- Technology is the driving force behind robust supply-chain operations in the retail industry.
- AI, machine learning, and robotics have streamlined and improved tasks in fulfillment centers.
- Experts told Insider how companies could implement agile digital infrastructures in their processes.
- This article is part of “Build IT,” a series about digital tech and innovation trends that are disrupting industries.
Digital technology has dramatically improved the retail-customer experience over the past few years. Using e-commerce websites and apps, you can order pretty much any item — clothes, electronics, you name it — and get it delivered to your door with lightning speed.
This is possible because of a robust supply chain, and digital innovation is the driving force behind its success. In fact, retailers are deploying a diverse variety of technologies to improve the efficiency, agility, and resilience of every part of their supply chains.
Robots are helping fulfillment-center workers sort through large volumes of products, artificial intelligence is predicting the most energy-efficient delivery routes, and modern data-collection and analysis methods are helping retail stores optimize stock management.
Retail-technology experts say that without these innovations, supply chains would struggle to function in the face of fast-changing customer expectations and turbulent economic times.
Increasing efficiencies in the retail supply chain is necessary
Paul Maguire, the head of retail delivery at the digital consultancy Endava, told Insider that embarking on a digital transformation was critical to better-connected and more resilient retail supply chains. Digital technology will “close gaps in supply-chain visibility” and help retailers “manage future unforeseen surges in product demand,” he said.
He added that new retail trends such as social commerce, where online merchants sell products and services via social-media sites including TikTok and Instagram, were “reshaping demand and fulfillment dynamics” across the retail industry.
“This shift means that products can suddenly become very popular, creating a surge of consumers rushing to get their hands on sought-after items, exacerbating any supply-chain instability,” he said.
By adopting agile digital infrastructure, Maguire said, retailers can “prevent bottlenecks in delivering shoppers’ wish lists” and “deliver on the latest trends.” For example, Maguire recommended retailers invest in a centralized transportation and logistics control tower. This would essentially serve as a dashboard of data and automation tools to help retailers “react to challenges and prevent disruption” throughout the entire supply chain.
Leveling up with robotics, AI, and machine learning
Technologies such as robotic process automation, artificial intelligence, and machine learning are streamlining the workload of retail-supply-chain workers, Maguire said. Amazon, for example, has developed and deployed a robot that can perform simple tasks in its fulfillment centers.
The e-commerce giant says that the robot “streamlines the fulfillment process by moving individual products before they get packaged” and even brands it as a “major technological advancement” for its staff.
Many Amazon employees are concerned that this technology will eventually take over their jobs. But Maguire’s view is that it’ll help workers “diversify their skills, work faster, and evolve with the market changes,” he said, adding: “Technology will merely act as a support pillar, enhancing human capabilities, rather than replacing them.”
These innovations will “continue to bolster and streamline the retail supply chain as they become even more sophisticated,” Maguire said. Use cases for AI and machine learning include predicting product demand and optimizing inventory. This is possible with the analysis of factors such as past sales, promotions, economic indicators, and seasonality, he added.
Retail firms also use AI and machine learning to streamline the way they manage stock. Maguire said these innovations have helped retailers “automatically adjust reorder points and quantities based on real-time data, preventing overstock or understock situations.”
These technologies even allow retailers to set product prices based on rapid market changes, Maguire added. Doing so can help them increase profits, improve competitive advantage, and prevent overstock.
Tech is key to addressing supply-chain challenges
In addition to navigating fast-changing retail trends and customer-purchasing behaviors, the retail supply chain has been heavily influenced by “unprecedented challenges” in recent years such as the COVID-19 pandemic, the war in Ukraine, and rising inflation.
“These disruptions have been coupled with a significant shortage of labor, leaving many logistics providers lacking the resources to facilitate warehouse operations and deliveries,” John Perry, the managing director at the supply-chain and logistics consultancy SCALA Consulting, said.
To survive, Perry said that the retail supply chain must take steps to become more agile and flexible. One way to do this is by leveraging robotics and other automations to develop “resilient systems that can withstand challenges,” he explained.
Citing a survey from SCALA, he said many companies were investing in these technologies to “make their supply chains more efficient and flexible.” In the survey, 35% of respondents said they had invested between about $1.2 million and $6 million, while an impressive 28% said they’d invested more than that.
“Of those already utilizing the technology, many have already felt a substantial impact,” Perry said.
The most common benefits of using robotics and automation are greater productivity, better ability to meet customer demand, and cost savings.
Naji El-Arifi, the head of innovation at e-commerce consultancy Wunderman Thompson Commerce & Technology, said that AI was a useful tool for retailers wanting to cut costs and boost efficiencies in their supply chains.
For example, the British furniture retailer DFS uses this technology to help its delivery drivers quickly determine the most efficient delivery routes.
“This has meant drivers can make more drop-offs, all while using as little fuel as possible,” El-Arifi said.
Tracking stock with big data
Another challenge many retailers face is tracking large volumes of products stored in their warehouses. This can lead to issues such as overstocking and product wastage, said Samuel Mueller, the CEO and cofounder of Scandit, a tech company that provides software for smart data capture.
“Too much stock is stored in back-of-house environments, to the extent that it can’t be optimized, and workers take what they see first, rather than what might expire first, taking grocery as an example,” he said.
However, by collecting stockroom data via smartphones and analyzing it with computer software, retailers can overcome these issues and ultimately make better decisions.
“Digital transformation through the use of AI as well as by capturing and accessing the right data via computer vision can overcome such challenges and enable more accurate forecasting,” Mueller said.
A data-driven tech strategy can also help retailers appeal to sustainability-conscious consumers. For instance, many brands are using digital passports for collecting and sharing information illustrating a product’s life span and environmental impact. This data can often be accessed by scanning a QR code on product tags, allowing customers to check whether an item is eco-friendly.
“For retailers, this enables them to monitor stock levels still left in the market, enhance their sustainability credentials, and get a slice of the pie, rather than leaving this ‘forgotten’ market to third-party marketplaces,” Mueller said.
How retailers can get the most out of supply-chain tech
Applying digital technology to traditional supply chains is a daunting prospect for many retailers, but retail experts said a few strategic moves could ease the process.
For retailers looking to invest in robotics and automation, Perry’s advice is to analyze the processes in their supply chains and set quantifiable objectives. This helps them determine the areas that need digitization and “guide the implementation process that, in some cases, may happen over several years,” he said.
As retailers adopt new technologies, employee training will also be crucial.
“Robotics and automation are not something employees should fear, so engaging them in the entire process will build trust and encourage them to use the systems,” Perry said.
Maguire said companies should “gain visibility across their supply-chain networks and shopping platforms” as they bolster tech initiatives. This, he said, involves “using cutting-edge technologies to build a holistic view of their operations, monitor the evolving landscape, and identify areas for continuous improvement.”