Machine learning and artificial intelligence for retail supply chains

How retailers can incorporate machine learning and artificial intelligence into their supply chain: A snapshot of the recent ASCI Networking Breakfast panel event

 

By Harsha Illindala, Vice President, Solutions Advisor – APAC at JDA Software

 

I was lucky enough to host a panel at a recent ASCI breakfast on new advances in machine learning and artificial intelligence and how they are helping retailers optimise their operations and supply chain. I was joined by Michelle Grujin, Managing Director, Retail Industry Lead ANZ at Accenture and Marcy Larsen, Industry Solution Executive, Retail and CPG at Microsoft.

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While these technologies are becoming increasingly important, we first discussed some of the macro trends influencing retail customers today, what makes them different to customers from 10 or 20 years ago to frame why investing in these technologies is so important:

  1. Hyper-personalisation

 

Retailers are now expected to customise the customer experience to the segment of one. Retailers need to cluster and segment more narrowly across all retail formats.

  1. Premiumisation

There is a growing interest in premium food, clothes and other merchandise. There has been growth in health, vegan and specialised foods. Customers are also concerned with ethical sourcing and fair trade. They want to believe in the product.

  1. Convenience

Convenience is the price of admission: customers expect retailers to be convenient to deal with. They prioritise this, often over price.

  1. Mobility

The ability to shop online from a Smartphone means customers are more mobile than ever before and can purchase from anywhere.

  1. Urbanisation and population

There is a changing population mix with more customers living in urban areas. Customers will favour retailers who prioritise inclusion and diversity and demonstrate authenticity.

  1. Talent

We then went on to discuss how talent in retail is changing. According to the 2019 Retail C-Suite Viewpoint surveyconducted by JDA Software and Microsoft, talent is a top three issue with the C-suite in retail.

The workforce is varied with more part-timers and a workforce with time constraints. The gig economy is mobilising millennials and the retired workforce. Employees now have the ability to achieve genuine flexibility and hold down several different styles of job which fits in with their lifestyle and personal constraints.

For retailers the focus is now less on workforce scheduling and more about engagement with employees. There is also a huge competition for skills so retailers need to create a dynamic environment which values their skills.

Engaging employees with technology that is as advanced, if not more advanced, than what they are able to access at home is important. Employees, just like customers, expect retailers to demonstrate inclusiveness, diversity and authenticity.

  1. Provenance in supply chain

Customers care about the claims made by brands and retailers about products. Smart looking packaging and brand advertising strategies are important. Environmental and societal influences, morality and accountability are priorities for the customer.

  1. Data

The influence of data is significant. Customer trust is established when the right data is provided. When there is transparency of data between suppliers – shipping through to store – it creates a better customer experience.

  1. Influence of digital

Customers expect the physical experience to be on par with the digital experience. Technology is transforming the customer: 75% of a customer’s visits to a store are influenced by digital and 58% of sales are impacted by digital, according to the 2019 Retail C-Suite Viewpoint survey.

Digital has changed the customer journey; digital is now the ‘front of store’. The customer journey has evolved to loyalty – discovery – research – purchase – fulfillment.

We then went on to discuss which technology, such as artificial intelligence (AI) and machine learning (ML), is emerging to help retailers meet the needs of the customer in light of these macro trends.

The Tech

We then covered technology that is playing increasing important role in the supply chain for retailers and why companies should be investing in them:

Technology for personalisation

36% of the C-suite in retail expect to undertake pilots using AI in personalised product recommendations, 20% for localised pricing and 29% for personalised product assortments.

AI helps retailers meet customer expectations around product availability and fulfillment choices – in-store, pick-up and delivery. Customers expect instant gratification when it comes to fulfillment.

AI also provides a flowing, single view of inventory and allows for dynamic allocation and fulfillment, predictive replenishment and a shorter product life cycle.

Technology for provenance in supply chain

AI and ML provide real-time visibility. Traditional systems such as ERP centric reports and dashboards are too slow, alternatively AI provides real-time and direct visualisation of supply chain data with ML identifying and weeding out data discrepancies.

Blockchain is becoming an increasingly common buzzword and is something that could old the answer to many provenance related issues. With Blockchain providing a method to manage forms of exchange, entities in a supply chain can with increased confidence know where each asset has originated

Technology for the workforce

Technology is changing rapidly and affecting supply chain practices. There are several workplace changes that will become more important to how supply chain operates.

With more virtual and contingent workers, automation, increased connectivity through workplace social networks (e.g. instant messaging, communities) and more advanced communication tools (e.g. virtual meetings, webinars) will become increasingly important. Apps (e.g. personal organisers, goal setting, real-time feedback, team activities) will play a role, as will gamification (e.g. realistic training scenarios to stress test and develop supply chain strategies). Artificial Intelligence (e.g. advanced data mining) will help identify business trends and opportunities.

Challenges in adoption

We went on to discuss the major challenges facing retailers in adopting these technologies.

Some of the key observations included:

  • 55% of retailers don’t have single view of inventory
  • 78% of retailers don’t have real time view of inventory
  • 50% of retailers believe their technologies are lagging
  • Most retailers have CDTOs / CDOs and in-house AI teams, but tangible and scalable innovations have been far and few between
  • Many retailers have started off by trying to understand “what will my data show”, but need to transition to “what action needs to be taken” as a result of those insights

Is technology simplifying supply chain or adding to complexity?

We went on to question whether an increasingly complex supply chain is being simplified or further complicated by technology. We agreed that technology can minimise store effort in handling product and create flexibility in flow volumes and mechanisms.

We also discussed automation. There are increased and more affordable automation solutions in warehouses and in-store. Automation delivers productivity but also narrows variations. This means there is a greater need to manage the inventory flow to leverage the automation. Retailers need to manage coordination across inventory planning, transportation, yard, dock and warehouse operations.

A big thank you to the ASCI for inviting me along to host this excellent and insightful panel.

If you have questions about how AI and ML can improve your supply chain, you can contact me at Sriharsha.Illindala@jda.comor visit the JDA website.

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ASCI as Professional Accreditation Body

Extending an invitation to all Industry Peak Bodies in the Supply Chain

 

ASCI has positioned itself as the Professional Accreditation Body for the supply chain industry. In this capacity, it has developed a Professional Accreditation Scheme, in line with the criteria set by the Professional Standards Authority (PSA), which oversees the legislation for lawyers, accountants, etc.

Although ASCI has not yet obtained legislation for supply chain as a legislated profession, we are following the exact process in the expectation that we will one day be ready to seek formal legislation.

In doing so, the ASCI Professional Accreditation Scheme, in its current form, is the only one of its kind that is based on the PSA guidelines. To distinguish this from the offerings of other organisations, often also referred to as “Professional Bodies”, we need to understand the distinction between the various professional bodies in our industry. The term “Professional Body” is often used by Industry Peak Bodies in their reference to the fact that they serve the “profession”. They do indeed, but not as an accreditation body, rather an Industry Peak Body. They most often offer certification programs, rather than a professional accreditation scheme. Certification programs are not to be confused with a Professional Accreditation Scheme.

Here is the difference:

“Certification”, a formal process of assessing that an individual is qualified in terms of particular knowledge or skills. It requires the candidate to study a particular learning set and write an exam on this set of knowledge in order to obtain certification.

“Accreditation” which, as in the case of lawyers, accountants, engineers, etc provides independent recognition of achievements and maintenance of the exact standards required to join the community of professional supply chain professionals and practitioners.

Professionals and practitioners registered under the professional accreditation scheme, are recognised for their competence, ability, integrity, and service to the profession. It is a voluntary means of demonstrating professionalism and involves being held to account by your peers for your abilities and adherence to ethical standards.

It is in this context that ASCI has commenced discussions with several Industry Peak Bodies in the supply chain domain, with the objective to offer registration against the Professional Accreditation Scheme through these Industry Peak Bodies, to their members, making the scheme more accessible to the broader supply chain community. Peak Bodies that are interested in offering professional and practitioner registration to their members can do so by affiliation with ASCI.

If you represent a peak industry body then we want to hear from you. Contact Our National Office at professionalisation@asci.org.au to commence discussions. It is through our common passion for the sustainability of the supply chain community that we can collectively raise the bar of supply chain management in Australasia.

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Dr Pieter Nagel is Head of Professionalisation at ASCI. Contact him about collaboration or registration at professionalisation@asci.org.au

Indian regulations rain on Amazon and Walmart’s e-commerce parade

By ASCM CEO Abe Eshkenazi, CSCP, CPA, CAE

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Amazon and Walmart subsidiary Flipkart is scrambling to revamp its supply chains, vendor relationships and systems. New regulations from the world’s fastest growing economy have undermined these retailers’ business models and obstructed their sales in India’s burgeoning e-commerce sector.

Previously, foreign companies were forbidden from holding their own online inventory and shipping it directly to customers. Amazon had found a workaround in the form of local subsidiaries of firms in which it had holdings, which opponents insisted was violating the spirit of the rule. Largely due to such proxy sellers, Amazon and Walmart had controlled almost 80 percent of India’s e-commerce.

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But as of February 1, such goods are not permitted for sale by foreign companies. In addition, these firms are barred from entering into exclusive online sales agreements. A vendor’s inventory also will be considered under the control of an e-commerce marketplace if more than one-quarter of its sales are derived there.

The protectionist move follows ongoing complaints from domestic retailers over anticompetitive practices. Amazon and Walmart both requested a six-month postponement of the effective date but were denied.

“Thousands of products were pulled from Amazon.com Inc.’s India website Friday — the first direct impact from the country’s new e-commerce rules,” writes Corinne Abrams in the Wall Street Journal. The article goes on to explain that the restrictions are the latest effort by India to curb U.S. tech giants’ dominance in the country and “promote homegrown companies” as Prime Minister Narendra Modi seeks a second term.

“Both Amazon and Walmart have made big bets in India, where the e-commerce market is estimated to balloon to $72 billion in 2022,” Abrams adds. “Amazon has pledged to invest $5 billion to expand in [India], while Walmart’s takeover of India’s Flipkart for $16 billion was its biggest acquisition ever.”

Global supply chain know-how

The operations of these e-commerce giants have been thrown into disarray. As these companies, and others, navigate such severe regulatory pressure, success will hinge upon the effectiveness, responsiveness and flexibility of their supply chains.

ASCM provides the resources you need to plot your own course through the ever-shifting global marketplace. The APICS Certified Supply Chain Professional (CSCP) program enables individuals to master the fundamentals of supply chain strategy, business model design, relationship-building, risk management and much more. In particular, the CSCP learning system includes a module centered around monetary, regulatory and trade considerations; negotiation and collaboration; and international standards and compliance. Begin your journey toward this world-class certification today.

The Australasian Supply Chain Institute (ASCI) is the Premier Channel Partner for APICS and offers joint memberships with ASCI for local and ASCM for global membership for both corporates and individuals. Contact us today at http://www.asci.org.au/membership or enquiries@asci.org.au.

Top five supply chain podcasts of 2018

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Australasian Supply Chain Institute has reviewed podcasts interviews all over the globe to bring you the very best for your listening pleasure over the holiday break:

1.The Future of Work

Jacqui Canney, is EVP and Chief People Officer at Walmart and Clay Johnson, is EVP and Chief Information Officer at Walmart.

Jacqui is focused on the development, the retention and the rewarding of their 2 million employees. Clay is charged with putting ICT and HR together to create more productivity and automation. Walmart is the world’s largest employer with 5000 stores in the U.S and 10,000 globally.

Duration: 1 hour

ASCI review: An unbeatable interview on how Walmart is evolving and using tech to train and up skill their workforce; how they are using Blockchain to track food; what the future of Walmart looks like 5-10 years out. An interview just darn worth your time. 

2. ASCI Lounge

Daniel Kohut, Director, Solutions Advisor at JDA, shares his sales and operations planning expertise starting from his Australian career pathway, to the present day and the importance of professional development for supply chain experts in the midst of an era of digitisation transformation.

Duration: 20 minutes

ASCI review: So great to hear the Aussie accent and someone so passionate about the future of supply chain careers. Some good advice for professional development. 

3. Talking Logistics

Scroll straight to Episode 6: Angie Freeman, Chief Human Resources Officer, CH Robinson shares insights and ideas on the importance of recruitment and talent in the supply chain industry.

Duration: 29 mins

ASCI review: Best take on articulating the challenges in a succinct interview.

4. Supply Chain Now

Sandra MacQuillan serves as the Senior Director of Supply Chain Strategy & Transformation for Kimberly-Clark, where she leads company’s global supply chain, with responsibility for procurement, logistics, manufacturing, quality, safety, and sustainability.

Amy Gray serves as HR Director for Global Supply Chain at Kimberly-Clark. Amy has served in a variety of HR-related roles at K-C over the last 12 years, to include HR Business Partner and HR Project Leader.

Duration: 1 hour

ASCI review: Jump to 18 minutes in..the first part is just chatter. Interesting take on diversity to better represent customer profiles and global reach.

5. ASCI Lounge

Indrasen Naidoo, Director, Supply Chain System Transformation, Roy Hill (a 55 mega tonne per annum iron ore producer in Western Australia), joins us on the ASCI Lounge to reflect on Roy Hill’s roadmap for Intelligent Supply Chain for Assets, highlighting the need for leadership capacity; rethinking flows; and applying expert technology.

Duration: 20 minutes

ASCI review: Some salient points on how supply chain in Australia is stuck in traditional programs and what Roy Hill has done to move the dial. 

Enjoy your holiday podcast listening!

ASCI Lounge is Australasia’s supply chain podcast channel with over 3,500 downloads since 2016. To book an interview, or to join a panel discussion on a particular topic, email the ASCI National Office at enquiries@asci.org.au

ASCI National Office is closed from Friday 21 December however, you can purchase Guided Learning registration right up until 6 January 2019. For more information, visit: www.asci.org.au/education 

Monique Fenech is the host of the ASCI Lounge podcast channel.

 

 

 

The $100 Billion Returns Question

Billion Dollar Return QuestionBy Karin Bursa, Executive Vice President, Logility

Now that the holiday season is behind us, retailers can sleep easy, right? Well, no. Seasons are now both shorter and more frequent which means you quickly move on to the next one. However, a large and rapidly growing issue has emerged: the cost of returns. Unwanted gifts, incorrect sizes, styles and fits that didn’t match expectations, the reasons are countless. To attract and retain customers, many retailers strive to make the return process as frictionless as possible. But at what cost? The ease of returning an online purchase has turned the bedroom into the retail fitting room. Consumers now purchase multiple variations of the same product to “try on” at home and then return the rest.

Following the 2017 holiday season, several industry pundits proclaimed retailers would lose about $90 billion (yes… billion!) in returned merchandise that could not be resold (Good news for FedEx and UPS: People just opened $90 billion in unwanted gifts). Recently, another report published claiming this number reached $107 billion for 2017 ($107 Billion Lost In Returns). Regardless of the final number, we are talking about a lot of money that simply should not be “thrown away to erode margins.”

Returns can be forecasted and much of that inventory can be placed back onto store shelves or made available through ecommerce, discount locations, etc. So, if retailers know the returns are going to happen, why are the losses so high? I sat down with retail industry veteran Jim Brown to learn more.

 

Karin: Are you surprised at the high cost of returns?

Jim: Not at all. When I was in the shoe industry, we experienced a higher-than-average rate of returns that could not be sold. Today, the consumer’s mindset has evolved and applied the same logic we saw in the shoe industry, try on a wide variety before you find the right one, to the rest of their purchasing habits. Consumers today are more comfortable ordering more and returning most of that order. It is too easy to add items to an online shopping basket knowing you have the option to return the merchandise with free shipping. And, since you used a credit card, you’ll never have to pay out-of-pocket.

 

Karin: Based on your experience, what happens to this merchandise?

Jim: Basic items typically do not make up the bulk of the returned merchandise. So, if the items are re-saleable, a lot of them will move into a markdown status by the time they make their way back to the store, or into the available warehouse inventory due to selling seasons. Unfortunately, it’s not as simple as taking it from the initial customer and placing it back on the shelf. Often, there are many hands that will interact with the merchandise—tags may have been removed, packaging may be defective, etc. All of this takes time, resources and investment to re-create and ready the merchandise for resale. Time is money and each ‘touch’ depletes your margin.

 

Karin: Why are retailers not able to place the merchandise back in circulation?

Jim: Most retailers will try, or have a process that should accommodate getting the product back into the inventory. The reality is most retail supply chains are optimized to bulk move allocated or replenished goods to the stores/locations. Handling one item at a time is a very labour-intensive activity. Determining if the item is damaged, repairable, tagged, packaged appropriately, etc. all adds to this cost. If you consider the margin on a single item, the least costly option may be to not handle it all. Of course, this is dependent upon the cost and margin of the item, so you need policies in place that accommodate all types of merchandise sold. This is the same reason why reducing store-to-store transfers is so important for retailers.

 

Karin: Are certain industries more prone to this issue?

Jim: Definitely. Health and beauty is a good example because this industry is heavily regulated. Once a safety seal is broken, that item is off the market for resale. Ready-to-wear is another good example due to its specific sizing which is also prone to returns. Technology becomes obsolete quickly, and the packaging is almost impossible to return to its’ ‘factory fresh’ condition. This forces the majority of these returns to be sold at a markdown, contribute to that staggering number you mentioned earlier and result in ‘open box’ promotions and discounts.

 

Karin: What are some of the ways retailers mitigate this issue?

Jim: This has become increasingly more difficult. In the past, retailers could require return authorizations or a short return window. However, in today’s competitive environment where shoppers have more options, retailers are hesitant to put up any customer service barriers. The prevalence of social media means one bad experience can be amplified across a broad audience and impact future sales. If I know the return process will be a hassle, chances are I will shop elsewhere. The best way to mitigate returns is to get the transaction right with the customer at the point of purchase. By providing as much information about the item to them as possible, easy access to customer reviews, etc. will lessen the chance that an item will come back up front. Some retailers are experimenting with virtual dressing rooms and other innovative technology to help minimize the volume of returns.

 

The cost of returns is truly an astonishing figure; however, as Jim outlines retailers are just not set up to handle the one-off item returns in a cost-effective manner. There are ways to minimize the burden including getting the sale right from the start. Additionally, retailers need to forecast the returns as a part of their planning process and develop more cost-effective measures for handling the merchandise as it comes back. If you are able to better predict the amount of returned merchandise you are likely better equipped to collaborate with your suppliers and partners to mitigate the cost to you while still delighting your customers.

 

About the Author

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Karin Bursa, Executive Vice President, Logility

With more than 25 years of experience in the development, support and marketing of enterprise software solutions, Karin is able to provide The Voyager Blog several provoking perspectives including market-shaping events, end-user perspectives and technical reviews. She is a widely quoted source on the evolution of the supply chain, frequent author to many leading publications, and can be found speaking at many of the industry’s leading conferences.