The world is rapidly changing, and supply chains are vulnerable. Retail and consumer goods organisations are besieged by obstacles including geopolitical instability, labour shortages, rising costs, climate crises and natural disasters.
These challenges can lead to product shortages, halted production and delayed deliveries. Other factors – such as the push to meet sustainability goals and changing consumer trends – complicate matters further.
According to Gartner’s ebook, Adopt a New Supply Chain Strategy to Minimise Risk Impacts, supply chain risk management today must account for these unprecedented, fast-developing market disruptions as well as transformation within the business.
But how can organisations approach this? According to Felice Miller, who leads supply chain and sustainability strategy for Microsoft’s worldwide retail and consumer goods industry group, “they must have the analytical horsepower and operational agility to anticipate or respond in real time to changes in the market and succeed in the changing world”.
This is where a more autonomous supply chain, powered by artificial intelligence, is critical.
“Supply chains have been thrust into the spotlight and, today more than ever, conversations are taking place around how to optimise, improve and reduce complexity by leveraging AI-powered solutions,” says Miller. “In the short term, this enables better inventory management and order fulfilment. Meanwhile, the long-term benefits include improved customer satisfaction, waste reduction and increased operational stability.”
A 2021 article from Gartner predicted that by 2024, half of supply chain organisations will have invested in applications that support AI capabilities.
“I think this prediction still holds true,” says Miller. “The ongoing challenges in supply chain management have driven many organisations to adopt these technologies, and they are certainly becoming more relevant and well-known in discussions we’re having.”
Miller also attributes this growth to the rapid advancements in AI that have made these tools more accessible. In particular, the rise of generative AI has been a key factor.
“While both generative AI and traditional AI can contribute to supply chain optimisation, the former enhances employee productivity and can work with a broader set of data,” she says. “This revolutionises the types of insights that can be gathered and improves the explanations that go with them.”
Miller believes there are four key factors that make generative AI a more powerful tool for supply chain optimisation compared to standard AI tools: conversational competence, contextual capabilities, content generation and intelligent automation.
“Generative AI’s conversational and contextual capabilities give supply chain teams access to tailored insights and automations based on chatbot interactions with data sources, providing them with next best actions in the flow of work, which is critical for reacting to changing consumer demand.” explains Miller. “There is also the ability to enhance and supplement data sources, which empowers supply chain managers to make better decisions based on contextualised insights from unstructured data.
“This can be further enhanced with content generation and the creation of demand forecasts and reports with vendor-specific insights, which gives time back to team members to focus on more strategic decision-making. It also fuels greater supply chain orchestration.
“Finally, through intelligent automation, generative AI functions as a conduit to interact with software as a user interface orchestration layer going between different supply chain systems. Because generative AI is data-driven instead of rules-based, it can keep up better with dynamics environments and unexpected disruptions.”
Given the importance of using AI and generative AI to unlock opportunities and accelerate supply chain optimisation, Microsoft is working closely with Blue Yonder to “provide industry-specific capabilities across the Microsoft Cloud portfolio and create agile, sustainable supply chains powered by AI”, according to Miller.
Together with Blue Yonder’s technology, Microsoft’s generative AI-powered capabilities are enabling retail and consumer goods organisations to create agile, resilient and sustainable supply chains by connecting data across their ecosystems to identify issues and optimise performance.
This strategic partnership lays the foundations for an intelligent, autonomous supply chain through the Blue Yonder Platform which runs on Microsoft Azure, and Blue Yonder Orchestrator which is built on Azure OpenAI Service.
“With supply chains becoming more complex, it is imperative that businesses are able to respond not only to supply disruptions but also to evolving demand and changing consumer behaviour,” says Wayne Snyder, vice president of industry strategy for retail, EMEA, at Blue Yonder. “Supply chains must be able to react quickly, and new generative AI technologies are key to this.
“Our Blue Yonder Orchestrator capability built on Azure OpenAI Service, fuels more intelligent decision-making and faster supply chain orchestration. It is embedded within the Blue Yonder Platform, inherently benefiting from robust security measures, auditing, reliability and cost control, it can leverage optimisation tools across the whole supply chain. This way, Blue Yonder Orchestrator provides our retail and consumer goods customers with greater visibility and insights to help them make those better and faster decisions.”
Miller agrees, stating that “this comprehensive approach ensures a robust service for Microsoft and Blue Yonder customers, transforming traditional supply chain processes into a seamless optimised operation”.
In 2023, UK retailer Sainsbury’s, already a long-time user of Blue Yonder’s warehouse management software, was looking to replace its other existing solutions with modern, machine learning-driven solutions to improve its forecasting and replenishment abilities. Sainsbury’s implemented Blue Yonder’s demand planning, store order planning and fulfilment solutions across all its food categories.
“The results speak for themselves,” says Miller, explaining that Sainsbury’s has not only reduced the number of key systems it uses, but has also improved inventory stockholding and built a more resilient supply chain that can support future business changes.
Furthermore, the retailer has enhanced its ability to monitor and respond to changing customer needs and predict potential disruptions. For example, the ML-based forecasting and ordering capabilities help stores to better manage fresh and perishable products.
“When we started the project with Sainsbury’s, our goal was to make ML a key enabler of the firm’s future digital transformation,” says Gaël Ramaen, corporate vice president of retail for EMEA at Blue Yonder. “Now, Sainsbury’s is on a great trajectory and continues to invest in what matters most to its customers to provide great experiences through any channel and great offers adapted to local consumer demand.”
Several other large organisations, like beauty retailer Avon International and brewer Heineken, have adopted Blue Yonder solutions to optimise operations, yielding benefits like improved forecast accuracy, optimised service levels, and quicker response to supply chain disruptions.
Read more: Miller explains how data, AI and the cloud empower organisations to reinvent supply chain models for British supermarket chain Asda
Microsoft has an entire ecosystem of partners – firms like Accenture, EY and TCS – that provide supply chain organisations with solutions and advisory services to optimise their business processes and make better, data-driven, decisions.
“Utilising data in supply chains doesn’t just help to unlock better insights; it also helps make decision-making more predictive than reactive, helping organisations stay ahead of consumer demand and be more agile operationally,” says Miller. “Not only that, but data is key for establishing a digital foundation that retailers can use across the entire supply chain and beyond.”
For example, a unified data structure helps to improve communications across different areas of the supply chain and external teams. This can then lead to faster operations and reaction times in the case of a disruption.
Data can also be used to build digital twins, which allow retailers to virtually simulate possibilities across the supply chain and optimise product routes, inventory management, sustainability efforts and more.
“The idea here is to simplify and optimise the business in a unified way across the end-to-end supply chain, leading to more consolidated orchestration, execution and collaboration both inside and outside of the organisation,” says Miller.
Partner perspectives
We asked selected Microsoft partners how they are using Microsoft technologies to support retailers in transforming their supply chain processes
“By combining the power of the Blue Yonder Platform with Microsoft solutions such as Azure, Teams and Dynamics 365, we help joint customers optimise their supply chain from planning to execution with secure, specialised, real-time connections and workflows. The partnership has allowed Blue Yonder to deliver leading supply chain solutions that are cognitive, resilient and sustainable across one platform,” said Wayne Snyder, vice president of industry strategy, retail, at Blue Yonder.
“Infosys has been harnessing the Microsoft technology stack to streamline supply chain processes for retailers. Our AI-powered solutions transform category management, ensuring it’s tightly synchronised with the broader supply chain. Retailers can address demand across channels, optimise operations in real time, factor in space and labour parameters, and respond swiftly to opportunities,” said Aswin Prabhu Vembrakkat Suresh Babu, senior consultant of retail delivery at Infosys.
“Tango Extend, when paired with Microsoft Teams Phone, significantly improves retail supply chain management by making communication smoother and more centralised. It allows all parts of the supply chain to connect, which helps teams work together efficiently and make quick decisions easily,” said Lee Essex, senior vice president of global sales and marketing at Tango Networks.
Discover more insights from these partners and others in the Autumn 2024 issue of Technology Record. Don’t miss out – subscribe for free today and get future issues delivered straight to your inbox!