Leveraging AI to Improve the Supply Chain Efficiency for Grocery Retailers
Food companies are increasingly prioritizing supply chain transparency and efficiency. IBM expanded its food supply chain network, IBM Food Trust, with Carrefour rolling out the solution to all of its brands worldwide by 2022 and Topco Associates, Wakefern, and suppliers Beefchain, Dennick Fruit Source, Scoular and Smithfield joining the blockchain traceability program.
Half of U.S. grocery retailers are turning to artificial intelligence to improve supply chain efficiency. Nearly two thirds of the 50 retailers surveyed, most of which were grocery executives and managers, struggle with a disconnect between systems, and 48% rate their forecasting technology as average to very poor. While they would prefer that each supply chain component work together, few retailers have established a unified process.
The challenge for grocery retailers is that they lack connected systems, with consumers indicating they have separate demand planning, replenishment, allocation and order management systems for store and e-commerce orders. Combined with the fact that a small portion of consumers indicating they don’t manage each of their modules on the same platform, disparate demand replenishment systems appear to be a significant burden to efficiency.
Retailers are being pressured to push past barriers and produce more accurate demand forecasts. The pace of innovation is a significant issue, with 43% of grocery retailers saying their technology can’t keep up with business demands. Forty-two percent describe less-than-optimal synchronization between their inventory and channels, and nearly as many worry about fulfilment complexities, stocking inefficiencies and high product lead time.
When they do invest in needed technology, grocery stores are most inclined to spend on supply chain systems that increase stock availability and decrease stock holding, as 44% invest in new technology because their existing systems are unable to sustain new growth.
In an effort to keep reasonable service levels, food retailers often tend to overstock, but then over course-correct and understock instead. While 43% say they’re challenged by lack of real-time visibility of overall supply chain inventory, six in 10 say they are actively taking steps to address this hurdle and increase inventory visibility.
AI and machine learning hold a lot of potential to improve supply chain efficiency, and forward-looking retailers are already investing in these technologies. Grocery retailers say AI’s greatest potential to improve supply chain management relates to quality and speed of planning insights, while nearly 50% identified demand management as one of the top three areas for AI in the next five years.
One in three food retailers incorporate AI capabilities into their supply chain management processes, and one in four are working toward that goal. Artificial intelligence has the possibility to provide faster, more reliable demand insights, quality management capabilities and real-time updates along the way, the study noted.