Sales volume forecasting, storage cost optimization, anticipating friction moments… artificial intelligence (AI) can intervene at virtually every level of your supply chain, and therefore improve your company’s profitability. What if we told you that we had the solution to reach your full commercial potential?
Accompanied by our new partners — Arthur, Simon, Thierry and Lionel from Troople — we reveal in this article the key elements to, thanks to AI, translate your data into valid commercial solutions. How? By gathering the most valuable data and using visualization techniques, predictive models and statistical analyses.
Step 0: Prerequisites
To fully leverage the benefits of artificial intelligence in your inventory management, it’s important to ensure your business is ready to harness its full potential. Here are the essential foundations:
- A powerful ERP (Enterprise Resource Planning): Your ERP is the conductor of your operations, coordinating each department for optimal efficiency. With a robust ERP, your company has a solid foundation to maximize the benefits of logistics automation.
- An accurate data collection system: Your decisions depend on the accuracy of your data. An accurate and complete data collection system, capable of providing real-time information, is the foundation for proactive management of your inventory.
- An integrated management of your logistics: Logistics automation goes beyond inventory management. It requires a global vision of your supply chain, from procurement to distribution, in order to understand the interactions at each stage.
- A visualization and analysis system: Once your data is centralized, the next step is to visualize and analyze it in a clear and concise manner. Powerful tools such as Power BI, Tableau, etc. offer this capability.
If you put these building blocks together, you’re ready for AI-driven logistics automation. The next step is prediction. Using advanced models and machine learning algorithms, you can turn your data into predictive insights, enabling you to make informed decisions for the future.
Step 1: Demand Forecasting
“How can we imagine predicting the stock buffers to be provisioned in the warehouses without knowing future demand or without knowing the restocking time of the points of sale?” Arthur emphasizes.
Indeed, demand forecasting is the starting point for being able to optimize your stock management.
1.1 Cost factors that can be avoided
- Storage Cost: Keeping a product in stock rather than selling it immediately is a financial loss for any retailer.
- Excess Inventory: Maintaining excessive inventory levels can lead to unnecessary costs. “It also presents significant logistical challenges, especially for perishable goods,” says Arthur.
- Lack of Inventory: Failing to respond quickly to demand, due to stockouts for example, can result in lost sales opportunities.
1.2 Prediction model
As you will have understood, the key to the equation is to have the best possible estimate of your request. If you have already set up the prerequisites for this analysis, you are ready to move on to this step.
Time Series Analysis is a powerful method for predicting future demand. These models allow us to identify upward and downward trends based on sales cycles, seasonality, etc. Arthur explains: “There is a view of the future that is projected through these analyses, but there is also a view of understanding the business at the present moment.”
Time series also allow you to go a step further by establishing correlation links between your products. Take the example of a shoe seller: the latter might want to know the interactions existing between the sales volumes of leather boots and waterproofing sprays. This approach aims not only to optimize stock levels, but also to guide promotions, improve the layout in physical stores, and refine the recommendations on its e-commerce site.
These prediction models are inherently an advantage in a Make-to-Stock (MTS) approach and just as interesting in the case of a Make-to-Order (MTO) approach.
Step 2: Optimizing inventory management
Once future demand has been assessed, inventory adjustment can be considered, but its success depends on a precise understanding of the time needed to move products from point A to point B. Minimizing storage time therefore relies on precise knowledge of delivery times, in addition to future demand. “At this stage, it may be relevant to consider a link to your supplier’s ERP in order to have a total vision of your supply chain,” Arthur emphasizes.
By having clear visibility into travel times, your business can not only save on inventory costs, but also ensure products are available when needed, maximizing operational efficiency.
Step 3: Identifying bottlenecks
Absent worker, broken machine, late delivery, defective batch or even worse: operational inefficiency (batch A depends on batch B and batch B takes longer to arrive than batch A. Batch A is stored even though it is ready…)… the daily life of a retailer is rarely without surprises, and can quickly have an impact on the profitability of their business. Being able to anticipate potential flaws in their streamline and react quickly and optimally therefore represents a major challenge for any retailer.
Let’s take the example of our shoe seller. The latter sends a truck to his supplier to stock up on goods. At the time of loading, it appears that three pallets of products are missing. What to do? Immobilize the truck and the driver while they find these last pallets? Complete the load with other products not initially planned? Leave with a truck that is not using its full capacity? Troople can answer all these questions thanks to data.
“These decision-making processes, which seek among several scenarios the one that will offer you the best profitability, can be optimized thanks to a branch of modeling related to Markovian processes. We ensure that your merchandise, at any stage, goes in the direction that maximizes the chances that things will go better at the next stage. We want to minimize safety margins while ensuring that each stock unit is in sufficient quantity in the right place at the right time,” Arthur explains.
Automate with artificial intelligence
If you are a retailer, you know that optimizing the supply chain and inventory management is a major challenge: What stock should I have in my physical store or available to my e-shop? How do I manage returns? Should I rely on seasonality? Ignoring these questions could lead to increasingly high logistics costs, and thus impact your profitability… leading to no longer being competitive against competitors who have already understood the importance of this change.
In collaboration with the teams at Troople, we offer consulting services — via data science techniques — to companies that wish to adopt this new paradigm linked to artificial intelligence. Our common approach — combining digital and AI — is results-oriented, offering a complete solution to optimize supply chain management according to your needs. Here are the steps of this process:
- Understanding the need: Deep understanding of your business needs is at the heart of our shared methodology. Based on the ultimate goal of predicting sales, our partners analyze how to best use available data to minimize logistics challenges and maximize revenue.
- Pre-study: Recognizing the diversity of logistics software, structures and processes specific to each company, Troople and our experts begin a deep pre-study phase. This step involves a precise understanding of the systems in place, whether internalized or outsourced, based on testimonials and close collaboration with stakeholders. The purpose of this second phase is to develop a clear roadmap for the future.
- “Proof of Concept”: Our partnership goes beyond theoretical promises by providing specific recommendations and quantifying the expected return on investment. Through concrete examples and measurable figures, our partners at Troople demonstrate for example how concrete improvements can be achieved. DJM digital experts provide the additional layer for an innovative digital strategy. This is therefore a concrete but limited implementation of AI technologies in your supply chain used to validate the proposals made in pre-study and to align before the implementation phase.
Implementation: The implementation phase brings the recommendations and results proven during the Proof of Concept to life. Troople and DJM digital guide your company through the implementation of the recommended changes, ensuring a smooth transition to optimized logistics processes. This phase ensures that measurable benefits translate into significant and sustainable supply chain improvement.
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