Leverage AI and Machine Learning to Establish Inventory Correlations and Patterns
The COVID-19 pandemic has caused a significant shift in demand patterns, resulting in standard merchandise planning approaches offering as much help as reading tea leaves to anticipate inventory needs. At this point, the initial shock to supply chains has subsided and the focus is more on recovery.
The retail industry has weathered wars, economic recessions, natural disasters, and shifts in shopping behaviors, but this disruption is unlike any other we have experienced. Customers are engaging in buying behavior that has upended the traditional sales models that generally examined week-to-week sales shifts over multiple years. This unprecedented event affects demand and inventory and consumer shopping behaviors, so tools that were sufficient prior to the pandemic have now become obsolete.
Get the low-down on the secrets retailers and manufacturers need to know about inventory optimization.
Identify Opportunities with AI and Machine Learning
However, retailers shouldn’t fear that they have to start from scratch. Advances in data collection, sales reporting, and technology are available to make sense of the massive amount of information residing in data warehouses. The ability to access and process that data to identify opportunities is a challenge that retailers need to address to position themselves for success.
While most business intelligence (BI) tools can extract the data, retailers will struggle to establish correlations and patterns. As such, planning tools can be enhanced with artificial intelligence (AI) and machine learning (ML) to help. These are not simple bolt-on tools, implementation requires planning.
To take advantage of advanced planning tools leveraging AI and ML, retailers need to position their organization for a successful implementation and evaluate what is already in place. Retailers need to:
- Data needs to be cleansed and consolidated
- Merchandise hierarchy needs to be evaluated and attributes should be attached in a manner to facilitate reporting
- Customers’ information history must be captured and aligned to sales data
Evaluate the Process of Merchandising
- The merchandise planning processes and procedures should be evaluated and optimized. Opportunities can be identified in the current state to streamline decision making and improve accuracy
- If the organization is utilizing merchandise planning tools that are more than ten years old or still using Excel, an evaluation is needed to determine if they are capable of integration with bolt-on solutions as-is or require an upgrade/new solution
Build a Technology Roadmap
- With cash being a premium, retailers should ensure they have planned for the future by building a technology roadmap
- Identify the total cost of ownership (TCO) and expected return on investment (ROI) to prioritize actions
- Select the right AI/ML tool to fit your current tools and cost model
Improve ROI by Targeting Inventory Investments More Profitably
These steps can be implemented in a short period of time with the right approach and metrics. The right planning tools improve ROI by targeting inventory investments more profitably. Resulting in less cash outlay, lower handling and storage costs for zombie merchandise. Let’s discuss how we can position your organization for success with advanced retail merchandise planning.