Discover How a Leading Tech Retailer Dropped Its Inventory Strategy and Embraced AI
Inventory control represents a huge challenge for any retailer. In fact, inaccurate inventory is the single biggest cause of poor customer experience, according to a new survey by Blue Yonder.
Canada’s largest tech retailer got ahead of these problems. By doing so, it transformed its business.
How did the company overcome its inventory issues? By moving away from its longstanding approach and embracing artificial intelligence (AI).
In the survey, retail executives said AI could improve inventory and order forecasting most. The case of this tech retailer, The Source, shows why.
Manual Analysis No Longer Cuts It
The Source produces more than $400 million in annual revenue across more than 300 retail locations and online. But the company faces challenges in carrying so many products. The Source sells low-frequency purchases such as TVs, fast-moving convenience items such as chargers and everything in between.
How do you forecast demand for such a wide range of products? For years, The Source relied on manual analysis and sales history. But that approach is “limiting,” one Source executive noted. Especially when “you’re trying to drive incremental revenue and win in a volatile marketplace.”
The company knew it needed a data-driven way to forecast demand. Sales history matters, yes. But so does a range of external factors that shape consumer behaviors. And AI and machine learning (ML) enable better decision-making based on those complex, interconnected factors.
The Source needed AI/ML to translate huge data volumes into actionable insights.
Big Gains From AI
Would The Source’s new AI-powered solution work? That was the pressing question.
“I’ll admit the level of comfort among the team was initially low,” The Source executive recalled. “We were extremely nervous about the volumes we were sending to some stores.”
But the results put those concerns to rest. The Source saw major improvements, including:
- Much higher sell-through rates: “For example, our key promotional offer on Black Friday experienced a 98% sell-through,” The Source executive said. “We sent every unit to the right location in the right quantity. That’s unheard of in our industry.”
- Nearly full stock: “The day our Black Friday ad ended, our in-stock rate across all departments was 95%. In previous years, it had been as low as 82%. That means we’re not leaving sales on the table as we head into December.”
- Higher customer satisfaction: With AI, The Source can “dynamically replenish inventory and deliver high availability, even during peak sales periods.” That means “high levels of shopper satisfaction.”
- Reduced inventory investments: The Source didn’t simply see more sales and a better customer experience. The company also slashed costs. Over two years, The Source reduced its inventory investment by 19%.
Make the Promise, Keep the Promise
The Source’s big wins should not surprise us, Srinivas Pujari said. Pujari is Blue Yonder’s corporate vice president for product management commerce and data science. Before joining Blue Yonder, he spent two decades overseeing the customer experience for prominent retailers.
Retail comes down to two fundamental concepts, Pujari said: Make a promise to your customer, and then keep that promise.
He explained, “AI and ML are most important to retailers where (1) they allow you to make better promises to the customer — smart forecasts based on historical data and a wealth of real-time information — and (2) they enable you to monitor your system, detect anomalies and take corrective actions to ensure you meet your promises.”
The Source is one of many leading retailers reaping the benefits of AI. The payoff? A better customer experience and bottom-line gains.
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