made technology their main tool for increasing business efficiency and cutting costs along the whole value chain. And visibility of the end-to-end supply chain through an integrated platform enables retailers to better predict disruptions in the flow of goods and suggest appropriate actions to mitigate the commercial impact and limit the cost impact of these disruptions. By minimizing interruptions that lead to out-of-stocks and price increases, integrated platforms help retailers maintain high levels of customer satisfaction in what is becoming an increasingly volatile and competitive market.
However, retailers must choose wisely among emerging technologies and choose solutions that can translate the information into actionable improvements to their real-world business processes rather than producing results for a more academic case study with no means of achieving tangible results.
When evaluating new AI-products and technology partners, here are a few fundamental questions to ask:
• Does the solution fit well with my organization’s strategy to tackle key decision-making points with an adequate level of insight while avoiding unnecessary complexity?
• Is this another point solution or do they apply a holistic approach to implementation and systems integration?
• Is the technology flexibility designed and adapted to specific business cases?
• Does the technology partner have a track record of timely and successful implementations?
• Are we aligned to address technology, people and processes to ensure success on all fronts?
Clearly, the stakes are high to get it right. And AI will be able to provide deeper insights to teams at a much higher frequency and granularity than ever before. However, visibility alone will not be sufficient to extract more value from AI-powered supply chain and retail planning solutions. Any significant investment in technology must be accompanied by organizational changes, business process updates and upskilling efforts. Only then will retailers realize their anticipated ROI.
From real-time pricing and AI-driven assortment to omnichannel analytics, retail has quickly moved towards a limitless, consumer-driven landscape, leaving brands with more data than they can intelligently process. Acting quickly and strategically, retailers are gaining a competitive advantage by implementing data-driven processes that are closely aligned with consumer demands and market trends rather than traditional, outmoded methods.
Prashant Agrawal is on a journey to help organizations across retail, grocery, CPG and manufacturing realize value from the mountain of data they possess. As the founder and chief executive officer of Impact Analytics, the fastest-growing AI product company, Agrawal helps organizations make data-driven decisions, automate complex workflows with proven AI-enabled solutions and improve efficiencies to add millions to their bottom line.
John Moynihan is a grocery advisor at Impact Analytics. He brings 40 years of retail strategy and technology experience, helping retailers invest in smart grocery technology to sharpen their end-to-end commercial offerings. From demand planning to category strategy and management, assortment planning and optimization, and lifecycle pricing Moynihan helps traditional grocers with the right strategies and technology to consolidate, grow and improve their market position.