Automation could boost revenue growth 10% each year: survey
- Retail and consumer products supply chain and operations executives think automation could boost revenue growth by 10% each year, according to a new report from IBM and the National Retail Federation (NRF).
- Of the 1,900 supply chain executives at retailers and consumer products companies around the world surveyed by the IBM Institute for Business Value, 80% expect to be using automation by 2021.
- IBM considers the highest growth areas for automation in retail to be supply chain planning and in-store operations. Currently, 49% of retail respondents are piloting or using automation in their supply chain planning, and 42% are doing so for in-store operations.
Automation can break down what are so often referred to within the supply chain as "silos" — separate data streams that could inform one another but currently have no way of interacting. Retailers have a clear incentive to adopt technological solutions that would join together all of this data — for example e-commerce sales shipping destinations and in-store inventory — but those who have used automation to bridge these gaps are still in the minority.
At NRF's "Retail's Big Show" in New York City, retailers that have seen the benefit of adopting automation were on display.
Michael Relich, COO of Lucky Brand, for one, recently adopted an artificial intelligence-backed merchandising and fulfillment platform called Celect, which has allowed the company to localize product assortment in each store.
"The holy grail is having store-specific assortments. Everyone talks about it. No one has really been able to do it," Relich said during a presentation. Leaning on automation for merchandising and fulfillment has helped Lucky reduce inventory overall, fulfill 40% of e-commerce orders from stores and even direct e-commerce fulfillment based on store inventory so that orders ship out from stores that see less foot traffic.
Jeanette Barlow, vice president of product management for Watson Supply Chain at IBM, told Supply Chain Dive automation can also solve another problem in the air at Retail's Big Show: the overwhelming expense of true omnichannel fulfillment.
When it comes to serving every customer the way they want to be served, retailers "not only needed to be able to do that from an order management orchestration standpoint; they needed to have more intelligence around how to do the fulfillment — where they source the order from across their network so they could do so profitably," Barlow said.
IBM Watson's newest product, Barlow explained, was born out of customer requests to have more assurance that omnichannel could indeed turn revenue into profit. It uses machine-learning and predictive models to find the best location in a retailer's network from which to fulfill an order at the lowest cost while still delivering on customer expectations. IBM is also introducing third-party logistics provider (3PL) data into the mix so that retailers can choose the lowest cost carrier by shipment.
"Companies that aren’t experimenting with this capability risk falling behind and need to move quickly if they hope to remain competitive," according to the report.
To get started incorporating automation in retail supply chains, the IBM report suggests thinking big by taking into account the entire fulfillment system, but starting small at first — running all efforts to automate through a central office.
"This is a key success factor since most organizations have thousands of potentially automatable process tasks to consider, convert and manage," reads the report.
- IBM Institute for Business Value The coming AI revolution in retail and consumer products
- Supply Chain Dive What drives retailers to seek supply chain visibility
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