Leveraging Artificial Intelligence to Manage the Effects of Global Supply Chain Disruptions

MANILA, PHILIPPINES — As the Philippines continue to experience high inflation, recording 8.6% in February 2023, Filipinos are expected to adjust their budgets and prioritize essential goods and services. While this poses an opportunity for grocery retailers to increase sales, the ongoing global supply chain disruptions have also made it difficult to keep inventory high and prices low

According to the World Economic Forum, the invasion of Ukraine is a primary cause of much of the energy and food price inflation in many countries and is fueling a global food crisis. Extreme weather also continues to disrupt the global supply chain by impacting major shipping routes and crop yields. In the Philippines, storms in the 2021-22 crop year caused sugar shortages, resulting in skyrocketing price increases from Php 54.5 to Php 89.5 per kilo for refined sugar.

As inflation is expected to remain high in 2023, economists anticipate a recession in major economies, which will certainly affect the developing world. It is also likely this will have a significant impact on grocery retailers. Fortunately, machine learning and AI (artificial intelligence) technology,  like the technology used by global supply chain leader RELEX Solutions, is able to provide insights to diminish disruptions to business operations. 

Automated demand forecasting reduces operational costs 

Amid rising costs of goods and services, Filipinos are becoming more price sensitive, seeking sales and markdowns and assessing which shops or channels offer the most competitive prices. Following recent gas price hikes, many online delivery platforms increased their fees resulting in  changes to customer shopping patterns, who are now opting for in-store shopping. With more foot traffic expected in groceries and supermarkets, keeping a high inventory at a low price becomes essential. 

In order to adapt quickly to these and other changes, retailers should leverage automation and artificial intelligence-driven insights to cut down operational costs and lower the cost of goods and services. AI helps predict the impact of demand drivers such as promotions, prices, product displays, and weather data to accurately forecast demand and optimize replenishment. For retail operations, this means that they can better allocate their manpower and avoid losses. 

AI allows more efficient inventory management for omnichannel 

While retailers are expected to have an increase in foot traffic, online channels will continue to be prevalent due to the convenience and savings they offer through digital promotions. According to a report by Meta and Bain & Company, the Filipino digital consumer population is the second largest in Southeast Asia at 69 million and is expected to continue growing its gross merchandise value by 20% by 2027. 

With the increased demand for omnichannel, retailers should focus on removing silos within their e-commerce and brick-and-mortar businesses and start managing both as a single, unified business. This transformation is a laborious task that requires accurate, real-time reporting to adequately manage customer expectations, making it essential for retail brands to integrate solutions powered by AI. The right tools ensure fulfillment of online orders from stores, customer backorders, and online orders are correctly accounted for in forecasting and inventory planning, even as products are redirected from one fulfillment center to another.

AI enables a better customer experience

When retailers are out of stock, they’re losing sales and possibly customers. The efficiency of a retailer’s replenishment operation is critical to maintaining customer satisfaction and business profitability. However, a recent study by RELEX Solutions found that close to 50% of retailers don’t know how much stock they have in each store, revealing a gap in the strategic approach to accurate and effective store ordering among these companies.

To stay on the consumers’ radar, retailers need to prioritize efficient replenishment systems that address customer needs without burdening resources. With consumers being able to shop anytime and anywhere, AI and machine learning technology help brands keep the right amount of inventory, forecast changes in demand, and adjust replenishment orders, driving improvements to service, sales, and customer satisfaction. 

“The evolution of artificial intelligence in retail is very timely due to the need for businesses to save up money as current economic conditions push customers and partners to minimize expenses,” said Kristie Davison, Vice President for APAC at RELEX Solutions. “AI helps retailers eliminate excess costs and manage their cash flow for better business sustainability.”

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