Artificial Intelligence • 27.04.2017

Retail replenishment and price optimization: Machine Learning solutions for retail

… and what the retail industry has learned from particle physics

In the old days, it entailed gut-level decisions. Meanwhile, artificial intelligence and algorithms assist with replenishment and price optimization today. Dunja Riehemann, Director of Marketing at Blue Yonder, which collaborates with retailers such as Bonprix, Otto, dm, and Morrisons, explains why retailers can benefit from machine learning solution.

Ms. Riehemann, what makes machine learning so valuable for the retail industry?

Machine learning implies that a system is able to make independent decisions and react to changed requirements and products based on algorithms and collected data. For example, the solution accurately calculates how many pork chops are needed prior to a sunny holiday by predicting future consumer buying behavior.

As a provider of intelligence, you offer machine learning solutions for retail to optimize replenishment and prices. How exactly does this work?

By using historical sales data and by including public holidays, vacation times and weather conditions, systems like ours that are based on artificial intelligence allow retailers to accurately forecast the amount of merchandise needed to be in stock at the store to meet customer demand. This information is linked with the ERP and merchandise management systems of retailers. Order recommendations for replenishment and price optimization are automatically made available in the respective systems via the Cloud. 

How accurate are these forecasts and what are retailers able to gain from them?

They are highly accurate. In the case of Morrisons, one of the leading chains of supermarkets in the United Kingdom, we were able to reduce out-of-stock rates by about 30 percent by utilizing a simple ordering system. This is great progress. We are in charge of the overall replenishment of durable products in the stores. The roll-out in all 491 stores took place in the fall of last year. The system handles more than 13 million ordering decisions each day. This enables Morrisons to also achieve its goal of giving store associates more time to service their customers and not having to worry about administrative tasks like issuing orders for the next few days. We are now expanding cooperation to other product selections.

Dunja Riehemann is convinced of the advantages of artificially intelligent...
Dunja Riehemann is convinced of the advantages of artificially intelligent solutions.
Source: Blue Yonder

Replenishment optimization has changed considerably over the past years.

Yes, that’s true. In the past, retailers made gut-level decisions, as in “Tomorrow is a holiday and the weather is supposed to be nice, so I guess I stock my stores with these products." There was no way of keeping track of the inventory in detail. However, in this day and age, retailers are no longer able to afford surplus inventory and elevated levels of waste because it is extremely expensive and could mean tarnishing the reputation of a company. When people find out that a supermarket chain throws away tons of groceries, it causes damages that go far beyond revenue loss. Having said that, customers still expect to find a fresh salad on Thursday evenings. Retailers need to consider all of these factors in their planning process.

You have specialized in food and fashion retailing. Why is that?

That’s because next to margin and revenue pressure, these areas are also very driven by online pure players. Added to this is that the shelf life of fresh foods in food retailing is limited and that retailers sell their merchandise right up to the expiration date. We support them in this by optimizing replenishment and facilitating flexible pricing. Things are different in fashion retailing, which is more driven by seasonal influences and needs to ensure its products in inventory have been sold by the end of the season to avoid sitting on unsold merchandise. We assist our customers by continuously adapting their prices, thereby significantly boosting their chances of selling their products.

You got the idea for your solutions from particle physics. How did this come about?

Blue Yonder originates in the data science field. The company’s founder Professor Michael Feindt is a former CERN scientist and noticed during his work that there are big parallels between particle physics and economic issues. After all, the challenge there is also to find connections in data that is so big to where a human being is no longer able to keep track of it – as is the case with the large and complex datasets created at the POS. We used this to develop our solutions, which can be applied in both online and offline retail.

Is artificial intelligence still a very abstract concept for the retail industry?

Actually, it no longer is. This term is currently being hyped up the same way big data was back in the day. I think the economic sector finally understands how these solutions can be incorporated into business processes to reap the benefits. In the case of Otto, for example, we optimize replenishment of the distribution centers with their partner retailers and we assist dm with forecasts its suppliers receive to deliver their products at a later stage. We also support the Magazine zum Globus AG with a pricing solution.

Does this make humans obsolete?

Unlike a human being, a machine is far superior in keeping track of large and complex datasets. That being said, a machine will never be able to make strategic decisions for us. Humans will continue to have to make those.

Copyright title picture: panthermedia.net/agsandrew

Author: Natascha Mörs, iXtenso

related articles:

popular articles:

Thumbnail-Photo: Simple tips and tricks to start your online business...
20.05.2020   #online trading #retail

Simple tips and tricks to start your online business

How to start an e-commerce business: Why you don’t always need a big online store

Creating your own online store is still the most popular way to sell products online. To start an e-commerce business, you first need a store setup and a fulfillment service provider who handles the warehousing, packaging, and shipment of ...

Thumbnail-Photo: Light up the future with Posiflex at EuroShop 2020...
11.02.2020   #kiosk terminals #Trade fair special EuroShop 2020

Light up the future with Posiflex at EuroShop 2020

Serviced IoT solutions: personalized, flexible and connected

The Posiflex Group, a synergy of world-leading POS, kiosk, and industrial computing technologies — will bring its Serviced IoT solutions to EuroShop 2020, the leading Europe trade fair for the retail industry, from February 16th – 20th ...

Thumbnail-Photo: Connected Retail Experiences and StartmeupHK Festival 2020 goes virtual...
03.06.2020   #e-commerce #multichannel commerce

Connected Retail Experiences and StartmeupHK Festival 2020 goes virtual

Transformation from an in-person event to a fully virtual experience

The StartmeupHK Festival 2020 is to be transformed from an inperson event to a fully virtual experience. Connected Retail Experiences will take place on 7th July 2020. Inves tHK’s decision to bring this annual event into the ever more rapidly ...

Thumbnail-Photo: Our bot is happy to assist you
31.03.2020   #consulting #customer relationship management

Our bot is happy to assist you

Chatbots and AI virtual assistants automate customer service

Chatbots and virtual assistants – some think they are creepy, others consider them a part of daily life. Either way, they patiently answer frequently asked questions related to the opening hours of the nearest supermarket.By now, some ...

Thumbnail-Photo: Pay-As-You-Go
17.02.2020   #payment systems #Trade fair special EuroShop 2020

Pay-As-You-Go

VR Payment and BMS Consulting bring fully automated payment to the point of
sale with payfree

For the first time ever, payfree realises the vision of cash register free checkouts without camera surveillance and expensive sensor technology on the shelvesThe payment process begins automatically upon passing the checkout areaInnovative process ...

Thumbnail-Photo: Shop NEXT 2020
31.03.2020   #online trading #brick and mortar retail

Shop NEXT 2020

Next shopping experience

Due to the retail industry in Southeast Asia is developing rapidly and the retail industry value has exceeded 100 billion dollars. Over 250 exhibitors and 10,000 visitors from 30 countries or regions are expected to participate in Shop Next ...

Thumbnail-Photo: Contactless? Cross-channel? Consumer-friendly?...
11.05.2020   #mobile payment #payment systems

Contactless? Cross-channel? Consumer-friendly?

Things to look for in a payment solution

Whether it’s e-commerce, point of sale, or mobile payment: we have to pay for our purchase. But what do customers want and expect from a payment solution? How can retailers meet these expectations and are self-checkouts really a faster option ...

Thumbnail-Photo: Password? No need!
09.03.2020   #mobile payment #security

Password? No need!

Interview with Dr. Daniel Schellenberg, COO of IDEE GmbH

Do you have an existing user account? Did you forget your password? No doubt, those are some annoying questions when you shop online. The brains behind IDEE agree and leverage your "digital identity" to make surfing and online shopping ...

Thumbnail-Photo: The new digital signage landscape: cloud-based...
14.04.2020   #digital signage #artificial intelligence

The new digital signage landscape: cloud-based

Using AI for automation and personalization

Big technology advancements mean digital signage systems are starting to become easier to use, to scale and to integrate, fuelling a market boom that will see the sector worth almost 30 billion dollars in five years' time.In a market that's ...

Thumbnail-Photo: Self-Service for the ultimate customer experience...
19.02.2020   #brick and mortar retail #self-checkout systems

Self-Service for the ultimate customer experience

EuroShop 2020: iXtenso spoke with Diebold Nixdorf

Diebold Nixdorf as a leader in connected commerce offers innovative technologies for the optimized mix of self-service and checkout systems. With the program Storerevolution™ their solutions are a benefit for customers and retailers at the ...

Supplier

VR Payment GmbH
VR Payment GmbH
Saonestraße 3a
60528 Frankfurt am Main
POS TUNING Udo Voßhenrich GmbH & Co KG
POS TUNING Udo Voßhenrich GmbH & Co KG
Am Zubringer 8
32107 Bad Salzuflen
Adasys GmbH – a Poindus Company
Adasys GmbH – a Poindus Company
Max-Planck-Straße 10
70806 Kornwestheim
StrongPoint
StrongPoint
Isafjordsgatan 5
164 40 Kista
ROQQIO Commerce Solutions GmbH
ROQQIO Commerce Solutions GmbH
Harburger Schloßstraße 28
21079 Hamburg
Diebold Nixdorf
Diebold Nixdorf
Heinz-Nixdorf-Ring 1
33106 Paderborn
Poindus HQ - Taiwan
Poindus HQ - Taiwan
5F., No.59, Ln. 77, Xing-Ai Rd.,Neihu Dist.
Taipei City 114
Burkhardt Leitner Modular Spaces GmbH
Olgastrasse 138
70180 Stuttgart
GLORY Global Solutions (Germany) GmbH
GLORY Global Solutions (Germany) GmbH
Thomas-Edison-Platz 1
63263 Neu-Isenburg