The retail supply chain is undergoing a major transformation, driven by the rise of e-commerce and the increasing complexity of global supply chains. In Gartner's 2023 Top Supply Chain Technology Trends report, "actionable AI" was named the No. 1 trend. This reflects the growing recognition among retailers that artificial intelligence is essential for modernizing and optimizing the supply chain.

AI can be used to optimize every aspect of the retail supply chain, from demand planning to inventory management to transportation and logistics. By using AI to automate tasks, improve visibility, and make better decisions, retailers can reduce costs, improve customer service, and build resilience against disruptions.

This article will explore how retailers are using AI to modernize their supply chains and achieve end-to-end optimization.

Supply Chain Digital Transformation as a Competitive Advantage

Retailers grappling with lower gross margins and lower operating margins in this inflationary economy are seeking every possible efficiency to maximize margins and stay competitive. Since most retail businesses still rely on legacy, manual methods to monitor and operate supply chains, retailers that leverage AI to optimize supply chains will gain significant differentiation. The biggest retail brands are busy transforming legacy supply chain operations by launching intelligent, automated processes. They're taking control of their own destinies by deploying AI to track assets and monitor their locations in real time, optimize routes for faster last-mile deliveries, plan the workforce in warehouses, and more.

Staying on Top of Fluctuating Customer Demand

Forecasting retail consumer demand has never been more challenging. If a retailer doesn't have the product when demand spikes or the product is delivered late, not only does the revenue vanish but also the customer experience and satisfaction suffer. Retail supply chain leaders are deploying AI tools to prevent stock-outs, high carrying costs, other waste and inefficiencies while keeping pace with unpredictable external factors and predicting trends and patterns. McKinsey's 2022 supply chain survey revealed that demand planning was the top priority for digitization among global leaders, with eight out of 10 intending to or already are leveraging AI for planning. They use AI to synthesize actionable insights from enormous amounts of supply chain data, from weather and perishable items to historical and transaction data, external market data, sanctions data, and promotions.

Achieving Demand-Supply Balance With AI

Whether selling excess inventory or struggling in a supply-constrained environment, a lack of visibility into inventory data will lead to customer experience failures. Retail supply chain leaders are adjusting their inventory management strategies in 2023 to achieve demand-supply balance, striving to optimize inventory without negatively impacting customer service, while also generating supply chain cost savings. Supply chain executives are leveraging actionable insights powered by AI to increase visibility into inventories and reduce nonmoving inventory, inventory holding costs, fulfillment costs, and transit times. Retailers that use manual processes will continue to experience expensive spoilage and out-of-stock scenarios, leading to dented profit margins and customer frustration. Automated, data-driven inventory management is essential for making the retail supply chain more agile and responsive to inevitable disruptions.

Retail Supply Chain Endgame is Agility and Resilience

Retail brands are now generating and capturing more data than ever before, but many still lack the tools to process this vast data trove into actionable insights. AI tools not only help optimize components like inventory management or demand planning, but also provide a consolidated view of the insights that matter, powering intelligent decision making that drives overarching business objectives. Moreover, technology is also enabling retailers to identify anomalies early so that they can take action to avoid disruptions and bolster supply chain resilience.

In Summary

For today's dynamic retail landscape, AI-powered supply chains are essential for retailers to remain competitive. AI optimizes inventory management and demand forecasting, provides invaluable insights for strategic decision making, and enhances customer experiences by streamlining operations and staying ahead of market trends. Retailers that embrace AI gain a critical edge, while those that rely on legacy methods risk falling behind. AI is the compass guiding retail brands toward their endgame of supply chain agility and resilience. So, whether you're a retail executive seeking smarter solutions or a technology enthusiast looking to stay at the forefront of innovation, the message is clear: AI is the future of retail supply chains, and the future is now.

Vrinda Khurjekar is the senior director, Americas business at Searce, a cloud computing solutions and technology services provider globally that specializes in cloud, AI and analytics.