If there is one graph that summarises the sentiment around for Supply Chain as far as AI is concerned, it’s this!
The searches for this term are through the roof and growing many fold over!
The AI wave has created massive inroads into how we write and build software applications. Coding before and after AI is undergoing a massive change. Something similar is absolutely on cards for the world that moves the atoms (Supply Chain & Last Mile) !
While we don’t yet have teleportation that might spring products from one place to another like magic, Supply Chain with the advent of AI agents + the evolving consumer landscape especially unified commerce protocol created by Google will massively change Supply Chain Ops!
The Quick Commerce Example
Supply Chain and fullfilment side of problems have largely been the unsexy side of businesses with the technology and ambitions being limited on this side. Most things just about worked and while developments have constantly been at play, they often were a secondary priority to customer experience side of things.
This changed with advent of Quick Commerce especially in India where we have a $50 B worth of equity created in just 4 years by primarily 2 existing firms (Zomato & Swiggy) and 1 upstart (Zepto)!
The 10mins delivery story exposed a major issue with how Supply Chains are run! The existing fragile and uncoordinated way of doing things, long lead times, slow updates to data and not evolving planning to reflect the changing customer needs etc meant
Issues
- Products often go OOS aka Out of Stock. D2C brands spend money on traffic but lose out on sales if inventory
- On the other hand, we might end with situations where the product has stock lying within the warehouses and it’s not generating appropriate throughput before stock expires.
- Besides these there are plenty of problems around right pricing! right key words to target and also locations to prioritise the inventory.
The right amount of inventory at the right place has a massive impact on customer perception on availability, average order value and for the business on the overall cashflow and efficiency of business.
The DMART Example
If there are two metric to track the quality of a retail business it’s inventory days and average margin on products! A business like DMART aka Avenue Super Markets runs with an operating margin of 8% and holds inventory for ~30 ish days.
Any D2C brand looking to benchmark themselves should compare their numbers against these. Of course, brands with higher margins can hold inventory for longer but for most atoms business, OPM will likely hover between 8-12%.
The only way to improve the efficiency of the business is to streamline ops and execution to bring the holding inventory days down through :
Approach
- Firms needs to constantly evaluate and iterate on Assortment
- SKUs should either bring in margins or customers
- Hero SKUs bring customers and can operate at low margins
- High margin SKUs bring in the cash
- Enhanced Demand Planning
- The right assortment means nothing if the appropriate stock is not available
- Demand Planning thats automated and incorporates advanced demand signals e.g. Sports Matches, Regional Festivals & Events and so on !
- Dynamic Pricing
- This lever while not very well received on the consumer side of things e.g. Instacart :
- It’s an important lever when managing throughput on goods for the supply chain side
- It’s still tricky but most firms either under or over price their products
- Workflow Optimisation
- Besides improving the point solutions mentioned above
- The key to a good and agile supply chain is embracing the AI agents
A well integrated data layer + AI agents to automate most planning and purchase calls + humans reviewing key line items is the way to go!
This promise has been repeatedly made but not been executed to the best of ability in most places except the very best in business like Amazon & Walmart
Offer
We offer a FDE based approach to help you diagnose and prioritise the key problems and then help implement the same as well along with the team.
- Outcome based pricing
- White Glove Implementation Experience
- Combine the best of strategy, AI and tactical execution!
Not working and looking to embrace this evolution is not a poor business but no business!